4. Project Objectives
• Determine
investors
knowledge
about
social
impact
metrics
• Assess
investors’
reliance
on
social
impact
metrics
to
make
investment
decisions
• Identify
the
tools
that
investors
use
• Identify
frameworks
to
reduce
barriers
for
greater
investment
• Provide
recommendations
to
government
aimed
at
improving
the
use
of
social
metrics
4
5. Overview of Metrics and Impact Investing
5
Source:
Clark,
Rosenzweig,
Long
and
Olsen
(2004).
Assessing
Social
Impact
in
Double
Bottom
Line
Ventures
6. Impact Investing: An Overview
“Investments
intended
to
create
positive
impact
beyond
financial
return”
Provide
capital
Businesses
designed
with
intent
• Transactions
tend
to
be
private
• Not
unintentional
positive
social
or
debt
or
equity
investments
environmental
consequences
Expect
financial
returns
…
to
generate
positive
social
• The
investment
should
be
expected
and/or
environmental
benefit
to
return
at
least
nominal
principal
• Should
be
part
of
the
stated
• Donations
are
excluded
business
strategy
• Market-‐rate
or
market-‐beating
• Should
be
measured
as
part
of
returns
are
within
scope
the
success
of
the
investment
Source:
JP
Morgan,
Rockefeller
Foundation
and
GIIN,
2010
6
10. Who are Impact Investors and Why Do Metrics Matter
• Investors
vary
in
their
motivations,
assets,
risk
and
return
expectations,
social
impact
objectives
Financial
First
Investors
Impact
First
Investors
Optimize
financial
returns
Optimize
social
or
environmental
impact
Minimum
requirement
for
Minimum
requirement
for
social
or
environmental
financial
returns
impact
E.g.
banks,
pension
funds,
E.g.
Foundations,
family
investment
funds
offices,
impact
investing
funds
• The
way
investors
use
metrics
varies
depending
on
their
purpose
10
11. INVESTMENT LIFECYCLE
Value
Definition
Due
Diligence
Monitoring
Reporting
• Identifying
• Selecting
• Understanding
• Communicating
impact
goals
investments
whether
impact
impact
with
and
investment
which
fit
with
goals
are
being
stakeholders
parameters
an
investor’s
achieved
impact
goals
11
12. Measurement Principles, Approaches and Tools
Theory
of
Case
Studies
Change
Cost
Benefit
ESG
Screens
Analysis
Social
Return
on
Investment
12
13. Measurement Principles, Approaches and Tools
Investor
Perspectives
“[Outcomes
are]
complex
and
even
if
• Informants
favour
outcome
and
you
find
an
appropriate
metric,
there
impact
measurements
but
very
is
so
much
analysis
…
that
needs
to
few
are
able
to
collect
this
go
into
proving
that
a
certain
information
percentage
of
the
outcome
is
related
to
my
intervention.”
• Informants
found
it
less
helpful
to
-‐
Program
Officer,
Foundation,
QC
measure
metrics
at
the
portfolio
level,
due
to
sector
specificity
• Limitations
– Comparability
and
standardization
13
14. Value Definition
• Key
informants
lacked
consensus
Definition:
Theory
of
Change
on
the
value
of
a
theory
of
change
A
theory
of
change
is
a
map
that
describes
the
“process
of
planned
– Non-‐profit
investment
funds
social
change,
from
the
and
foundations
were
more
assumptions
that
guide
its
design
likely
to
develop
theories
of
to
the
long-‐term
goals
it
seeks
to
change
to
clarify
their
goals
achieve”
(Community
Foundations
and
shape
organizational
of
Canada,
2012).
strategy
– Financial
first
investors
using
investment
thesis
to
identify
their
values
14
15. Due Diligence
• Most
informants
use
metrics
in
Investor
Perspectives
the
due
diligence
phase
to
capture
“We
have
turned
down
long
term
value
and
reduce
risk
numerous
promising
• Informants
identified
the
fit
of
a
opportunities,
even
going
to
venture
within
their
impact
the
length
of
doing
an
on-‐
site
(and
costly)
due
parameters
as
a
key
criterion
for
diligence
trip
and
killing
the
investment
deal
because
we
weren’t
• Investors
favour
quantitative
data
convinced
the
fund
manager
but
value
qualitative
factors
such
understood
the
importance
as
compelling
concept,
of
ESG
value
add.”
relationship
with
entrepreneur
-‐
Manager,
Investment
• Informants
had
previously
chosen
Fund,
ON
not
to
invest
in
an
organization
because
it
was
not
able
to
convince
the
investor
of
its
ability
to
achieve
its
social
objective
15
16. Monitoring
• Investors
monitor
their
investments
Best Practice: Working
to
ensure
that
financial
and
social
Closely with the Venture
objectives
are
being
met
A private equity investor
we spoke with works
• Informants
argue
that
metrics
closely with the
should
be
monitored
on
an
ongoing
companies in which they
basis
and
integrated
into
invest. They assume a
management
board seat after investing
in a company to develop
a strong working
• Informants
are
divided
about
relationship with their
frequency
of
monitoring,
depending
investees. They provide
on
their
organization
and
more than just capital -
stakeholders
ongoing mentorship and
support to their investees.
• Challenges
related
to
data
acquisition
and
capturing
impact
16
17. Reporting
• Metrics
help
investors
to
Investor
Perspectives
understand
and
communicate
the
“If
we
tell
our
investors
value
achieved
by
an
investment
that
we
invested
x
dollars
and
saved
y
GJ
of
energy,
does
that
really
resonate
• Increases
accountability
to
with
them?
We
need
to
stakeholders;
increasing
pressure
think
through
who
the
to
do
so
audience
is
for
these
measures
and
right
size
them,
as
opposed
to
• Marketing
value
of
metrics
picking
something
off
the
shelf.”
• Challenge:
capturing
the
full
-‐
Manager,
Investment
range
of
outcomes
related
to
their
Fund,
ON
investment
17
18. Best Practices
• Working
closely
with
ventures
• Participatory
framework
design
• Incentivizing
measurement
• Values-‐based
investing
18
20. Costs of Social Measurement
• Expensive
and
resource-‐intensive
Investor
Perspectives
“[Measurement]
is
not
an
• Many
investors
are
reluctant
to
“additional”
cost.
It
is
part
of
their
unique
selling
divert
resources
from
operations
proposition,
not
an
add-‐on,
to
measurement
so
the
business
must
incorporate
this
information
• Investors
pick
ventures
that
into
its
sales
presentations.”
integrate
measurement
as
part
of
-‐
High
Net
Worth
Individual,
their
business
ON
• Investors
are
open
to
subsidizing
measurement
but
have
not
had
to
20
21. Use of Third Party Service Providers
• Third
party
provides
provide
Investor
Perspectives
credibility
and
help
to
address
“It’s
important
that
we
have
a
investors’
lack
of
capacity
and
expertise
third
party
evaluator
so
that
loan
recipients
do
not
feel
their
responses
threaten
their
loan
• Managing
impact
data
in
house
is
status.
Validation
is
also
popular
for
investors
with
limited
important
for
our
credibility.
"
resources
or
a
customized
approach
-‐
Manager,
Non-‐Profit
to
measurement
Investment
Fund,
Ontario
• Many
investors
leave
measurement
to
the
venture
and
emphasize
the
importance
of
using
data
that
is
already
collected
21
22. Competing Priorities
• Investors
downplayed
the
role
of
Investor
Perspectives
metrics
in
their
ability
to
achieve
“Is
[measurement]
the
best
use
of
their
social
and
financial
objectives
ventures'
time,
money
and
capital?
We
have
a
responsibility
to
use
that
data
and
• Investors
are
concerned
with
not
just
collect
it
because
it
fits
ventures
diverting
attention
from
somebody’s
framework.”
–
Manager,
value
creation
to
measurement
Credit
Union,
BC
• Investors
worry
that
a
focus
on
measurement
may
slow
the
sector
down
• Investors
are
still
placing
capital,
using
metrics
where
they
are
helpful
22
24. For Investors
• Clarify
why
metrics
matter
• Collaborate
with
other
investors
on
due
diligence
• Share
sector-‐based
strategies
for
metrics
24
25. For HRSDC and Other Government Agencies
• Incentivize
collaboration
between
investors
and
ventures
on
social
measurement
• Encourage
the
creation
of
policy/regulation
that
advances
social
impact
measurement
• Encourage
the
use
of
non-‐financial
indicators
in
government
procurement
and
reporting
• Develop
an
understanding
of
ventures’
use
of
social
metrics
25
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