Entries in metrics (6)


Impact investment and a measuring the higher purpose

An upcoming conference on impact investing at the Vatican highlights just one aspect of the growing interest in the intersection between financial capital performance and human, social and environmental performance, according to a recent article in the Financial Times.

Impact investing has been gaining traction in mainstream wealth management circles, generating both funding and attention to the issue of how to measure the social impact -- as well as the financial returns -- of a given investment. Exactly how much capital is invested in this manner is a point of some discussion: the Global Impact Investing Network (GIIN) has identified about $75 billion in total, while BlackRock -- one of the world's largest investment firms -- states that it alone manages $200 billion in impact investments. Still, there is clearly momentum behind the idea of doing well by doing good in the capital markets.

The requirement to measure social impact is what differentiates impact investing from other types of investment activity, such as socially responsible investing (SRI), or environmental, social and governance (ESG) investing, which apply various levels of screening up front to weed out certain industries or invest in companies that exhibit certain characteristics.

As expected, there is an active debate about what the right metrics for impact investments should be, and how they should be calculated. These are the same questions we addressed in developing the economics of mutuality, and we are very interested in the evolution of the answers.

-- Clara Shen


Measuring economic, social and environmental impact 

The Aspen Network of Development Entrepreneurs (ANDE) is a global organization consisting of members that support small and growing businesses (SGB) in emerging economies.

A central element of ANDE's work involves promoting the measurement of the impact that these businesses have across multiple dimensions -- economic, social and environmental -- and it has developed it's own core set of metrics to track the development of the SGB sector. ANDE also recommends that its members adopt IRIS, a catalog of social, environmental, and financial performance metrics for impact investors from the Global Impact Investing Network.

We are interested in ANDE's efforts to foster common, transparent measurement definitions, and share its belief that these can improve not just credibility but overall business performance as well. For a closer look at how ANDE and its partners are using metrics to support value creation, I encourage you to read this SSIR article that postulates:

"For metrics and evaluations to create value for us, individually and collectively, we must do two things:

  1. Integrate impact metrics with financial and operational ones. Integrated metrics can help organizations develop better products and services, improve resource allocation, and build more efficient and impactful businesses.
  2. Implement targeted, actionable evaluations that are useful to multiple stakeholders and fit with collective learning agendas. Such evaluations will build on existing knowledge; break down big questions into manageable, answerable pieces; and put the answers back together to inform strategic decision-making for enterprises and the sector at large."

Image source: ANDE

-- Clara Shen


Monitoring and evaluation at the middle of the diamond

A business model shouldn't remain theoretical; if it's to be successful, it's costs, production and impact must be accurately measured. This applies to models meant to work at the middle of the economic diamond -- with emerging consumers worldwide -- as much as with new digital business models deployed in developed economies.

I enjoyed a recent NextBillion piece on measurement and evaluation because it reminds us that you need to take the time to develop the right metrics in order to get the most value from them.  In it, Heather Esper, program manager of impact assessment at the William Davidson Institute at the University of Michigan, reviews nine tips for M&E for "base of the pyramid" business models. These include:

  1. Metrics are essential to inform decision-making, understand impact, monitor progress toward targets and identify areas of opportunity.
  2. Many professionals now accept all assessment types (impact, process, performance, etc.) and methods (qualitative and quantitative) and use a range of these to incorporate multiple perspectives and types of indicators depending on their organizational needs and budget.
  3. Using assessment to create value works best when it is driven by the business or organization being assessed, as it ensures reporting is relative and in line with organizational goals.  
  4. Evolve with your metrics – as you grow and your metrics grow, they can become more robust and complex. Think big, start small. Focus on collecting data to answer priority questions and build your data collection from there.
  5. Be clear in the goals of data collection and the value you expect to extract from that data so that focus and clarity is maintained as you acquire data and use it.
  6. Assess only what you will use and what will bring value to the organization. This means you should have the capabilities to analyze the data, and be able to share the findings in a way that resonates with different audiences. This is a critical component to reaping the most value from assessment.
  7. Measure what you can actually affect – don’t measure for the sake of measuring, but ensure you’re measuring with good reason and in an area in which you can intervene. Having a theory of change can guide you in what to collect and what you don’t need to collect.
  8. Collected information can be valuable to internal and external organizations (data collected for a particular purpose can also be used to create value in other ways).
  9. Pay special attention to opportunities to deliver value to the research subjects through data collection. Do not merely extract data.

Image source:

-- Yan Toh



Another view on sustainable social business

We are very interested in the work that Erik Simanis is doing in the sphere of social business and new business models. Erik is passionate about social impact, and with an MBA and PhD in business strategy and sustainability, he has guided start-ups, green-field ventures, and product teams in Eastern Europe, Africa, India, and South America over the past 20 years.

As his work makes clear, he is not interested in vague notions of social responsibility or “shared value” that have no foundation in real-world business principles. We recommend two papers (both published in the Harvard Business Review) for an overview of Semanis' outlook and approach (click on titles for the full text):

  • Reality Check at the Bottom of the Pyramid -- "If companies wish to launch flourishing ventures capable of transforming the lives of millions of low-income people across the developing world, they must get back to basic business tenets. However laudable its mission, a business built on unrealistic expectations will fail just as surely at the bottom of the pyramid as in a developed market."
  • Profits at the Bottom of the Pyramid -- "Blinded by devotion to social missions, too many companies with grand ambitions overlook profitable opportunities that match their resources and skills and jump into ventures that overwhelm their capabilities. A more realistic assessment of the challenges at the bottom of the pyramid can help companies generate the profits that will make socially beneficial businesses sustainable over the long term."

While we may approach some of the practical challenges from a different direction, we share a commitment to rigorous measurement and building an approach to social business that is sustainable for the long term.

-- Bruno Roche and Clara Shen


It's not just about the right questions -- it's about the right person asking the question

Kristin Lacy, NGO Semilla Nueva's director of Monitoring, Evaluations and Grants argues that for organizations to achieve truly sustainable, locally-led development, they must include program participants not only in project design, but also in project analysis.

In Who Asks the Question May be as Important as the Question Itself: When the surveyed become the surveyors, monitoring and evaluation becomes localized, Lacy advocates sustainability of M&E work through the empowerment of local communities. This puts the tools for sustainable development – from project design to evaluation – into the hands of the beneficiaries themselves.

It's a potentially powerful idea, and it parallels the operating model we have in mind for MAUA, which involves MAUA Operations Representatives (recruited from the poor communities we are operating in) administer surveys measuring Shared Financial Capital, Human Capital and Social Capital.

-- Jia Yan Toh