The space of development practice is growing to attract investors from various economic sectors. Although development banks have been applying the logic of investing for Social Impact for some time, these investment areas are now becoming more appealing for all investors looking to achieve not only harm mitigation, but actual, tangible social and environmental impacts which are not just neutral, but positive.
What’s the key difference?
Measuring Social Impact is really not all that different from traditional M&E practice, in fact, the development of an Investment Strategy makes use of the Theory of Change thinking popularized by M&E practice. The key difference is being able to financially quantify the measured change, so that it can fit into a framework of investment, and strategies associated with this. The other side of this coin is that M&E may hold a great deal of learning and information which is excluded from the narrower focus of Impact measurement for investing. In either case, having a full awareness of the two will ensure that you keep your project relevant to traditional grant funders, as well as to ‘new market entrants’ – the impact investors. Holding both aspects well will also ensure that you build institutional memory through recording your learnings, while building a sound track record of value for money practice. The two practices converge and diverge at various points, but both hold value.
Quantifying your Social Impact in Financial Terms
If you are aware of the need to quantify your Social Impact in financial terms, this may change the type of indicators you select to focus on, as some may be difficult to tie to a reliable financial proxy. At the same time, these non-quantifiable (in financial terms) changes, are often highly significant to explain changes that took place, or to describe significant transformations which took place in individuals or organisations, where such transformation was a necessary condition of the final impact being realised.
With this in mind, it is important to take a well-informed approach as you design your M&E system to be able to show Social Impact. Choosing indicators which serve your Social Impact, or investment rationale decisions will help to strengthen the way you think about change, as meaningful for improving livelihoods, wellbeing, or sustainability, but these need not be the only indicators you include in your analytical process.
An Example: Youth Employment Programme
Consider a youth employment programme. Your social impact lens may measure the present value of earnings of alumni from the programme, against the costs of providing them with skills, and linking them to employment opportunities (your programme activities), but as your implementation team knows all too well, it was the deep personal transformation which so many of your beneficiaries reported which truly enabled them to transition into the workplace. You might be able to assign financial proxies relating to their earnings, but considering significant increased wellbeing, personal growth, and the development of a sense of agency as the young people overcome previous challenges and achieve what they perceived to be impossible is somewhat harder to put a dollar value to! Showing the social returns to your social investors will be great but knowing how you achieved this is really the ‘secret recipe’ on which that successful investment hinges. To gather this information, you may have used methods of outcomes harvesting, through focus groups, or continuous surveys or journaling activities to capture these changes, all a part of mixed-methods, complexity M&E.
What both sectors present are tools and systems for understanding change and value. Delve into these and find what will best position you to communicate the change you’re creating. Barring any glaring logical inconsistencies between methods, there is nothing stopping you from innovating in this space.