In September, the Women’s Impact Investing Network and Georgetown’s Net Impact Chapter, with support from the Beeck Center, hosted a panel discussion to demystify the impact management and measurement (IMM) and provide the latest insights and best practices from leading practitioners in the field.
The speakers included Lisa Hall, Fair Finance Lead at Georgetown’s Beeck Center for Social Impact and Innovation, Diane Damskey, Head of Secretariat for Operating Principles of Impact Management at the IFC, Rachel Bass, Research Manager from the GIIN and our own Brianna Losoya-Evora, Impact and Learning Manager, from CEED.
The conversation was fascinating and wide-ranging. Below we’ve provided you with six takeaways we found the most interesting and compelling.
1) The conversation around IMM has evolved in recent years from “accountability” to “standards” and now to “value”: Brianna from CEED introduced the panel with a look at how the impact investment industry has evolved. While accountability and standards – which help facilitate the comparison of different types of impact – are vital to IMM, she stressed the importance of a feedback loop. Investors need to gather this data and analyze it but also learn from it and use that knowledge to improve upon impact practices and create more value for all stakeholders.
2) Impact measurement was previously regarded as an accountability and compliance tool and now more and more, it’s becoming a business tool: Investors are increasingly realizing the value that IMM can bring to different departments, from business development and operations to investor relations and marketing, among others.
Rachel Bass discussed the GIIN’s landmark study from 2017, “The State of Impact Measurement and Management Practice”, which provided data that the top three reasons investors were motivated to conduct IMM were: 1) to better understand the impact, 2) proactively reporting impact to key stakeholders, and 3) to manage and improve their impact. A smaller proportion viewed IMM as having business value. It will be interesting to see how this may have changed in the upcoming report the GIIN is publishing in the next month.
3) ESG comes first in IMM: As Diane commented, there is no impact investing without incorporating ESG. Potential negative effects of an investment – and there are always effects no matter the type of investment – must be considered.
4) One of the greatest risks of mobilizing capital to the impact sector is the potential for impact washing. Impact investors need to be looking behind the curtain on investments to maintain credibility. There are increasingly examples of investments and funds being marketed as impact investments without the impact management practices in place to substantiate this label. Diane pointed to the issues in the green bond markets and how the Green Bond Market Principles were essential to promoting credibility in the market. The new Operating Principles for Impact Investment Management, created by the IFC this year, will hopefully do the same for impact investing industry by providing guidelines that increase transparency, and accountability.
5) The four greatest needs in IMM at the moment are:
- Collecting, measuring and harmonizing impact data: Rachel discussed how many different ways there are to look at impact: by investment, sector, fund, portfolio, and so on. Figuring out how to roll it all together is a challenge. The GIIN’s IRIS+ is a useful step in the right direction, but there is more work to be done. Lisa provided an example of measuring something as simple as a job, noting that IRIS has an estimated 40 indicators just to measure employment, and once you consider the job tier, duration, and benefits measurement becomes even more complicated. Even once a catalog of metrics are agreed to, Lisa posed the question of how one would compare 1000 jobs in unhealthy conditions to 100 good quality, safe jobs.
- Transparency: Most companies, indeed all public companies, are required to produce financials. Most companies are required to produce financials, why not impact results for impact investors? Independent verification, similar to financial auditors, would also add credibility to the sector.
- Resource efficiency: Diane emphasized that impact investing is not easy, and can be costly in terms of resources, but we’re seeing more and better ways to measure and manage impact, and how to use that data to generate business intelligence and add value. By implementing a lean data approach, the sector could benefit from narrowing in on the right handful of metrics as opposed to a laundry list that are costly to collect and risk diluting the overall impact. Moreover, building in feedback loops and sharing that data with all stakeholders stands to benefit the entire value chain as opposed to just the entity collecting the data.
- Data, data, data: It is hard to understate how many times we hear this at industry events. More research, case studies, and other publications will work to prove this model that one can ‘do good while doing well[MJ1] [BL2] ’.
6) Tides are changing: In Lisa’s words, “Don’t underestimate the power of client demand”. Clients, particularly women and millennials are helping to push this conversation forward and creating the change in products in the market. Rachel noted that faith-based investors, very large banks and private wealth investors are increasingly exploring impact, which is exciting, but in Diane’s words, “time is of the essence.” She compared this change to the when women were first included in financial planning and to the adoption of ESG, which has accelerated rapidly over the past 20 years – it will take a revolution, but if the younger generation works to educate people, we can get there.
She ended on a positive note, stating that “we’re not there yet but we’re having the conversations”