Five Dimensions Of Impact - Effective Way To Demonstrate Impact

Did you know that 62% of companies mentioned the SDGs in their reporting, 37% of companies selected priority SDGs, 79% of companies that prioritized the SDGs chose SDG 13 Climate Action, 28% of companies set quantitative targets and linked these to societal impact? (Source: SDG Reporting Challenge 2017) In other words, many companies are starting to align with UN SDG Goals, but are they moving beyond simple impact washing? While multiple impact frameworks, standards, and tools are available today, most organizations are still struggling to understand and communicate their impact.

Millennials are much more impact savvy than previous generations. They are asking hard questions beyond the simple composition of portfolios. How are you creating an impact? How are you incorporating voices from stakeholders and beneficiaries to tell the true impact story? One of the biggest challenges facing private equity, corporate, impact investors, and other asset owners is how to build a portfolio that defines and generates true impact. Impact Management Project (IMP) ongoing effort (IMP) aligned with TONIIC T-100 and OCED group to solve this challenge.

In 1994, when I worked at TIBCO/Reuters, we championed and revolutionized software integration based on publish/subscribe, which is now ubiquitous and fundamental to any corporate application's integration. Back then, our premise was - create a software bus (similar to Intel’s Hardware Bus). This allowed us to create a loosely coupled design that can flexibly exchange information with infinite scalability. 

How can we scale with the same principle in the social sector? The time has come to apply a flexible approach that allows anyone to select and cross-link any standards like SDG, IRIS, GRI, and Custom Metrics for their asset/investment/grantee. At the heart of the problem, Impact Management Project (IMP) is defining what’s called Portfolio Impact Categories, Assessment, and overall Portfolio Analysis tool. This may be very important to asset owners, but let us step further and get in-depth feedback from each asset. How can we allow any asset owners or managers to map their internal and external data to analyze results based on five IMP dimensions?

Last three years, we have been experimenting and collecting feedback from hundreds of social sector companies, working with multiple standard bodies, and bringing in our experience to solve the challenge of building flexible integration for the entire impact ecosystem.

SoPact Impact Cloud simplifies all the impact jargon using a simple impact search engine aligning Theory of Change (TOC) and Impact Management Project (IMP). Simplify metrics selection aligned with Sustainable Development Goals, IRIS, GRI, and build custom metrics based on your internal goals and targets. Drive a lifecycle of impact framework, progress monitoring, and reporting with individuality and flexibility.

In Uniting the Impact Ecosystem: A Call for End-to-End Impact Management, we introduce impact ecosystem players. Three key layers are Asset Owners, Asset Managers, and Assets.

In the following section, we describe challenges in effectively using different standards and frameworks using Impact Cloud.  According to Impact Management Project - A Guide to Mapping the Impact of an Investment, "Asset owners are increasingly interested in the impact of their investments on society and the environment. Against this backdrop of growing interest from asset owners, asset managers are increasingly looking to assess and communicate the effects of investments on people and planet." For Asset owners, there is no single linear impact management process; the process is iterative, with different entry points.

Impact Management Project

Impact Management project defines five dimensions of its effect on people or the planet: intended and unintended, positive and negative. For each effect, the level of performance is evaluated for all five dimensions.

The real challenge is that that investor should use a data-driven approach to assess the impact. This is where the impact cloud provides a flexible foundation of cross-reference services that allows the evaluator to assess results based on external and internal data.

Figure: Working Example from Impact Management Project: Evaluation process for each effect based on a data-driven process.

Integrating Investor’s Impact Matrix

As investors gather better asset-based evaluation, the next task is to map their existing portfolio and then, over time, transition that portfolio to be impactful in the way that best suits their intentions and constraints.

 

The ultimate goal is to define a portfolio that maps all the assets that help communicate the two most important questions:

1. Impact allocation for a portfolio that communicates composition by instruments and sector composition and defines impact metrics of a portfolio. These impact metrics can help clearly communicate the real footprint. For example, €220 billion portfolios of the pension fund may achieve a much lower impact that avoids harm than the $10M portfolio of a family foundation focused on creating solutions. An investor seeking higher impact might want to review impact metrics before investing.
2. Impact investors are now asking to provide evidence of how their capital creates an impact or how beneficiaries benefit from the stated impact? This has been often a challenging subject as often an outcome of impact investors are not aligned with the investee. Often they do not speak the same language of an outcome and often do not trust results/data collected from investee. Creating an impact data pipeline from enterprise to asset owners through Impact ID describes how we can solve outcome alignment and data trust issues between asset owners, asset managers, and assets.

Integrating Social Impact Frameworks & Standards

During the last ten year, we have seen a rise in leading frameworks from the theory of change, impact management projects. We have also seen many standards starting with Sustainable Development Goals (SDG) and IRIS/GRI etc. While these standards and frameworks are a good starting point, they are not sufficient to truly understand the impact of assets. There are other initiatives from the UN, OECD, and TONIIC to build an integrated framework. For example, TONIIC’s T-100 provides a cross-linking between Impact Management, SDG, and IRIS.

While these are definition is useful, they still have few limitations --

1. Requires more flexibility to accommodate other qualitative/quantitative custom and standards-based metrics
2. Requires a foundation metrics search, selection, data collection, analytics, and reports

Unfortunately, many investors use this reference, but they have to streamline the process on their own. SoPact Impact Cloud provides a theory of change (TOC) & impact management (IMP) project-driven life cycle management. An integrated approach helps the asset manager and an asset define, monitor, and report results consistently.

Integrating Theory of Change 

Impact Cloud integrates SDG, IRIS & Impact Management framework defined by OCED, IRIS, and TONIIC. In fact, we take a step forward by integrating a flexible metrics catalog that provides enriched metadata at the metrics level and cross-links SDG goals, targets, and indicators with GRI and IRIS. On top of that, each of the SDG targets can create a hybrid standard and custom metrics allowing each asset to define impact (and context) metrics. This theory of change-based approach allows asset managers and the assets to collect data, report progress, evaluate, and analyze results better to communicate the impact to asset owners for capital allocation.

Conclusion

The key to the success of impact measurement & management is that the process aligned with the theory of change should be completely integrated from impact framework creation, metrics selection, data collection, results tracking, evaluation, analysis, and communication.

Most Asset Managers today still aggregate results from the assets in excel based manual process. They often have a pseudo impact data aggregation framework, which requires investee or grantee to provide data regularly. Many even use B-Labs based B-Assessment approach. While they provide IRIS based framework to aggregate results, most feel that this approach is too limited.

The B-Assessment-based approach might be useful to a few, especially the GIIRS rating; most investees think this approach does not convey the necessary context. Second, the questions presented in the form for IBM Rating pigeon holes to a rigid approach. Finally, social and environmental metrics used by IRIS are too limited and do not convey a true impact.

The best data aggregation

1. Allows asset managers to define metrics specific to the context that is unique to each enterprise (asset).
2. Allows enterprise and asset managers to measure progress against their own unique targets.
3. Performs simplified analysis of assets with similar or different metrics.
4. The results from different assets and asset managers can be nicely composed in a unified way, reducing tremendous data aggregation and reporting burden.

Impact Cloud reporting provides built-in widgets that beautifully provide an integrated theory of change, impact management reporting combined with portfolio or fund level automatic reporting. The story-driven wizards allow dynamic tables, charts combined with integrated impact learning and narratives from social media feeds.

Impact measurement to management enables funders to make better decisions based on a reliable and effective process.

Further Reading

• Five Dimensions of Impact Management
• Social Impact Management

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