Sachi Shenoy, Co-Founder & Chief Impact Officer
We have reason to be optimistic, according to findings in the report recently released by Global Impact Investing Network (GIIN): The State of Impact Measurement and Management Practice, Second Edition. The report compiled survey responses from 278 impact investors from around the world, and Upaya was proud to participate. The findings reveal a sharp increase in investors who are systematically reporting on the impact of their portfolios. We should not, however, rest on our laurels until we remove the roadblocks that are preventing smaller, lesser-resourced investors from fully adopting impact measurement and management (IMM) practices.
According to the report, only 21% of respondents were able to use donor funding to support their IMM activity; contrast this with 69% (mostly for-profit funds) who support IMM through management fees, cash flows, or profits from investments. Respondents expressed frustration at the lack of donor funding to support IMM, although there is increased demand from these very funders for their grantees to report back on their social impact.
In order to remove this stubborn roadblock, it is critical that we non-profits present our IMM budgets as necessary to inform and improve our program work, which funders should support. The majority of survey respondents (77%) say that a primary motivation driving their IMM activity is to report impact to key stakeholders. A smaller percentage (57%) say that these findings help inform business decisions. It is commendable that impact investors are increasingly committing to impact reporting, but the real value in IMM is in using data to refine and improve program offerings. Unless funders and practitioners view this as core work, we will miss out on the true impact potential of this movement.
Roadblocks aside, we have much to applaud. The last two decades have seen a surge in impact investment deal flow, but impact reporting, for a long time, lagged way behind funds’ financial reporting. That is now starting to change. 87% of the respondents now regularly collect and analyze their own data to assess the social performance of their portfolios. Compared to just two years prior, more and more impact investors are converging around industry standards to guide their metrics and reporting: for example, 80% align to the UN Sustainable Development Goals (SDGs) versus 43% in 2017.
There is also an increased percentage of impact investors who are moving beyond merely reporting on “outreach” figures – 78% are measuring the outcomes of their work, and 43% go even further (like Upaya) to report on effects in terms of depth or significance. For example, Upaya collects survey data directly from jobholders around the change in their incomes over time, and how that income is helping the household emerge from poverty along specific dimensions, which I discussed this in depth in a recent webinar with SoPact.
Collecting such granular data is useful. For example, we amass a number of observations from the survey responses we collect from jobholders at our investee companies. The majority, for example, aspire to have access to a “rainy day fund,” because it is often the case that an emergency creates a massive financial hit and plunges them back into poverty. Armed with their feedback, we can work with the company founders to build in a savings facility as an employment benefit, and we then expect to see employee retention increase. Feedback from your target audience, in many different forms, can only help strengthen and focus business decisions. We at Upaya allocate 10% of our budget to IMM, and it is worth it.
n = 278; Source: The State of Impact Measurement and Management Practice, 2nd Edition, Global Impact Investing Network
Looking ahead with all this positive momentum, hopefully the 2021 GIIN industry survey will show us that the remaining roadblocks have fallen, allowing for more rigorous analysis and reporting. The next wave should show us that practitioners are incorporating learnings from their impact data to improve their programs and deliver better results to investors. We all know that some programs are effective, and others not so much … let’s openly acknowledge that and use our impact data to drive real change!
