Two years ago, NextBillion.net published Building a Collaborative Social Impact Measurement Operating System. The article concluded that unless we make the process of collecting, sharing and analyzing data accessible and easy for all, we will not measure social impact to build an active social sector.
UN SDG data problem - Lack of trust!
While donors spend billions of dollars on ground data collection/aggregation, monitoring, and evaluation, it is unfortunate that there is a significant lack of trust in the gathered data!The questions to be raised are-
- Why keep throwing away money that does not align with impact objectives of funders and recipient organizations?
- How can we create "Social Impact Operating System" that bridges data trust between top to down and down to up level organizations?
- How can we create a simple but effective system that inspires trust between different players?
Let's say a large foundation working in India, want to focus on SDG Goal 4: Quality Education (Ensure inclusive and quality education for all and promote lifelong learning). Collectively, they are looking to ensure that their intended outcome metrics align with other ecosystem players from funders, other agencies, and non-profits working in the region. Having many players funding similar objectives have a potential to create multiplicative funding possibility which may hurt or not align with the overall aim of the foundation. Fundamentally, how should foundation decide on funding? While there are standards like the International Aid Transparency Initiative (IATA), which can help share funding details, this approach is a small piece of a big puzzle.
- How do we align the recipient organization and funders with a specific SDG goal and targets?
- How do we ensure reliable data practices that gather clean data to track specific SDG Goals/Targets and Indicators?
- How do we ensure that recipient organization does not manipulate results that they are reporting?
- How do we ensure outcome results are seamlessly available to a potential funder.
What if you have a system that easily tracks the beneficiary data and reports to any funder who simply wants to pull the results before funding? While this was a vision two years ago, this is now becoming a reality. Thanks to an innovative team and advancement in enterprise SaaS-based technology and techniques, we have cracked one the most difficult challenge for good!
Impact Investments in Global Partnership
While impact investments are relatively a new investment vehicle, they are increasing. Let's look at the overall impact investment which is a lot broader than just impact funds. Impact investment such as Community Development Finance Institutes (CDFI), Social Impact Investing, Social Incubation, and Impact-Management are all part of impact investment. CDFI market is significant, and impact investment & social incubation are growing incredibly fast. Unlike the philanthropic market, these young business model are driven by both social and financial portfolio return and growth rate substantially rapid. According to Impact Alpha last year at least $114 billion was invested with over 40% year over year growth. The report (available at here) provides compelling evidence that the impact investing industry is growing, both regarding size and maturation. We found a similar increase in CDFI where assets are nearly doubling over the last two years, from $64.3 billion to $121.6 billion and same growth in social incubation and asset management. However, wealth manager or fund managers struggle with their investment thesis as often it is difficult to fund investment based on their investment thesis. While there are many investment theses, let's look at two common one below.
Investment Thesis 1: Impact Ecosystem Alignment
Let's say there is an Asset Manager who wants to focus on country strategy or SDG Goal strategy. A few problematic challenges he would face are,
- How do I know investments are aligned with goals, targets, and indicators critical to funding the core mission of ecosystem investments?
- How do I know that investee has a defined data capacity that generates both social and financial results transparently?
- Can I simply ask "What is your impact id" and review outcome transparently before investing?
SoPact's Impact Manager approach allows impact portfolio managers to create portfolio-based approach. SoPact's impact cloud is a first end to end impact management platform that allows funders to align outcome with the investee and downstream organizations. They can collect administrative, impact and progress data seamlessly to improve trust. Impact Cloud is designed based on a modern architecture which uniquely integrates leading global, sector and metrics repositories, aligned with leading frameworks with a significantly rapid setup process compared to most other solutions in the market. The consistency & simplicity of the tool allows any downstream organization to collect data and report data with high level of confidence & certification.
Funders can pull outcome and results simply by accessing an "Impact ID."
Investment Thesis 2: Program Evaluation & Effectiveness
The program's effectiveness is often very important criteria that can boost funder's trust. Unfortunately, inconsistency in the outcome definition, data gathering, and poor tools can give a wrong picture. Let's say there are series of Community Development Finance Institutes (CDFI) in a specific state focussed on low-income housing and small & medium size borrowing for employment, how do we know if they are lending money to zone, county or area code that needs the most help? Do we know if there is a country or statewide volunteer management initiative? What if I can pull stakeholder, operational capacity results of organization and volunteer opportunity information by "Impact ID"?
Conclusion - Building an Impact Data Pipeline for Quality SDG Measurement
2017-2018 were another back to listening years where SoPact team spent time with hundreds of executive directors, evaluators, practitioners and impact management thinkers. Talking to various foundation and impact funds funders, we found that many are looking for an ecosystem-based decision-making strategy with a high level of transparency and data trust. While the standards-based approach can be useful, It does not provide a consistency and data integrity.
Curious to see how SoPact team has solved this challenge? Join us for our next webinar.