Metrics that Matter

The Global Impact Investing Network defines impact investment as capital investment into ventures, or funds with the motive of making social or environmental impact while reaping a financial return [1]. A key step before the investment is made, either through Social Impact Bonds or through Environmental, Social and Governance (ESG) focused PE firms, is impact assessment. The term impact assessment can be broadly defined as a set of methodologies that go beyond assessing the financial outcomes of the business by quantifying the direct/indirect impact on the people, the environment and the economy. 

In one of the readings, the former Governor of Massachusetts turned impact investor, Deval Patrick talks about adopting B Labs GIIRS standards for measuring impact [2]. This lead me to the question, how does a social venture quantify the social, environmental or political impact of its operations? These quantifiers would essentially define the bottom-line for a social venture.

     B Labs provides industry leading tools for impact assessment which help ventures define and measure the aforementioned quantifiers. The tool typically poses a questionnaire based on impact area and impact topic. The questionnaire serves as an indicator of the possible quantifiers for impact and the corresponding answers serve as a measure of magnitude.

   

     I decided to apply B Labs assessment tool [3] to the Envirofit case and determine a set of possible quantifiers for impact. Here is a subset of questions that the assessment yielded for Envirofit:

1. If tracked, what was the total or per use number of metric tons of carbon off-set or saved by use of your product or service, during the last 12 months?
2. Tell us more about how your product/service provides or is powered by cleaner burning energy than market alternatives.
3. Is there something different/innovative about the product/service that has changed the industry? Is this something that is replicable, unique at the time that it was created, and that has been emulated by other organizations?
4. If direct research on your product/service has been performed, did the results confirm that a desired outcome is being achieved? 
5. How do you verify that your product/service contributes to the desired outcome?

Each of these questions define and assess the metrics that matter. Hence such tools/standards can help not only impact investors/funds but also social venture founders to ensure that the investments are translating into the intended impact.

References:

[1] The GIIN. (2017). Impact Investing. [online] Available at: https://thegiin.org/impact-investing/.

[2] ImpactAlpha. (2017). What we know about Bain Capital’s $390 million Double Impact Fund. [online] Available at: https://news.impactalpha.com/what-we-know-about-baincapitals-390-million-double-impact-fund-8dd4e0c90571.

[3] B-analytics.net. (2017). Standards Navigator | B Analytics. [online] Available at: http://b-analytics.net/content/standards-navigator.