Measuring Impact Beyond Financial Return Dr. Andrea Colantonio London School of Economics, London, UK January 2013 Slide 1
Context - Key findings from past research on the impact investing performance front, the biggest challenges lie in metrics there is a frequent lack of awareness of the impact actually pursued by investments feedback on the quality and usefulness of metrics of impact outcomes is often weak there is no simple, single solution to better assessment, no single tool that can transform understanding Slide 2
Exit Context the impact investment space is complex (draft) Sector & ethos Planned outcomes Track record Staff skills Financial requests Investment objectives Expected financial returns Type & scale of social outcomes Perceptions of risk Follow-through coach & assess Capabilities & governance Customer response Competitors response Policy environment Operational risks Financial outcomes Entrepreneurs & project owners Source & screen deal Social investor Agree deal Funded projects Grow value Social outcomes Advisers for investment readiness Evaluators Regulators Changed capabilities Exit Pool of potential investors (philanthropists etc) Indirect investors (e.g. Big Society Capital) Legal advisers Accountants / economists Due diligence experts Slide 3
Exit Context the impact investment space is complex (draft) Sector & ethos Planned outcomes Track record Staff skills Financial requests Investment objectives Expected financial returns Type & scale of social outcomes Perceptions of risk Follow-through coach & assess Capabilities & governance Customer response Competitors response Policy environment Operational risks Financial outcomes Entrepreneurs & project owners Source & screen deal Social investor Agree deal Funded projects Grow value Social outcomes Advisers for investment readiness Evaluators Regulators Changed capabilities Pool of potential investors (philanthropists etc) Indirect investors (e.g. Big Society Capital) Legal advisers Accountants / economists Due diligence experts Exit Slide 4 Impact Investing Metrics Perceptions of Metrics / participation in measurement
Aims Conceptual framework to understand and define impact investment activities, especially in terms of social entrepreneurship sustainability-focussed business models micro-finance Set out analytical model outlining how impact objectives are incorporated into investment decision and value creation Draw out empirical findings from local and community studies on extent of importance of impact objectives Develop new tools and methodologies to improve decision-making and evaluation Slide 5
Methodology 1 Literature review Identify and learn lessons on KPIs from (a) existing good practice and (b) policy research Structure insights into investment processes Gain perspectives through investor survey and interviews Structure using decision tree framework Case study analysis Examine in detail how impact has been measured and incorporated at preappraisal, appraisal and monitoring Analysis of decisions in practice Assess, drawing on existing data: key forms of value; priorities of value; and links between risk and return Slide 6
Methodology 2 Statistical overview of decisions Detailed regression analysis Postinvestment statistics Summary of project data Survey data Details of wider objectives Survey data Case study In depth consideration Case study Slide 7
Huge interest in SIBs Team and expert advisers London School of Economics (LSE) Project director Dr. Andrea Colantonio Project manager Neil Reeder Project advisor Prof. Ricky Burdett Project advisor Prof. Anne Power Research network (to be confirmed) Young Foundation, Euclid, NESTA (Survey & workshops) Slide 8
Contact a.colantonio@lse.ac.uk Slide 9