Making Sense of Social Impact Investing

Measuring impact: it feels hard. •  Is the way we measure it going to be acceptable? •  Has somebody else already figured out the best way to measure this? •  What if I do it, and then expectations or standards change? •  Where do I start? •  When should I start? •  Am I doing enough? •  Am I doing too much? •  What should I be spending on this? •  Is it worth it? •  What happens if we do measure…will it actually help or hurt? ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

Making it Easier: Major Questions •  What’s the “right way” to measure? •  How much should we be spending? •  What do we get out of it? (Is it worth it?) ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? •  Emerging standards around: –  Terminology –  Indicators –  Method –  Reporting •  Trends We’re discussing some of the most commonly-discussed resources here, but there are many more! ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? Logic Model = Impact Value Chain Graphic source: “Impact Measurement Approaches: Recommendations to Impact Investors,” Social Venture Technology Group with support from The Rockefeller Foundation, 2008. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? IRIS The IRIS framework consists of six parts: •  ORGANIZATION DESCRIPTION - indicators that focus on the organization’s mission, operational model, and location •  PRODUCT DESCRIPTION - indicators that describe the organization’s products and services and target markets •  FINANCIAL PERFORMANCE - commonly reported financial indicators •  OPERATIONAL IMPACT - indicators that describe the organization’s policies, employees, and environmental performance •  PRODUCT IMPACT - indicators that describe the performance and reach of the organization's products and services •  GLOSSARY - definitions for common terms that are referenced in the indicators ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? Social Accounting •  The process of communicating the social and environmental effects of organizations’ actions to particular interest groups within society and to society at large •  Most commonly used in the context of business, or corporate social responsibility (CSR), although any organization may do it •  Is also known as social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting, or sustainability accounting •  Seeks to broaden the scope of accounting in the sense that it should: –  concern itself with more than only economic events; –  not be exclusively expressed in financial terms; –  be accountable to a broader group of stakeholders; –  broaden its purpose beyond reporting financial success. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? Social Return on Investment (SROI) Analysis 1.  Involve stakeholders: Inform what gets measured and how this is measured and valued by involving stakeholders. 2.  Understand what changes: Articulate how change is created and evaluate this through evidence gathered, recognizing positive and negative changes as well as those that are intended and unintended. 3.  Value the things that matter: Use financial proxies in order that the value of the outcomes can be recognized. Many outcomes are not traded in markets and as a result their value is not recognized. 4.  Only include what is material: Determine what information and evidence must be included in the accounts to give a true and fair picture, such that stakeholders can draw reasonable conclusions about impact. 5.  Do not over-claim: Only claim the value that organisations are responsible for creating. 6.  Be transparent: Demonstrate the basis on which the analysis may be considered accurate and honest, and show that it will be reported to and discussed with stakeholders. 7.  Verify the result: Ensure appropriate independent assurance. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

What’s the right way to measure? Social Performance Management (SPM) Principles An MFI that manages its social performance will deliberately: •  Translate its mission and values into clear, measurable objectives to capture intentional social benefits. MFIs that are clear about their objectives are more likely to have a deliberate strategy to achieve them. •  Design and implement systems for social responsibility, including client protection. At a minimum, MFIs should ensure they do no harm. Microfinance has great potential to help clients, but it also has the potential to hurt them, especially through over-indebtedness. •  Track, understand and report on whether it is achieving its social objectives. MFIs that manage their social performance are more effective at reaching their target market, delivering appropriate services, and creating positive changes for clients. •  Align its business processes to achieve both social and financial objectives. All aspects of an MFI’s operations affect whether it achieves its social goals, including marketing, recruitment, staff training, incentives, organizational culture and Board composition. •  Ensure that decision-making considers both social and financial outcomes. Awareness of the social and financial consequences of decisions leads to better overall performance management. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

How much should we be spending? •  Current benchmarks on cost •  Ways of reducing cost (tools) –  Excel –  Surveymonkey/Survey gizmo/zoomerang –  Social Evaluator –  Pulse –  Efforts to Outcomes •  Trends ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

Other methods and resources include… •  Balanced Scorecard (BSc) •  HIPTM Framework •  SROI Lite – GSBI version •  Social Impact Analysis – GSVC.org •  Progress out of Poverty IndexTM (PPITM) – Grameen Fdn. and Mark Schreiner •  Customized solutions – SVT Group …by no means an exhaustive list! ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

It pays to do good •  83 percent of Americans want MORE of the products, services and retailers they use to support causes. •  American consumers are no longer taking the recommendations of family or friends at face value. Before deciding whether to purchase recommended products or services, more than four-out-of-five consumers (81%) will go online to verify those recommendations, specifically through researching product/service information (61%), reading user reviews (55%) or searching ratings websites (43%). •  84% of Americans believe their ideas can help companies create products and services that are a win for consumers, business and society •  Only 53% feel companies are effectively encouraging them to speak up on corporate social and environmental practices and products •  48% of Americans will try to buy fewer gifts or holiday products this season because they are concerned about the effect their consumption may have on the environment •  61% of Millennials (born 1979 – 2001, 78 million strong) feel personally responsible for making a difference in the world •  78% of Millennials believe that companies have a responsibility to join them in this effort. Sources in order by bullet: 2010 Cone Cause Evolution Study, 2010 Cone Online Influence Trend Tracker; 2010 Cone Shared Responsibility Study; 2010 Shared Responsibility Study; 2007 Cone Holiday Environmental Survey; Cone 2006 Cone Millennial Cause Study; Cone 2006 Cone Millennial Cause Study. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

Scenarios •  Scenario 1: Medium sized nonprofit social enterprise which trains youth to refurbish computers for sale •  Scenario 2: Foundation with a portfolio of 2 dozen social enterprise grantees – both grant funded and PRI funded. ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

Resources •  McKinsey “Learning for Social Impact” report •  FSG Finance “Breakthroughs in Shared Measurement & Impact” •  Zero Divide SROI Case Study •  B Corp (bcorporation.net) •  Efforts To Outcomes (socialsolutions.com) •  GIIRS (giirs.org) •  GRI (globalreporting.org) •  Impact Reporting & Investment Standards (IRIS) (iris.thegiin.org) •  Pulse (app-x.com/pulse) •  Social eValuator (socialevaluator.eu) •  Tools & Resources for Social Impact (TRASI) •  SVT Group (svtgroup.net) •  ZeroDivide (zerodivide.org) ©2010 SOCIAL VENTURE TECHNOLOGY GROUP.. All rights reserved.

Making Sense of Social Impact Investing

by Margaret Stangl on Nov 02, 2010

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