How do impact investors measure social impact?
The hallmark of an effective impact project is the realization of the goals and how the impact initiative has fared. We, at Artemis Impact, have talked at length about the significance of impact measurement, how to lead the activity, and arrive at measuring the quality and degree of the impact created. But all this was specific to impact drivers for self-assessment purposes. In this blog, we shall direct our focus to impact investors. How is it that those who park their money and make an investment in an impact project can measure the social impact achieved by the campaign, basically, how can they calculate the return value of their investment?
But before we go on to explain ways through which investors can measure impact, let us take a look at the definition of impact investing.
Impact investing is when investors direct their capital towards generating measurable, sustainable social impact. The capital is directed towards firms and organizations with a cause of generating social, environmental impact besides profits. The Harvard Business Review explains impact investing as, “directing capital to ventures that are expected to yield social and environmental benefits as well as profits—provides investors with a way to do well by doing good”.
Impact measurement is not an exercise that is carried out by investors after the realization of the impact and achievement of goals, in fact, it starts right at the time of choosing to invest in a particular impact project. The investor, before investing in a project, may like to assess the potential result before committing to the organization. After this, a periodical assessment of the initiative, its pace, and growth toward achieving the desired outcome may also be mapped. Finally, once the campaign reaches fruition, comes the step to evaluate and measure the impact, its returns, and the possibility of re-investing in the project.
Measuring social impact
In our series dedicated to calculating Social Return on Investment (SROI), you can get an in-depth understanding of how impact projects measure and value the degree of their impact in monetary terms. SROI is a proprietary tool of SVI.
This method involves measuring the value created in social, human, or environmental terms and using monetary figures to represent it. The process of SROI calculation involves meticulously following formulae to weigh outcomes against the costs involved. Mostly calculated in the form of a ratio, it exhibits how many dollars worth of social value is created per dollar spent.
An extremely significant aspect of measuring SROI is assigning monetary value to inputs, something which isn’t as easy as it sounds. Assigning monetary value to qualitative inputs may get challenging.
Theory of change
Another model that is worth exploring is the theory of change. It comprises causal pathways from outputs through outcomes via intermediate states leading to the impact created. ToC is a comprehensive description and illustration of how and why the desired change is expected to happen in a particular context, it is, therefore, a significant tool in mapping and measuring impact.
Artemis Impact Framework
Derived from the TOC, Artemis impact framework simplifies the components making it easier for organizations to design impact strategies and measure the impact. One of the benefits of using this framework is that it integrates seamlessly with other data collection & visualization features of the Artemis impact platform.
One more way to gather insights on impact is by matching the project’s strategy with end goals. For this purpose, scorecards can be prepared to monitor and measure key performance indicators on a range of metrics such as finance, operational cost, the social value created, among others. This way, the current scenario can be compared with parameters set during the beginning of the impact program and even with others operating in the industry.
Another approach is to assess the value of impact in its absence. This means making sense of the present situation in the absence of the impact achieved – a scenario where the impact intervention would not have existed in the first place.
All in all, social impact assessment requires more robust and dedicated tools. There is also a need to formulate a uniform, all-encompassing impact measurement approach to achieve large-scale, sustainable social benefit.
To learn more about impact investing, leading an impact project, and impact measurement, refer to our blogs on our website. Also, do not forget to check out our Artemis Impact mobile application, tailor-made for all impact leaders and creators out there.
Artemis Impact is a network of corporate, donors & non-profits. With our corporate enterprise solution, we aim to empower companies to build human-centered impact stories and create sustainable impact with their CSR programs & core business.