Measure What You Value, Don’t Just Value What You Can Measure
Feb 21, 2017
At the 3rd annual 2017 Winter Innovation Summit in Salt Lake City, Utah, from January 25–27, I had the opportunity to interact with many of the leading thinkers, policymakers, investors, nonprofits, social entrepreneurs, and academics from around the globe. Key themes included social impact investment, the role of data and evidence, communications, public-private partnerships, impact measurement, and research-based best practices in social services. While all these areas are important, my main takeaways are the role of data and evidence, and public-private partnerships to support impact investment. One speaker read the words of Robert Kennedy that reinforced the idea of measuring what you value, not just what you can measure:
“Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”
—Robert Kennedy, University of Kansas, March 18, 1968
Social Impact investment targets both return on investment and social outcomes; one without the other is not sustainable. Therefore, the need for effective, repeatable, robust measurement is critical for impact investors and social enterprises.
However, developing effective and repeatable measures of social impact is easier said than done. It is certainly more complicated than simply calculating profit and loss. The social outcomes selected—and the business model chosen, including cost effectiveness and corporate governance—will determine how attractive a project is to investors. Getting this right is important, especially as interest in social impact investment grows rapidly. Better metrics will be needed.
Still, social benefits are difficult to value, measure and compare. Tracking and measuring these benefits can also be costly. Available systems, such as IRIS, managed by the Global Impact Investing Network (GIIN), provide a common language for impact measurement practices across the industry. Nevertheless, more work needs to be done to ensure consistency and comparability across the industry.
Together, the public and private sector can play a catalytic role in creating and enabling an ecosystem of proper policies, encouraging transparency and taking concrete steps to develop the market. Some governments have provided support through tax credits, guarantees and subsidies or have co-invested in social impact investing (SII) funds. Others have supported delivery organizations through technical assistance or focused on creating intermediaries to improve the process through SII wholesale banks, exchanges and other strategies to link investors and delivery organizations.
In Mexico, government regulations and the creation of the National Institute for Entrepreneurship (INADEM) have spurred the growth of private equity markets and are accelerating entrepreneurship. Most notably, the Secretary of Innovation and Technology in Jalisco, in partnership with the Multilateral Investment Fund of the Inter-American Development Bank, is leading an effort to create a social impact bond to incentivize and support various activities around social entrepreneurship. The state of Yucatán, in partnership with Promotora Social Mexico, has also launched a local initiative for social entrepreneurs and supports the development of the Latin American Impact Investment Forum in the region.
Furthermore, the Global Social Impact Investment Steering Group, a network based in the G8 with the aim of catalyzing the global social impact investment market, now includes two national members in Latin America: Brazil and Mexico.
According to the latest GINN Annual Impact Investor Survey (see GINN), investors committed more than US$15 billion globally in 2015. This suggests that money may not be the major constraint for the nascent impact investing market to take off. Government can foster impact investment and better metrics to measure what is important in social outcomes. That is the critical factor for this market to flourish.
The Winter Innovation Summit is hosted every January by the Sorenson Impact Center, a think-and-do tank that focuses on solving social problems using data, evidence, and innovation. Learn more about the Summit here.