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Alnoor Ebrahim, Associate Professor, Harvard Business School Kelly McCarthy, Senior Manager, Global Impact Investing Network Daniel Brown, Doctoral Candidate,

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Presentation on theme: "Alnoor Ebrahim, Associate Professor, Harvard Business School Kelly McCarthy, Senior Manager, Global Impact Investing Network Daniel Brown, Doctoral Candidate,"— Presentation transcript:

1 Alnoor Ebrahim, Associate Professor, Harvard Business School Kelly McCarthy, Senior Manager, Global Impact Investing Network Daniel Brown, Doctoral Candidate, Harvard Business School Correspondence to: aebrahim@hbs.eduaebrahim@hbs.edu The State of Impact Measurement An update for the Social Impact Investment Taskforce Guildhall, London, July 9, 2015

2 At a Glance: G7+1 Mobilizing Convene diverse players (Canada, France) Influence legislation (Aus, Italy, Japan) Build knowledge base via investor surveys & academic centers (Aus, Italy, US) Standardizing Process guides (Japan, UK, Germany) Process/assurance standards (Germany, UK) Outcome standards by industry (France, UK) Transparency/reporting (Germany, UK, US) Financing Pay for Success/SIBs (Aus, Canada) Bank of unclaimed assets (Japan) Catalyze philanthropic support (US) Source: National Advisory Board updates to Social Impact Investment Taskforce (2015)

3 It is early days (still)… Though there is increasing understanding of social impact measurement, the practice is still under development. (Japan) [Need] to develop an impact measurement culture before setting impact objectives to measure. (Italy) Measurement of impact … continues to vary on a deal-by-deal basis. (Canada) Source: National Advisory Board updates to Social Impact Investment Taskforce (2015)

4 I.Methods II.Adoption III.Ecosystem

5 Guidance (process) Impact Measurement Working Group Social Impact Investment Taskforce (2014 ) JP Morgan (2015 ) EVPA (2013 )

6 Methods for different stages Estimating Impact for due diligence 1 Monitoring Impact to improve program 3 Evaluating Impact to prove social value 4 Planning Impact through strategy 2 Expected Return SROI Theory of Change Logic Model Mission Alignment Social Value Criteria Scorecards Quasi-Experimental & Experimental Methods RCT Historical baseline Pre/post test Regression discontinuity design Difference in differences Post-InvestmentPre-ApprovalDue Diligence Process Alignment: Source: Ivy So & Alina Staskevicius, (2015), “Measuring the ‘impact’ in impact investing,” Harvard Business School, MBA independent project. http://www.hbs.edu/socialenterprise/pdf/MeasuringImpact.pdf http://www.hbs.edu/socialenterprise/pdf/MeasuringImpact.pdf

7 Data Quality GIIRSGRISASBSROI Materiality Reliability Comparability Additionality Universality

8 Data Quality GIIRSGRISASBSROI Materiality √√√ Reliability √√√√ Comparability √√√(√) Additionality √ Universality √√√

9 I.Methods II.Adoption III.Ecosystem

10 EVPA Guidance Adoption How social/environmental performance of investees is measured IRIS Metrics Adoption

11 So… Investors appear to be seeking and using general guidance and some standardized metrics But… What are they actually measuring ? How are they judging performance ?

12 Top 10 IRIS metrics RankRegistered UsersMetric 157Client Individuals: Total (PI4060) 250Full-time Employees: Total (OI3160) 344 Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 ) 442Permanent Employees: Total (OI8869) 541EBITDA (FP1657) 641Net Income (FP1301) 737Client Individuals: Female (PI8330) 830Net Income Before Donations (FP3274) 930Units/Volume Sold: Total (PI1263) 1029Part-time Employees: Total (OI8864) 166 registered users

13 Top 10 IRIS metrics RankRegistered UsersMetric 157Client Individuals: Total (PI4060) 250Full-time Employees: Total (OI3160) 344 Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 ) 442Permanent Employees: Total (OI8869) 541EBITDA (FP1657) 641Net Income (FP1301) 737Client Individuals: Female (PI8330) 830Net Income Before Donations (FP3274) 930Units/Volume Sold: Total (PI1263) 1029Part-time Employees: Total (OI8864) 166 registered users. Financial

14 Top 10 IRIS metrics RankRegistered UsersMetric 157Client Individuals: Total (PI4060) 250Full-time Employees: Total (OI3160) 344 Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 ) 442Permanent Employees: Total (OI8869) 541EBITDA (FP1657) 641Net Income (FP1301) 737Client Individuals: Female (PI8330) 830Net Income Before Donations (FP3274) 930Units/Volume Sold: Total (PI1263) 1029Part-time Employees: Total (OI8864) 166 registered users. Financial, Operational/HR

15 Top 10 IRIS metrics RankRegistered UsersMetric 157Client Individuals: Total (PI4060) 250Full-time Employees: Total (OI3160) 344 Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 ) 442Permanent Employees: Total (OI8869) 541EBITDA (FP1657) 641Net Income (FP1301) 737Client Individuals: Female (PI8330) 830Net Income Before Donations (FP3274) 930Units/Volume Sold: Total (PI1263) 1029Part-time Employees: Total (OI8864) 166 registered users. Financial, Operational/HR, Social (output)

16 Top 10 IRIS metrics RankRegistered UsersMetric 157Client Individuals: Total (PI4060) 250Full-time Employees: Total (OI3160) 344 Jobs Created at Directly Supported/Financed Enterprises: Total (PI3687 ) 442Permanent Employees: Total (OI8869) 541EBITDA (FP1657) 641Net Income (FP1301) 737Client Individuals: Female (PI8330) 830Net Income Before Donations (FP3274) 930Units/Volume Sold: Total (PI1263) 1029Part-time Employees: Total (OI8864) 166 registered users. Financial, Operational/HR, Social (output/ outcome )

17 Performance challenges Source: GIIN, J.P. Morgan 2015 Given these challenges, how satisfied are investors with the social performance of their portfolios?

18 Performance relative to expectations

19 Measurement Conundrum Many challenges to measuring social impact… Yet investors are satisfied with social performance! o Highly idiosyncratic practice; limited convergence o Little external scrutiny or reporting obligations o Few incentives or demands for systematized information See: GIIN/J.P. Morgan 2015; EVPA 2014. Investing for Good, Esmée Fairbairn, Big Society Capital (2015), “Oranges and Lemons.”Oranges and Lemons New Philanthropy Capital (2014), “Smart Money: Understanding the Impact of Social Investment.”Smart Money: Understanding the Impact of Social Investment

20 I.Methods II.Adoption III.Ecosystem

21 A Growing Ecosystem Standard s & Ratings Guidance Metrics

22 Where are we? Impact Measurement Working Group, Social Impact Investment Taskforce, 2014 Emergence Convergence Standardization Integration Convergence on: Process guidelines Data quality (except additionality) Not on: Metrics (by industry, investment stage, or investor type) Performance of investees or investors

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