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By Anna Smukowski '19
January 29, 2019
At The Atlantic’s Power of Purpose Summit and the Columbia Social Enterprise Capital for Good Conference in fall 2018, the consensus was clear: the way people are making money and choosing to spend it is changing. Underlying this change is the opportunity for individuals and corporations to align their careers and capital with impact, however the challenge of how to measure that impact still remains. Fast forward to January 2019, TPG Growth’s Rise Fund launched Y Analytics as a for-profit impact measurement and research firm and the Acumen Fund has spun out their Lean Data initiative as 60 Decibels, a new for-profit firm. With these firms come new ethical implications for how for-profit firms quantify, and monetize impact.
Similar to issues I’ve encountered during my day job in Pay for Success (PFS), calculating and monetizing the cost-benefit of social services is complex involving many interplaying factors and parties. The level of evidence needed to demonstrate social value of high performing social service providers to engage in PFS negotiations is in the form of quasi-experimental design(s) or randomized controlled trial(s) – the most rigorous forms of evaluation. These studies show clear impact, including direction and magnitude of impact, of a social service on a target population but have had their fair share of ethical issues including the potential to deny vulnerable populations critical services in order to test a model.
“In the absence of rigorous evaluation of a company's social performance, the for-profit impact measurement industry has rolled out terms like impact multiple of money where the methodology attempts to put a dollar value on the social impact expected from a company’s business activity based on evidence-based financial proxies of impact.
Concerns by impact investing veterans like Jed Emerson include missing out on funds that tackle larger, systemic societal issues by focusing on maximizing project level impact or cherry picking positive outcomes and dismissing negative ones. On the positive side, the move to standardize impact measurement provides an opportunity for new investors to understand and evaluate a complex industry in terms they can understand: money. According to ImpactAlpha an example of the multiple is the Rise Fund’s investment in the education technology firm EverFi. The fund estimates that they could deliver $500 million in societal benefit through the reduction of alcohol-related deaths, averted sexual assaults and lowered student debt burden off of a $100 million investment.
As the impact measurement industry evolves, it will be interesting to see how they grapple with similar challenges nonprofit social service providers, governments and evaluators have grappled with in creating and funding effective social programs.
Thank you to the Bernstein Center for sponsoring my attendance to The Power of Purpose and The Social Enterprise Conference as part of their ethical leadership development grants for the Student Leadership and Ethics Board. Thanks to ImpactAlpha and the Urban Institute for references.
For more information, please feel free to visit our Student Leadership and Ethics Board homepage.