The business of impact measurement and management
There is no doubting the positive impact investing and investors can have on a particular community or country. This is why leaders will usually go to great lengths and travel to distant lands to seek out investment. The adverse impact investors can have on a community, though, is not sold as much as the positive is. It is, therefore, essential to measure the impact of social entrepreneurs, check out the inferences and measure the effects appropriately.
What investors seek to-do
Social entrepreneurs that choose to serve a particular community go there with the best of intentions, at least most of them do. Ideally, they seek to leave a lasting impact that revolutionizes the community they are serving. Impact investing is not to be confused with charity. Social entrepreneurs also have an eye for their bottom line as they seek to make the changes they want to see in the community. Having the best intentions though does not mean that a few negatives do not come out as a result of the involvement of the enterprise in a community.
Need to measure the impact of investments in a community
Measuring the impact of social investments is not only beneficial for entrepreneurs, but also the community at large. Measuring helps to ensure that investors are making the impact they want in the places they have set up shop. Communities also benefit because there is an accurate analysis of where they stand at the other end of the impact investing agenda. It involves having an in-depth look and considering the negative and positive effects a company has on an environment. Measuring impact is done by certain metrics that the organization has to agree to. The standard metrics for analyzing impact are set up by research institutes.
A standard metric would be the IRIS system, which is very common among many investors. The system helps organizations increase data comparability and clarity, making it easier to measure impact. For this metric to help assess impact accurately, clearly defined investment objectives have to be presented. The IRIS metric is popular because of its alignment with the Global Reporting Initiative (GRI) Standards. Investors that go with this metric can do underwriting, screen deals, assess performance, compare investment strategies and do due diligence.
An alternative metric to use would be the Global Impact Investment Rating System (GIIRS). This metric helps determine an investment’s rating score on social and environmental impact. It builds on the IRIS metric by providing additional criteria to determine an investor’s fund score.
Measuring impact is a must for every entity that considers itself an impact investor or social enterprise. It is the only way to ascertain whether positive changes are being made and felt or not.
Managing impact
Managing the impact of an investor’s intervention in a community is important because it gives feedback on the effects of investments on people and the environment. It entails setting social and financial goals, as well as defining intentions and articulating challenges as well as constraints. Impact management being the serious process that it has to be, requires a consensus among different organizations. Just like impact measurement is assessed by certain metrics, management is done through a consensus among many organizations. Organizations, therefore, came up with consensus standards under the banner of the Impact Management Project (IMP). Under the IMP, management is looked at in five dimensions. These are;
- The materials that are going to be affected due to works done by an investor. Having a look at what will be affected by an investor’s intervention and the effect that will have on the investor.
- The extent of the effects brought about by an organization’s intervention and the significance of the effects.
- Stakeholders involved as an investor closes in on a certain community. The stakeholders have to be well defined as well as how the investor’s activities will affect them.
- A look at the status quo to see what exists without the intervention of an investor is an important dimension. An in-depth look at the state of affairs pre-investment will help assess impact after the investor steps in.
- Understanding the risks involved and putting in place measures to mitigate them. Dealing with the risks early helps an investor cushion against waste and ruin.
These dimensions of looking at impact investment provide a clear framework for dealing with effects of impact investing.