Kevin Starr, who among other things runs the Mulago Foundation, penned a provocative, must-read series of posts on Stanford Social Innovation Review titled “The Problem with Impact investing (Pt. 1, Pt. 2, and Pt. 3).
He leads off his last post in the series with the sub-header “Real impact investing is not for the timid” and focuses most of his screed on the fact that our sector is horrendous at articulating and measuring impact.
This is hard stuff, these are long and rocky roads, and it is certainly not for the faint of heart.
At a minimum impact investors diverge radically in articulating what we mean by impact. At our most timid, we claim that nearly any enterprise operating in the developing world by definition is creating impact (really?). At the other end of the spectrum, even the most impact-focused investors are likely to screen heavily for impact but then have limited capacity (financial resources, time and attention) post-investment to really understand or accelerate impact. At the recent ANDE metrics conference there was deep appreciation for the strong foundation we’ve created in our sector – the Pulse platform, IRIS standards and GIIRS ratings – as well as a generalized acknowledgment that these tools alone are not enough to bring the clarity and insights we need to create large-scale, lasting change.
As Kevin states, both clearly and provocatively:
While the philanthropy world is still pretty bad about measuring impact, the impacting investing world is worse. Real impact measurement is a drag on the financial bottom line and investors are usually willing to assume it’s there, so few feel compelled to do it. What’s weird to me is that while all impact investors know that you could never maximize profit without measuring it, they often fail to recognize that the same is true of impact.
If impact investing itself isn’t for the faint of heart, forging the way forward on the next chapter of understanding and accelerating impact in our space is for the bravest of the brave. Yet we know that better answers are out there; we know that there is increased appetite to dig deeper and to find real lessons about what is and isn’t working and why; we know that both funders and entrepreneurs are looking for better measures so they can deliver real change.