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Meeting the Challenge of Measuring Impact Investments

Sep 26, 2013 01:54 pm

Impact investors are increasingly evaluating their portfolios to assess social and financial returns, but this practice remains relatively uncommon compared to traditional grant-making sectors such as health or international development. Evaluation in a rapidly evolving field like impact investing certainly presents many challenges. However, as more foundations experiment with a broader range of investment approaches, stepping back to assess what works is critical. As a field, we need to move beyond our methodological concerns, particularly regarding the limitations in rating systems and social impact taxonomies, and reflect on the bigger picture of what is and isn’t working throughout the life cycle of an investment, from our decision making and due diligence approaches to the actual activities and services our investees are providing. The lessons we learn can only strengthen our individual and collective practices, positioning us to better address the social, economic, and environmental challenges we care most about.

Arabella Advisors recently conducted an evaluation of the Rockefeller Foundation’s program-related investment (PRI) fund, which gave us the opportunity to address these challenges head on. The evaluation revealed a number of key themes and findings that can strengthen the field. We are excited to share these findings alongside our colleagues at the Rockefeller Foundation at next week’s Independent Sector Conference in New York City. Here are some questions we will explore during our panel:

  • Foundations have the ability to deploy various types of capital, and it is not always clear what the right investment package is or when in an organization’s life cycle to invest. How do investors choose the right form of capital to maximize outcomes and impact?
  • A growing number of foundations are using impact investments to further advance their mission and social goals. However, aligning and integrating investment and grant-making approaches often requires operational adjustments and teams with diverse skills and backgrounds to work together in new ways. How program-related do a foundation’s investments actually need to be?
  • The impact investing field as a whole is still struggling to identify the best metrics and standards to use for measuring social impact. Which voices do we include in feedback and evidence? How are industry tools and taxonomies like GIIRS and IRIS helping us measure and understand impact?

Given the diversity of issues, investment approaches, and forms of capital, evaluating impact investments is likely never going to be a straightforward process. The more we collaborate and are transparent about our successes and failures, the more quickly we will learn as a field and the better we can serve the populations and geographies that matter to us. If you cannot join us at the conference, look out for a wrap-up of the panel discussion on this blog in the coming weeks.

Have experience evaluating PRIs or impact investments? Join the discussion below and be sure to check back with us in early October for a recap of the Independent Sector Conference session.

Whitney Mayer is a director at Arabella, where she provides guidance on strategy, evaluation, and implementation projects.

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