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The Future of Impact Management & Impact Reporting

Impact Management | impact reporting

Reading time: 5 minutes

Unmesh is the founder of the social impact measurement company, SoPact and co-founder of the Nonprofit, Ektta. SoPact is a personal vision that grew from 28 years of experience in technology, management, and the social sector.

SoPact aims to transform the global social sector efficiency through data-driven, collective impact measurement and scale social businesses, foundations, government agencies, development projects, CSR initiatives, and impact investments for the benefit of their clients.

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Posted on 2017-10-18

  • This week in San Francisco @SOCAP 10th Anniversary I had the opportunity to talk to social impact thinkers, practitioners, and leaders. While many impact investors are navigating different taxonomy and dictionaries of social impact, it is quite evident that “impact report” is becoming the holy grail of impact investment. Unfortunately, Impact Management world is full of different standards, framework and platforms/tools, which makes it hard to agree on a standard impact report template.

    While “Measure What Matters” has become the most popular slogan in the impact community, we must parse this slogan carefully. There are two directions that we should be aware of:

    1. Standardization Approach
    2. Democratized Impact Approach

    I will explain these concepts through the following paragraphs, starting with a small background on how the function and size of impact funds affect the way they manage impact. 

    Frequently, investment funds are classified by asset value: $200M-2B (large institutional), $5-200M (large), $5-50M (medium), and $5M or less (small). Normally, smaller impact funds tend to focus on underperforming markets neglected by others players, such as rural populations or remote regions. Unfortunately, many impact funds are rushing to grow funds size to increase risk/reward and management returns. The size of a fund often dictates the direction of impact management and reporting.

    As the fund grows into a larger category, the fund manager feels more aligned towards a standardization approach. Also, investors coming from Wall Street background are more likely to align towards standardization. While it offers familiarity to traditional financial advisors, it often fails to clarify (or understand) that unlike the financial world, social impact is context specific.

    Impact investment often relies on GIIRS rating, Community Development Finance Institutes (CDFI) use AERIS certification, and Microfinance uses MIX Market (and SPTF framework). In some instances, very large institutional impact investors are also known to develop their proprietary rating systems. Even some of the platforms such as B-Lab and AERIS offer certifications with some control over their own portfolio's metrics. While certification and rating play an important role, investors should take this as only one of the data points. Most impact investors that focus 100% on impact first portfolios should be well aware that every impact is context dependent. This context cannot be captured in the standardization/certification approach. The main point is to ultimately drive “social impact” to improve outcomes for the beneficiaries. Hence, having the  beneficiaries voice in learning true impact is critical.

    There are many other organizations focusing on social impacts, such as Asset Management entities (low-income real estate funds or funds focusing with an inherent goal of aligning with social impact), Businesses aligned to social goals, Social Venture networks, Public Sector, and certain Foundations. For them, context and metrics tend to be even broader. For that reason, we need to make sure that these new form of impact instruments don't blindly follow a Wall Street impact management approach. These organization would be better off with demonstrating impact through end-to-end impact management that ensures the impact to the beneficiaries is clearly communicated in form of narrative, qualitative and quantitative results, and an actionable ecosystem.

    Those evaluators looking to setup a complete end-to-end impact management strategy should consider the following step-by-step approach to managing their impact:

    • Capture results from the field through both narrative survey and qualitative/quantitative outcome and output. Ensure that direct beneficiaries are included in the net promoter score, feedback on progress out of poverty survey.
    • Transform key results based on ultimate communication goals such as demonstrate an effect of the program by a community, county or a zone, etc.
    • Aggregate results at the funder level so they have better data trust and learn the outcomes for strategic decision-making.
    • Demonstrate overall outputs/outcomes to see how and where your services are getting the intended results.

    This approach gives a true comprehensive impact thesis. Afterall, every investment is about social change, isn't it?

    What do you think? Please write your opinion. Read More Impact Perspectives at SoPact.com

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