alnoor ebrahim, associate professor, harvard business school kelly mccarthy, senior manager, global...
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Alnoor Ebrahim, Associate Professor, Harvard Business SchoolKelly McCarthy, Senior Manager, Global Impact Investing NetworkDaniel Brown, Doctoral Candidate, Harvard Business School
Correspondence to: [email protected]
The State of Impact Measurement
An update for theSocial Impact Investment TaskforceGuildhall, London, July 9, 2015
At a Glance: G7+1Mobilizing• Convene diverse players
(Canada, France)• Influence legislation (Aus,
Italy, Japan)• Build knowledge base via
investor surveys & academic centers (Aus, Italy, US)
Standardizing• Process guides (Japan,
UK, Germany)• Process/assurance
standards (Germany, UK)
• Outcome standards by industry (France, UK)
• Transparency/reporting (Germany, UK, US) Financing
• Pay for Success/SIBs (Aus, Canada)
• Bank of unclaimed assets (Japan)
• Catalyze philanthropic support (US)
Source: National Advisory Board updates to Social Impact Investment Taskforce (2015)
It is early days (still)…
• Though there is increasing understanding of social impact measurement, the practice is still under development. (Japan)
• [Need] to develop an impact measurement culture before setting impact objectives to measure. (Italy)
• Measurement of impact … continues to vary on a deal-by-deal basis. (Canada)
Source: National Advisory Board updates to Social Impact Investment Taskforce (2015)
Guidance (process)
Impact Measurement Working GroupSocial Impact Investment Taskforce (2014)
JP Morgan (2015)
EVPA (2013)
Methods for different stagesEstimating Impactfor due diligence
1 Monitoring Impactto improve program
3 Evaluating Impactto prove social value
4Planning Impactthrough strategy
2
Expected Return
• SROI
Theory of Change
• Logic Model
Mission Alignment
• Social Value Criteria
• Scorecards
Quasi-Experimental & Experimental Methods
• RCT
• Historical baseline
• Pre/post test
• Regression discontinuity design
• Difference in differences
Post-InvestmentPre-ApprovalDue DiligenceProcess Alignment:
Source: Ivy So & Alina Staskevicius, (2015), “Measuring the ‘impact’ in impact investing,” Harvard Business School, MBA independent project. http://www.hbs.edu/socialenterprise/pdf/MeasuringImpact.pdf
Data Quality
GIIRS GRI SASB SROI
Materiality √ √ √
Reliability √ √ √ √
Comparability
√ √ √ (√)
Additionality √
Universality √ √ √
EVPA Guidance Adoption
How social/environmental performance of investees is measured
IRIS Metrics Adoption
So…
Investors appear to be seeking and using general guidance and some standardized metrics
But…
What are they actually measuring?
How are they judging performance?
Top 10 IRIS metrics
RankRegistered
Users Metric
1 57 Client Individuals: Total (PI4060)
2 50 Full-time Employees: Total (OI3160)
3 44Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 )
4 42 Permanent Employees: Total (OI8869)
5 41 EBITDA (FP1657)
6 41 Net Income (FP1301)
7 37 Client Individuals: Female (PI8330)
8 30 Net Income Before Donations (FP3274)
9 30 Units/Volume Sold: Total (PI1263)
10 29 Part-time Employees: Total (OI8864)
166 registered users
Top 10 IRIS metrics
RankRegistered
Users Metric
1 57 Client Individuals: Total (PI4060)
2 50 Full-time Employees: Total (OI3160)
3 44Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 )
4 42 Permanent Employees: Total (OI8869)
5 41 EBITDA (FP1657)
6 41 Net Income (FP1301)
7 37 Client Individuals: Female (PI8330)
8 30 Net Income Before Donations (FP3274)
9 30 Units/Volume Sold: Total (PI1263)
10 29 Part-time Employees: Total (OI8864)
166 registered users. Financial
Top 10 IRIS metrics
RankRegistered
Users Metric
1 57 Client Individuals: Total (PI4060)
2 50 Full-time Employees: Total (OI3160)
3 44Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 )
4 42 Permanent Employees: Total (OI8869)
5 41 EBITDA (FP1657)
6 41 Net Income (FP1301)
7 37 Client Individuals: Female (PI8330)
8 30 Net Income Before Donations (FP3274)
9 30 Units/Volume Sold: Total (PI1263)
10 29 Part-time Employees: Total (OI8864)
166 registered users. Financial, Operational/HR
Top 10 IRIS metrics
RankRegistered
Users Metric
1 57 Client Individuals: Total (PI4060)
2 50 Full-time Employees: Total (OI3160)
3 44Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 )
4 42 Permanent Employees: Total (OI8869)
5 41 EBITDA (FP1657)
6 41 Net Income (FP1301)
7 37 Client Individuals: Female (PI8330)
8 30 Net Income Before Donations (FP3274)
9 30 Units/Volume Sold: Total (PI1263)
10 29 Part-time Employees: Total (OI8864)
166 registered users. Financial, Operational/HR, Social (output)
Top 10 IRIS metrics
RankRegistered
Users Metric
1 57 Client Individuals: Total (PI4060)
2 50 Full-time Employees: Total (OI3160)
3 44Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 )
4 42 Permanent Employees: Total (OI8869)
5 41 EBITDA (FP1657)
6 41 Net Income (FP1301)
7 37 Client Individuals: Female (PI8330)
8 30 Net Income Before Donations (FP3274)
9 30 Units/Volume Sold: Total (PI1263)
10 29 Part-time Employees: Total (OI8864)
166 registered users. Financial, Operational/HR, Social (output/outcome)
Performance challenges
Source: GIIN, J.P. Morgan 2015
Given these challenges, how satisfied are investors with the social performance of their portfolios?
Measurement ConundrumMany challenges to measuring social impact…
Yet investors are satisfied with social performance!
o Highly idiosyncratic practice; limited convergenceo Little external scrutiny or reporting obligationso Few incentives or demands for systematized information
See: GIIN/J.P. Morgan 2015; EVPA 2014. • Investing for Good, Esmée Fairbairn, Big Society Capital (2015), “Oranges and Lemons.”• New Philanthropy Capital (2014), “Smart Money: Understanding the Impact of Social Investment.”
Where are we?
Impact Measurement Working Group, Social Impact Investment Taskforce, 2014
Emergence
Convergence
Standardization
Integration
Convergence on:• Process guidelines• Data quality (except additionality)
Not on:• Metrics (by industry, investment
stage, or investor type)• Performance of investees or
investors