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Strategy

Impact Management

Impact Measurement & Management Made Simple!

Streamline Impact Management_ Sopact
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Time to Read: 23 min | Audience: C-Level Management | Last Updated: April 2018
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Impact Management for Impact Investors

Current state of impact management

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 there are multiple impact frameworks, standards, and tools 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 impact? How are you incorporating voices from stakeholders and beneficiaries to tell the true impact story? One of the biggest challenge facing private equity, corporate, impact investors, and other asset owners is how to build a portfolio that defines and generates true impact. There is an ongoing effort by Impact Management Project (IMP) aligned with TONIIC T-100 and OCED group to solve this challenge.

Looking back, in 1994, when I worked at TIBCO/Reuters where 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 loosely coupled design that can flexibly exchange information with infinite scalability. 

How can we scale with same principle in 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 take an extra step to move further and get in-depth feedback from each assets. 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 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 ecosystems players. Three key layers are Asset Owners, Asset Managers, and Assets.

Impact ecosystem

In the following section we describe challenges how to effectively use different standards and framework 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

Reference framework for impact management

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

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

Impact Categories & Evaluation

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 a next task is to map their existing portfolio and then, over time, a transition that portfolio to be impactful in the way that best suits their intentions and constraints.

Investors's Impact Matrix 

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

  1. Impact allocation for a portfolio that not only communicates composition by instruments and sector composition but also defines impact metrics of a portfolio. This impact metrics can help cleary communicate real footprint. For example, €220 billion portfolios of the pension fund may achieve much lower impact which avoids harm compared the $10M portfolio of a family foundation that is focused on creating solution. As an investor seeking for higher impact might want to review impact metrics before investing.
  2. Impact investors are now asking to provide an evidence of how their capital creates an impact or how beneficiaries are benefiting from the stated impact? This has been often a challenging subject as often outcome of impact investors are not aligned with investee. Often they do not speak the same language of an outcome, and often do not trust results/data collected from investee. Creating 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

UN SDG, OECD, Social Value & Toniic T-100

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

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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 asset manager and an asset define, monitor and report result in a consistent manner.

End-2-End Impact Change Monitoring

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 not only provides enriched metadata at the metrics level but also cross-link 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 collect data, report progress, evaluate, and analyze results to better 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 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 a data on a regular basis. 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.

B-Assessment based approach might be useful to few especially GIIRS rating, most investees think that this approach does not convey necessary context. Second, the questions presented in the form for IBM Rating, pigeon holes to a rigid approach. Finally social and environment metrics used by IRIS is just too limited and does 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 provides an integrated theory of change, impact management reporting combined with portfolio or fund level automatic reporting. The story-driven wizards allow dynamic table, 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

Curious about what other setting up actionable impact management framework? Get a free copy of this e-book with 4 impact measurement experts.

 

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Impact Management for Investors & Enterprises

What is Impact Management?

Impact Management is a process of defining the positive and negative effects of enterprises and investors actions have on people and the planet, and then figuring out ways to mitigate the negative and maximize the positive impact in alignment with impact management goal.  Impact Cloud is closed aligned with with GIIN and Impact Management Project to make actionable impact management using well defined best practices and Impact Cloud software platform.

There is a growing need to improve both Impact Measurement and Impact Management both.  While most organizations are still figuring out measuring impact need for impact management is also becoming equally important 

  • From counting “what” happens to understanding “why” things happen
  • The “why” informs “what“ is important to measure
  • Empowered to select indicators appropriate to inform your decision making

Impact journey with following is key

  • A common journey
  • Different pathways 
    (for making the journey)
  • Levels of evidence required

GIIN and Bridges Ventures are driving an important collaborative  initiative that has gain a great alignment and movement towards a common principles.

Leading organization are also (Ref: Karl Richter) need even better processes  in coming years along following area.

  • Common Processes > Quality Assurance :  e.g. to enable a UNDP country office representative to communicate to a fund manager what processes they are expected to follow to be compliant with UNSIF requirements, and to provide auditors with a framework to check compliance
  • Common Functionality > Software:  e.g. to define the functionality for impact management software that vendors are expected to provide, to meet UNSIF requirements, and to enable accreditation of impact management software
  • Basis for Data Interoperabilty > Reporting Rigor: e.g. to inform design of data architectures, enable the production of comparable data for identifying legitimate claims of impact and progress towards the SDGs
  • Resource Allocation > SDG Prioritization:  e.g. if a company/ fund priorities say SDG 5, and recognizes contributions towards SDGs 10 & 12, then it should spend more resources on managing the impact relating to SDG 5 (methodological intensity and level of evidence), less on SDGs 10 & 12, and at least a minimum level of doing no harm (negative screen) on the other SDGs

Impact Investing Framework

 

Using the language of impact investing is essential, whether you're working at a funding level (investors) or at an asset level (i.e. receiving the investment). A shared impact investing language allows these stakeholders to define shared expectations for how impact is going to be measured and reported. This is especially important if the deal structure is dynamic, based on reaching certain impact thresholds

Standard Impact Investing Frameworks

Sustainable Development Goals (SDGs)

The Sustainable Development Goals are a set of 17 objectives announced by the United Nations in 2015. The purpose of the goals is to spur global collaboration, mobilize capital, and catalyze new solutions to the world's most pressing problems.

UN-SDGs 17 GoalsThe Goals enable organizations of all types to frame their impact in terms of these categories, and also measure progress using the comprehensive indicators list also provided by the UN.

For example, for SDG 7: Affordable and Clean Energy, there are 5 general targets and 6 indicators. The target is more of a global goal (e.g. "By 2030, double the global rate of improvement in energy efficiency") while indicators can be measured on an organizational level by funders and their assets (e.g. Indicator 7.1.1 is the proportion of population with access to electricity.)

IRIS Metrics

The most used impact investing metrics, IRIS is a standardized system originally conceived by the Rockefeller Foundation, Acumen, and B Lab. They were built upon dozens of existing standards from a variety of sectors. Today, there are about 400 metrics in the IRIS catalog, which can be accessed for free here. An example of an IRIS metric can be seen in the image below.

IRIS metric percent recycled materials

GRI Sustainability Reporting

The Global Reporting Initiative (GRI) developed the world's first standards for sustainability reporting. Organizations use these standards to guide the information they disclose regarding social, environmental, and economic impacts. It also includes a set of principles to further structure that reporting process.

The GRI has a comprehensive resource center to help any organization get started using the GRI as a reporting framework. This includes a document detailing how to link the GRI standards with the SDGs. For a document detailing how to link GRI with IRIS metrics, click here.

Impact Management Resources

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