In this impact learning series, we'll talk about impact investments measuring social impact right
way. Hi my name is Unmesh Sheth. Today in this video we'll talk about why measurement
is important in impact investing what are the challenges of measuring the impact today
and how we can improve from here onwards so first of all why should we measure impact
for the impact investing number one to demonstrate whether the investment is achieving
the intended purpose of the goal secondly to increase the engagement and motivation of
all the stakeholders fundamentally impact is all about stakeholders and if you don't really
really engage them in outcome creation process you're not gonna achieve the best results
sharing the unbiased data that can serve as a bigger purpose of mobilizing additional capital
and high impact investments and lastly it can also support investors and advisor to better
allocate the resources so there are four stages of impact investing from investors eye first
one typically starts by estimating impact by performing during the pre-investment period
second step stage is planning for impact and that process is typically designed during the
guild negotiation per period and once investment has been made the investors and investee
agree on monitoring impact during throughout the life cycle when investors is invested until exit
and when you are exiting you are evaluating impact once every industry is complete out
how are there are fundamental things that are really not working very well impact investing
in impact measurement management are two sides of coin but this current approach we have today
is quite fragmented and incoherent while there are many standards and frameworks and tools even the
methodology for certification has been established that fragmentation of standard surface created a
very inconsistent approach for every asset manager we have looked at today in fact there is a trend
where according to GIIN the impact investing industry is experiencing significant momentum
but major firms large small and were entering the impact industry markets every week
the industry has received swell of support from governments and academics
but the big challenge here is that 66 percent investors are concerned about impact washing
and 35 percent of investors are concerned about comparing and validating impact results without
them it's very difficult to make better decisions for them so how can you really actually find out
that an investors or investees doing impact washing it's very simple
not collecting stakeholder data or only reporting activity in output and not the outcome
putting SDG icon in the report without even aligning SDG goals and targets
and essentially comparing the results based on other comparable results and maybe most reports
that can really be based on selective stories and not evidence so how can impact investors improve
the success rate of their investments first to assure the sustainability of impact exit
second build an internal capacity for impact learning this is the most
important point out of all and then optimize social impact along the financial profit
it is important to understand that the impact is not a one-time process it's a continuous
iterative can process and every cycle you're going to be learning from the impact impact dimensions
of stakeholders continue to improve every year after year and for that matter OPIM operating
principles for impact management has come up with the nine principles for strategic intent
origination and structuring portfolio management and impacted exit one of the key principle that is
the very important that to assist expected impact at each investment based on systematic approach
and that can be only achieved by improving the capacities of each investee
and not simply by demanding metrics during the term sheets so why are the organizations
actually not measuring the impact number one there is insufficient financial resources
lack of knowledge on how to manage the impact insufficient human resources
no set impact goals and don't have the right tools and impact is not the right priority it
can be any of this thing can really throw off the whole impact bandwagon actually there are a lot
of benefits to the investors that is above and beyond impact management and the most important
to that is that by going through impact management they are likely to achieve fastest product market
fit in fact impact measurement management is no different than product market fit because without
engaging stakeholder and outcome and maximizing it you are not going to be able to do that and
in order to do that obviously, you have to make sure that you you have create access the market
opportunity you connect with the stakeholders you enhance and scale the operations gather the
insight from the clients and design the product and services that with the brand
that can really create you long-term scalable business model for you unfortunately today's
impact measurement is complex oftentimes we see people enterprise enterprises with a 15 plus
outcome and very resource heavy with the endless analysis in fact as soon as we see the um
the theory of change with many many outcomes that's a red flag so stop doing that make sure the
theory of change has a one and simple one goal which is really focusing on impact experiments
which we have talked about in several other videos on how to maximize it
so here is how you can maximize impact as impact funds make sure you collect the necessary data
make evidence-based impact decisions increase entrepreneurs capacity encourage transparency
and stakeholder data and share your insights with others and maximize the impact we have is
this series dedicated to impact experiments and we've been sharing a lot of examples from many
entrepreneurs on how to maximize impact and the key to that is impact experiment is designed as
small short frequent experiments with a key immediate outcome designing towards stakeholder
survey if when you have sufficient number of response rate possibility aligning with the
five dimensions of impact and using platform block impact cloud to get further insights
based on qualitative and quantitive data analysis so as you do that very important that you focus
as an investor to not aggregate data results across the portfolio but focus
on your additionality and not the impacted recognition secondly make sure that your
data collection process is aligned towards what who how much contribution at risk
and it's one of the most important question is making sure that your organization is serving the
right demographics make sure the mission clearly aligns with the demographics you want to serve
race ethnicity social economic conditions location etc design simple longitudinal survey
that includes these key elements for example if your goal is to create affordable housing program
your goal is to make sure there is no gentrification happens if you can continue
to focus on financial profitability at the expense of stakeholder chances are actually you're going
to end up creating negative social impact and you may have to wind up your investments quite early
so make sure you keep doing this kind of experiments re-run re-run and optimize the process
manage the process through the impact management cycle and maximize throughout the journey thank
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