Impact Measurement & Management Deep Dive - …

1 1 January 29, 2018 Impact Measurement & Management deep DiveStrengthening practice and addressing industry challenges2 Thank you for joining us today!Please note: All participants are muted. Use the chat function to submit questions during the broadcast. We ll share a recording after the McCarthyDirector, IRIS and Impact Measurement and Management4 Hannah DithrichAssociate, Research5 The State of Impact Measurement & Management Practice169impact investor respondentsDecember, 2017683%78%75%63%50%45%21%16%To betterunderstand proactively reportour Impact to manage orimprove our believe thatimpact data havebusiness need tocommunicate ourimpact for marketingand/or are required byour investors ordonors to measureand report is clientdemand or pressurefrom changingcultural norms tomeasure and reportour are required bygovernmentregulations tomeasure and reportour for measuring and managing impactA variety of motivations drive IMM practicen = 113 169.

2 Source: GIINP ercent of respondents7 Key challenges lie in collecting and analyzing Impact data43%32%17%15%13%11%10%9%Collecting quality dataAggregating,analyzing, and/orinterpreting dataacross a portfolioIdentifying/selectingappropriat e impactmetricsIdentifying/selectingapprop riate impacttargetsUsing Impact data fordecision-makingAligning expectationswith our investorsand investeesUnderstanding and/ordefining our impactstrategy and/orimpact thesisEnsuring buy-in forIMM among keydecision-makers atour organizationPercent of respondents reporting significant challengesPercent of respondentsn = 155-167; Source: GIIN8 Key challenges lie in collecting and analyzing Impact data43%32%17%15%13%11%10%9%Collecting quality dataAggregating,analyzing, and/orinterpreting dataacross a portfolioIdentifying/selectingappropriat e impactmetricsIdentifying/selectingapprop riate impacttargetsUsing Impact data fordecision-makingAligning expectationswith our investorsand investeesUnderstanding and/ordefining our impactstrategy and/orimpact thesisEnsuring buy-in forIMM among keydecision-makers atour organizationPercent of respondents reporting significant challengesPercent of respondentsn = 155-167.

3 Source: GIIN991%77%43%38%37%34%30%20%Measure social/environmental outputsMeasure social/environmental outcomesMeasure the breadth of our impactMeasure whether our Impact is additionalMeasure the depth of our impactBenchmark our social/environmental performanceMeasure whether our Impact is attributableMeasure the longevity of our impactTypes of Impact measuredInvestors measure different types of impactn = 169; Source: GIINN umber of a wide variety of resourcesPercent of respondentsn = 137; Source: GIIN2%2%5%6%10%12%13%13%14%22%41%42%62%T otal Impact Measurement and Management (TIMM)PRISMS ocial Return on Investment (SROI)Global Alliance for Banking on Values (GABV)Sustainability Accounting Standards Board (SASB)Leadership in Energy and Environmental Design (LEED) Reporting Initiative (GRI)Aeris CDFI ratings systemSPI4 / Social Performance Task Force (SPTF)Principles for Responsible Investment (UNPRI)B Analytics / GIIRSU nited Nations Sustainable Development Goals (SDGs)

4 IRIST ools, standards, and indicator sets used11 Key challenges lie in collecting and analyzing Impact data43%32%17%15%13%11%10%9%Collecting quality dataAggregating,analyzing, and/orinterpreting dataacross a portfolioIdentifying/selectingappropriat e impactmetricsIdentifying/selectingapprop riate impacttargetsUsing Impact data fordecision-makingAligning expectationswith our investorsand investeesUnderstanding and/ordefining our impactstrategy and/orimpact thesisEnsuring buy-in forIMM among keydecision-makers atour organizationPercent of respondents reporting significant challengesPercent of respondentsn = 155-167; Source: GIIN12 Investors use both customized and standard metrics37%24%20%19%We customize some metrics for eachinvestment and use some metricsacross our entire use a set of standardized metricsacross all investments within select a set of metrics for eachsector and/or Impact objective withinour select a specific set of metrics foreach investors customize their Impact metrics n = 169.

5 Source: GIINP ercent of respondents13 Key challenges lie in collecting and analyzing Impact data43%32%17%15%13%11%10%9%Collecting quality dataAggregating,analyzing, and/orinterpreting dataacross a portfolioIdentifying/selectingappropriat e impactmetricsIdentifying/selectingapprop riate impacttargetsUsing Impact data fordecision-makingAligning expectationswith our investorsand investeesUnderstanding and/ordefining our impactstrategy and/orimpact thesisEnsuring buy-in forIMM among keydecision-makers atour organizationPercent of respondents reporting significant challengesPercent of respondentsn = 155-167; Source: GIIN14 Most investors set Impact targetsn = 169; Source: GIIN 59%41%Percent of respondents that set Impact targetsYesNo15 Investors use evidence to select Impact targets and metrics73%51%25%10%74%20%16%7%We select them based on the existingevidence we used to develop ourstrategy ( , theory of change or logicmodel).

6 We select them based on a ratingsystem, index, analytics tool, or othersystem ( , IRIS).We select them based on theSustainable Development select them based on regulatoryand/or tax credit of selecting Impact targets and metricsImpact metricsImpact targetsPercent of respondentsImpact metrics: n = 146; Impact targets: n = 106; Source: GIIN16 Impact data inform key investment decisionsPercent of respondentsn = 144; Source: GIIN76%74%48%45%37%31%16%For pre-screeningor due diligenceInform investmentselection / portfolioallocation decisionsIdentifyopportunities forcapacity-buildingsupport ortechnical assistanceInform portfoliomodeling andstrategyImprove investees'operationalefficiencyHelp design orrefineproducts/servicesof our investeesInform exitdecisions and/orexit timingUses of Impact data for investment improve Impact achievedPercent of respondentsn = 148.

7 Source: GIIN85%72%67%64%62%58%52%Communicateresu lts tostakeholdersIdentify or refineappropriatemetricsImprove ourprocess foranalyzing andinterpreting impactdataAssess Impact andESG risk factorsSet or reviseimpactexpectationsand/or impacttargetsRefine our datacollection processIdentify whichstakeholders areaffected by ourinvestmentsUses of Impact data in Impact management18 Investor/donor understanding of IMM practice and reportingSophistication of IMM tools and frameworksAddressing ESG riskAvailability of research/data on IMM practiceAvailability of professionals with IMM-relevant skillsAddressing fragmentation in IMM approachesAddressing Impact riskIntegration of Impact and financial managementTransparency on Impact performance, including targets and resultsInvestors perceive progress in IMM, but challenges remain11%11%12%14%21%23%25%26%27%34%35%1 7%50%18%20%13%26%26%Significant challengeSignificant progressPercent of respondentsn = 104-126.

8 Source: GIIN19 Transparency and standardization key to advancing practice76%58%53%53%53%46%39%36%34%Trans parency inimpact data andresultsCommon Impact -based principlesfor investingConsideration ofimpact data withequal emphasisand rigor tofinancial risk andreturn in decision-makingDevelopment of animpact benchmarkIntegration ofimpact data intofinancialaccountingstandards andreportsTools tostrengthen impactscreeningImpactmeasurementcertific ation andcredentialing forimpact fundsand/or analystsThird-party auditand validation ofimpact data andperformanceStandard termsheets that includeimpact targets orincentivesImportance of opportunities to strengthen IMM practice (% selecting significant )Percent of respondentsn = 128-136; Source: GIIN20 Lissa GlasgoSenior Associate, IRIS and Impact Measurement & Management21 Key Challenges in IMM43%32%17%15%13%11%10%9%Collecting quality dataAggregating,analyzing, and/orinterpreting dataacross a portfolioIdentifying/selectingappropriat e impactmetricsIdentifying/selectingapprop riate impacttargetsUsing Impact data fordecision-makingAligning expectationswith our investorsand investeesUnderstanding and/ordefining our impactstrategy and/orimpact thesisEnsuring buy-in forIMM among keydecision-makers atour organizationPercent of respondents reporting significant challengesPercent of respondentsn = 155-167.

9 Source: GIIN22 METRICSC hallenge: Connecting Objectives to MetricsIMPACT OBJECTIVES23 METRICSIMPACT OBJECTIVESC hallenge: Connecting Objectives to Metrics24 Helps investors connect their Impact objectives to evidence-backed strategies and core metrics that show performance toward their goals Developed in consultation with industry experts, Impact investors, and standards settersThe Navigating Impact Project25 Investment Themes To DateDEVELOPEDMARKETSEMERGING MARKETSA ffordable HousingClean Energy AccessSmallholder Agriculture26 Investment Themes To DateAffordable HousingClean Energy AccessSmallholder AgricultureFinancial InclusionHealthPARTNER:SOCIAL PERFORMANCE TASK FORCE(SPTF)PARTNER:CENTER FOR HEALTH MARKET INNOVATIONS(CHMI)27 Affordable HousingClean Energy AccessSmallholder AgricultureFinancial InclusionHealthSelect An Investment Theme28 Smallholder AgricultureExplore StrategiesSTRATEGIES: Improved Access to Better, Stable Pricing Improved Access to Quality Inputs Improved Access to Training and Information Improved Farm Profitability Improved Food Security Improved Market Linkages Improved Options for Finance and Savings Improved Options for Risk Mitigation29 Smallholder AgricultureExplore StrategiesSTRATEGIES: Improved Access to Quality Inputs Improved Access to Training and Information Improved Options for Finance and Savings30 Each Strategy the Strategy Whatproblem does the strategy solve for?

10 Whodoes it best reach? What contributiontoward shifting the problem is likely? How muchof a change can an investor in this strategy expect? MapAcademic and field studies connecting finance and savings products to outcomes and MetricsSeven core metrics to measure toward progress, plus additionalsfor more nuance as Resources CSAF Responsible Lending Principles, FAST Shared Impact Assessment, Client-Centric Approach: Impact Evaluation guide31 Will MorganHead of Impact , SonenCapitalPartner, The BridgespanGroup@theGIINM ichael Etzel32 Thank you!Hannah