Impact Management ➤ Impact Investors

Impact Investors looking to confirm with standards, frameworks, and certifications

Key drivers

Design requirements

Current State Design

Framework: Step by Step

Impact Cloud® ▶ Consistency, Standards and Certification

Case Study

Key Drivers

This solution is most appropriate for impact practitioners or partners

  • Who wants to build an effective impact strategy
  • Choose effective impact metrics
  • Create a balanced approach to impact metrics
  • Align data strategy and stakeholder survey with impact metrics

Design Requirement

Impact evidence should be bottom-up

  • Align core metrics between organization and downstream partner
  • Link key metrics from partners with an organization
  • Impact investment or grant-making cannot make a proper decision without impact evidence. Define critical due diligence process and monitoring and. evaluation metrics between organizations and downstream partners
  • Avoid creating proprietary impact frameworks as they do not provide broader learning

Metrics or Results Consistency

  • If possible align with theory of change and impact management project
  • Carefully design impact metrics that allow a better individual investment/grantee results evaluation and not just nearly collect results that cannot be improved

Reporting and Learning Consistency

  • For continuous learning and improvement, make sure that you can build quality reports fast at individual grantee/investee or partner level
  • Exporting results to third party visualization tool will reduce your ability of learning

Current State Design

Before we improve your future state impact framework, it is important to document your current state. 

  • Are you collecting reports from your grantees or investee in a free form such as PDF or word report?  Chances are you don’t have your theory of change?
  • Have you defined the impact framework such as a theory of change? 
  • Does your investee and/or grantees already have a theory of change?
  • How do you normally collect results from the investee or grantee?  Email? PDF report, google or excel spreadsheets?
  • What kind of results do you aggregate?
  • Do you need to collect stakeholder impact?  Do you collect program data such as renewable products?  
  • Where do you collect documents such as legal, program summary, annual report, etc?

Framework: Step by Step

The future state impact framework is about streamlining current processes and improving data collection for continuous learning and improvement. The better-designed system must have a robust structure that aligns with portfolio and program objectives. As you build a framework, you must achieve the following key goals:

  • Proper alignment between funder and downstream partner
  • Alignment with standards, structures, and guidelines for reporting purpose
  • High-quality metrics reporting that allows robust aggregation of results, reporting of individual partners and continuous learning and improvement
  • As your portfolio grows, your framework, data collection, and reporting complexity will increase. This is perhaps the single most factor in selecting your future impact measurement & management platform. Will your platform allow flexibility as you grow?

Keep reading to learn in-depth framework concepts.  You can find hands-on step by step exercise here.

Overall Structure 

The overall structure is critical in building better metrics collections from portfolio companies and aggregating results in the most effective way. Build an impact framework that aligns with your impact goals such as cleantech, job creation, etc

Fund managers often tend to use asymmetric metrics between each investment, grantmakers, and social impact accelerators on others have core metrics by program and work with grantees to establish a few key indicators unique to their impact.

Each framework structure should consider

      • Core metrics for each program for comparison and aggregation
      • Metrics agreed with partners to monitor individual goals
      • Quality of metrics including standards, custom metrics
      • The right balance of qualitative and quantitative metrics
    • Frequency of result collection such as financial quarterly and social and environmental of a semi-annual or annual basis

Framework

If you are just starting to build an impact fund, our recommendation is to start with a theory of change framework initially.  Once the framework is settled, you can gradually move to an impact management project-based framework.

Theory of Change Aligned: We recommend that a first-time impact framework should use the theory of change. As their framework becomes matured, we slowly recommend transitioning to impact management project-based. Please note that impact investors may find impact management projects more appealing others should strongly consider too!

Impact Management Project Aligned: If you are coming from an impact investing background and you want to report based on five dimensions of impact scorecard, this is the right choice. Demonstrate environmental and social impact, in addition to financial returns based on IRIS, GRI, SDG, or other standards. Impact Strategy designed baed in GIIN IRIS+, Impact Management Project, Sustainable Development Goals SDG, and SDG Impact Certification. 

Impact Management Project defines five dimensions of the impact that allows both investors and entrepreneurs to further understand stakeholder, type of impact, depth of impact, contribution and risk associated with an impact

Using these 7 principles in your impact strategy is the only thing you need to set up for the sure success. 

Metrics Results Collection

This is perhaps the most crucial design element of all as it allows impact managers to aggregate impact evidence.

      1. Social, Governance, Environment and Financial Level
      2. Who will provide results? Investee, Grantee, Third Party? Who will input results calculations and assumptions?
      3. How will Investee and Grantee provide results?
      4. How often does the result need to be collected?
      5. What are the legal and other reporting required?

A well-designed system can automatically remind each investee or grantee of whether they are delayed the reporting or struggling to complete the reporting process. 

Performance Monitoring

A well-designed performance monitoring requires following reporting and learning goals. A well-designed system streamlines reporting and compares results with baseline, forecast, and actuals. If other investee or grantee are reporting the same metrics, the system should automatically allow comparing results, and aggregate results automatically in both numeric and visual format for a better comparison. 

  1. How do you want to review progress? Individual or aggregated?
  2. Phases: Due diligence, Monitoring, and Evaluation or Post-Exit
  3. Frequency: Monthly, Quarterly, Semi-Annual, Annual or Fiscal Year Based
  4. Data roll-up requirements 
  5. How you want to view review performance: Baseline, Forecast, Targets
  6. What are the qualitative reporting requirements?
  7. Comparision within a portfolio
  8. Comparision with external or benchmark results

Regular Internal Review

The Impact Manager is encouraged to create regular internal reports from its stored impact data to help it systematically and regularly assess the impact performance of investees or grantee against their agreed performance baselines, the Impact Manager's own goals and against the global SDG goals. This practice also enables the Impact Manager to assess the quality and effectiveness of its impact measurement and management practices to make process improvements. Impact Manager should review this process at least once a year and perhaps more frequently, depending on the relationship between them. 

Be Transparent

Results provider should be encouraged to be transparent about any data quality risks, gaps it identifies, including any inferences, proxies, assumptions made (and its well-reasoned rationale for doing so) in its reporting to Stakeholders. If certain risks are identified during diligence, we highly recommend a review of the mitigation process and improvement, including a timeline.

Social Auditing or Assurance

Impact Manager should engage third party social auditors where possible. While we believe social auditing is pretty challenging, at least a validator should, at minimum, focus on assurance or attestation. Attestation is a technique similar to a notary who verifies that what you say is correct. Also, impact analysis during diligence on third party evidence (or on proxies based on assumptions to compensate for data gaps) can be valuable. Impact Manager works with the investee post-investment to collect new impact data to fill data gaps to establish actual impact performance, the validity of the proxies and/or to learn more about the impact experienced by this group of Stakeholders recognizing that it might differ from the original assumptions or intentions. 

Impact Risk

The Impact Manager is encouraged to make the best use of available impact data and evidence to make informed impact assessments and management decisions that factor in the level of impact risk being taken (i.e. the risk that the data does not necessarily enable total confidence that the desired impact is occurring as expected). 

Security

Robust impact data design is a foundation for creating robust impact evidence for investors and informed impact management decisions for the enterprise. 

Better systems systematically collect and assess impact data in a secure way. If collected data are not appropriately secured, it can later expose you to reputation risk. At a minimum, the Impact Manager must have a system in place to collect and store impact performance data. Sensitive raw data is only accessible to those using it for analysis, and appropriate steps are taken to make sure that data are collected securely with the same rigor applied to financial performance data. 

Most impact managers tend to store summary results and not individual stakeholder results, reducing overall security risk. 


Impact Cloud® ▶ Consistency, Standards and Certification

Impact Cloud® is the most advanced, comprehensive, and flexible impact measurement management platform. We recommend that you start with the example plan below and gradually improve your impact journey year after year.

Every organization is a different impact thesis and framework. Starting on impact measurement & management journey should not be complicated. Since this the first time, the main goal is to ensure that the fundamental structure has high-quality reporting, simplify reporting from a partner.
One of the biggest surprises to the most customer when they move to Impact Cloud is that as soon as they start working on impact strategy, they will realize that their current (AS-IS) impact framework, data, and reporting strategy have so many gaps! So we have prepared an example plan for you. Please work with your impact practitioner to refine it further as per your needs.

Learn more about an end to end impact management framework (1 Hr)

Case Study

Company: WORKING CAPITAL FOR COMMUNITY NEEDS (WCCN)

Company Type: non-profit impact investing fund

Impact Theme: Microfinance

Geography: Latin America

MISSION: to create opportunities for access to microfinance, services, and markets to improve the lives and communities of the working poor in Latin America. WCCN empowers low-income Latin American entrepreneurs by sustaining partnerships with microfinance organizations and fair trade coffee organizations in Ecuador, El Salvador, Honduras, Guatemala, Nicaragua, and Peru. WCCN helps more than 30 thousand people start and grow their businesses and farms every year.

CHALLENGE: to implement a user-friendly data collection and data management system for an Impact Fund working with non-tech savvy partners

OPPORTUNITY: SoPact's technology built to solve the challenges faced by mission-driven organizations alongside a team determined to save time and resources on operative tasks.

SOLUTION: Impact Cloud®, a user-friendly solution to set indicators with metrics catalog and manage impact data

BEFORE IMPLEMENTING IMPACT CLOUD®

As an organization with funders in the United States and beneficiaries in Latin America, WCCN needed an innovative tool that is very easy to use for non-tech savvy people and where the data can be entered in Spanish but reported in English. Also, having people entering data from different countries poses a currency standardization challenge.

In the past, WCCN's staff had to use an Excel or Google form to collect data, but they soon realized that people could understand the metrics in different ways and enter almost any kind of data. For that reason, once the data collection process was over, they still had to spend a few weeks cleaning and validating the data before it could be used for any analysis and reporting purposes. By the time they were done with the data cleansing, it was already time to build the annual report and start collecting the data again. This left very little time to actually understand the insights coming from the data and plan strategically around them for the next year