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Is Improved Evidence the Next Big Priority for Impact Investing?

Jane Reisman, PhD — Impact Measurement Practitioner
Veronica Olazabal — Former Managing Director, Measurement, Evaluation & Organizational Performance, Strategic Learning & Impact, The Rockefeller Foundation
Photo credit: Anna Haines, 2018

The term impact investing was coined just over ten years ago at The Rockefeller Foundation’s Bellagio Center in Italy. At the time, the Foundation recognized a staggering gap between global development funding needs and the resources that were available. In fact, global philanthropic funds, even when combined with the development or aid budgets of governments, add up to billions of dollars; meanwhile, the cost of solving the world’s most critical problems runs into the trillions. Private capital is urgently needed in order to fill this gap and address pressing global challenges.

Since that time, the Foundation has invested in the growth and professionalization of impact investing – from incubating the platforms and networks to creating standards and impact measurements. It has also aimed to ensure ever-increasing investment of private capital toward solving social and environmental challenges.

While impact investing has grown to an over $100 billion global industry, efforts to measure the impact of these investments have not kept pace. In fact, the scarcity of evidence of the social and environmental returns of these investments has been cited as a significant threat to the continued expansion of the industry. While self-reported metrics and indices were a good start, they alone cannot meet the threshold for robust, measurable outcomes and impact.

Today, there is palpable demand for more robust, meaningful evidence of social change.

Believing this to be critical for the continued growth of the industry, the Foundation has worked since 2015 to stimulate demand for and help improve the supply of evidence of social impact. Consistent with its long history of supporting innovators and early adopters, the Foundation recently funded the nonprofit investment fund, Acumen, to scale its Lean Data approach– an approach that uses low-cost technology to gather high-quality data.

In the last half-decade, under the stewardship of leading organizations such as the Global Impact Investing Network (GIIN), impact measurement and evaluation have increasingly become priorities.

What started largely as a dialogue around metrics and indicators, primarily at the activity or output level, has evolved. GIIN’s recent launch of its Navigating Impact website and Impact Toolkit (previously known as the Resources Hub) are reflections of this evolution.

Today, there is palpable demand for more robust, meaningful evidence of social change. Companies are making significant strides toward strengthening their impact measurement and evaluation practices in ways that are right-sized and fit-for-purpose.

There are increasing examples of companies working to ensure that impact investments use the same level of rigor for impact measurement as it routinely uses on the financial side of impact investing. For example, a Foundation-supported case study of Toniic, a global network of active impact investors, documents how the network analyzes the impact of a collection of investments, aggregates data into a single database and ensures that its measurement efforts align with the Sustainable Development Goals. A case study of Green Canopy, an organization committed to promoting access to sustainable housing, looks at steps the organization took while developing the impact thesis for its resource-efficient homes. The study illustrates how Green Canopy applied a theory of change tool to systematically map the causal pathways between its strategies and intended impact.

In just over ten years, impact investing has burgeoned. The industry has seen evolution and growth in its standards, the volume and diversity of investments, and the standardization of its reporting and metrics. It is also now seeing less fragmentation and increased coordination at the international level through efforts such as the Impact Management Project, World Economic Forum’s Accelerating Impact Initiative, and Organization for Economic Cooperation and Development’s (OECD’s) Data Working Group on Impact Investment. Looking ahead, building a robust evidence base of the true outcomes and impacts of impact investing is the next frontier for this rapidly growing sector.

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