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Rise of Impact Investing Funding & Challenges Ahead

Posted by Unmesh Sheth on Oct 13, 2015 4:33:40 PM

The rise in social impact funding is placing a much-needed focus on impact measurement for both internal decision making and external transparency. Current approaches are often time-consuming, limited to financial output, or inconsistent at their data collection process. As a result, the level of impact may be diminished, as well as the social mission and efforts of the organization.

The social sector survival and growth depend on the entrepreneur's ability to demonstrate impact. Nevertheless, there is a lack of efficient data and measurement language to put funders and investees/grantees in a collaborative context, which reduces the impact visibility to funders.  Also, most of the investees/grantees consider impact measurement an overhead issue, without realizing that technology has dramatically shifted this conception in their favor.

In this blog series, I would like to discuss the correlation between the following key topics and solutions:

1. The importance of communication and transparency between the funder and the impact venture/evaluator, as well as the primary motivation to build an impact measurement system with a shared context and common language. This series will provide concrete examples and discuss few solutions towards this critical need.

2.  The reasons for a new, unique social impact operating system. This new operating system doesn't require any investment in technology. Instead, it just requires a mindset shift that can be addressed by new social sector media (like NextBillion and SSIR), as well as by data-driven nonprofits, social enterprises, and mission-driven accelerators.

3. The reasons for a lack of progress between funders and investees/grantees. We will look at some of the recent high-profile efforts in the impact fund industry and affordable housing programs. We will examine the reasons for failure and, more important, the lessons learned towards common social impact operating systems within the next five years. A few sub-topics that I would like cover in this matter are:

  • How the existence of many local and global metrics standards, frameworks and tool is not sufficient to make meaningful progress. We must build collaborative metrics sharing, aggregation, and language.

  • How it is necessary to move away from Excel to affordable, cutting-edge and advanced service-oriented tools that can offer tremendous empowerment to the social sector organizations. In this series, we will examine the benefits of this shift and the need for new evangelizing.

Finally, we will review a potential "MorningStar” equivalent rating system in the social impact domain. Though it is practically impossible to build a rating system between partners (we will talk about the reasons), it is possible to develop a meaningful impact dashboard based on existing quantitative frameworks mixed with qualitative information. This new approach can offer a radical shift towards more confident impact investment.

Topics: impact investing

Unmesh Sheth

Written by Unmesh Sheth

Unmesh is the founder of the SoPact. SoPact is a personal vision that grew from 30 years of experience in technology, management, and the social sector.