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Five Lessons in Investing for Impact

Field Notes

Tara Murphy Forde, Vice President of Impact and Strategic Initiatives at Global Partnerships, shares her view on the importance of industry engagement and highlights some of her high level take-aways from the Aspen Network of Development Entrepreneurs (ANDE) Metrics from the Ground Up conference.

“As we approach nearly a decade of using the term ‘impact investing,’ what can the industry learn from microfinance, particularly when it comes to impact measurement, evidence, and expectations?” For those of you who are familiar with Aspen Network of Development Entrepreneurs (ANDE), it won’t surprise you to know that this was one of the questions posed during last week’s Metrics from the Ground Up Conference in Washington, D.C. It is this type of honest, critical, and forward-looking dialogue that motivates Global Partnerships’ (GP) participation in the network.

As a nonprofit impact investor, GP has been providing working capital loans to social enterprises for over 20 years. We got our start in microfinance, which taught us a thing or two about what it means to pivot and refine an investment strategy based on emerging results, evidence, and insights. We have called on that experience, and the experience of others, as we’ve refined our impact methodology and expanded into new sectors and geographies. In turn, it was a pleasure to sit on a panel at last week’s event with Kelly McCarthy from the Global Impact Investing Network and Laura Foose from the Social Performance Task Force to share learnings and discuss implications.

Two issues we discussed on the panel were alignment and transparency. Given the varied and complex nature of the problems we look to address, and the often nascent stage of the solutions we support, it is understandable that impact investors and practitioners alike will rely on “theories of change” versus clear and decisive evidence. That being said, we need to be honest about what we know and don’t know, and find strategic partners who share our desire to learn and improve over time. We also shared some concrete lessons about what impact investors can do better moving forward. We can:

  1. Get clearer on what we can measure (often outputs), but not stop there. We need to define the outcomes and impacts we look to deliver and strive to measure them, even if only via directional data at first.
  2. Be careful not to get too narrow, too fast. While definition is important, we need to remain open to, and employ methods for, capturing unintended and longer term outcomes.
  3. Develop a deeper understanding of context, so when we analyze data, and evidence begins to emerge, we can interpret relevance and better understand outcomes.
  4. Invest in the talent, systems, and practices that will increase our capacity to deliver the desired impact.
  5. Remember to always keep the client at the center. If we use data to better understand client needs, behaviors, and motivations, we can protect against certain risks while gaining valuable insight into key impact and business drivers.

At Global Partnerships these lessons have manifested themselves in several concrete ways. We’ve developed an Impact and Research Team that is responsible for identifying high impact investment opportunities and evaluating the impact of existing ones. While monitoring and evaluation is an important part of our role, we do not operate in a silo. Our function is strategic. We are responsible for defining the impact we look to deliver, interpreting the emerging evidence base, identifying appropriate measures, screening investees, interpreting results, and informing portfolio strategy. In short, we are tasked with providing critical feedback loops to ensure that impact-related results and insights inform the allocation of capital.

While this may sound easy enough, putting the right tools, talent, and processes in place to execute on this vision remains a work in progress. It has meant investing resources, challenging previously held assumptions, and adopting an iterative approach to portfolio strategy. And we have not embarked on this endeavor alone. As a fund manager, we have invited our investors and investees alike to join us in putting impact at the center of impact investing.

Special thanks to Tara Murphy Forde for her piece on last week’s Metrics from the Ground Up conference. Follow ANDE on Twitter and visit their website to learn more.

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