A confluence of impact and scale

I spent last week at the annual meeting of the Global Impact Investing Network (GIIN), and I was struck by three trends that could take our sector to the next level.

The first is around taking impact seriously. The second is how different the impact measurement challenge looks depending on where you sit. The third is the acceleration of the rate at which mainstream financial capital is entering our space.

Throughout the GIIN conference, impact — the role it plays in defining our work and how to improve the quality of our impact data — was front and center in a way that I’ve not felt before. For example, one of the first panels kicking off this year’s event was on market segmentation. While segmentation is not a new topic in impact investing, the panel was titled “Market Segmentation through an Impact Lens.” The panelists — from Skopos Impact Fund, Tideline, Athena Capital Management and Omidyar — discussed their research and client-facing efforts to make sense of impact investing from the perspective of impact objectives.

This shouldn’t be brand new, but it is. An orientation to start segmentation with an impact lens runs against the natural tendency to segment investors by asset class or sector strategy, and it’s certainly a far cry from accepting that “intentionality” (as in: my intention is to make such-and-such happen with limited accountability on the data to figure out whether or not real change is happening) is a high-enough bar to set for the sector in terms of impact.

If we could pull off organizing ourselves, as impact investors, by the change we’re trying to make in the world rather than by the investing strategies we’re using to make that happen, that would be a big step forward.

Second, we need much better impact data AND we need to help people who are drowning in too much indecipherable, low-quality data.

I had the chance to participate in two panels focused squarely on advances in impact measurement. What I learned from these panels is that better impact data isn’t enough — there’s a huge desire for simplification too.

At Acumen, our Lean Data work has focused relentlessly on going directly to the low-income customers we aim to serve so we can understand what they have to say. Our objective is to improve the quality of impact data we have by scaling up our capacity to listen to the voices these customers, so we and our investees can better serve them.

While I’m convinced that this kind of listening must to be the foundation of everything we do as a sector, it’s not enough. Listening to my fellow panelists — from Goldman Sachs, Zurich Re, Abraaj Capital and Leapfrog — I heard that big institutions with large, diverse portfolios of impact investments not only desire better impact data but they also need help simplifying and clarifying the reams of impact data they already feel they receive.

Ironically, these large institutions have too much data coming in and most of it’s not very good. Our job is both to improve the strength of the signal and also lessen the noise.

Lastly, it was impossible not to notice that more and more big-name financial players are coming to the table.

The simple fact of having an impact measurement conversation between Acumen and Leapfrog on the one hand (two organizations that are essentially growing startups, with between $100M and $1B in capital under management), and Goldman Sachs, Zurich Re and Abraaj Capital on the other means that there are innovations in impact management happening across the spectrum of impact capital. That’s hugely positive.

Then, at the end of the day, we got to hear Former Governor Deval Patrick and Deborah Winshel discuss the impact investing strategies they began implementing in the last year at Bain Capital and Blackrock. Both articulated their goals to fully integrate impact into the global practices of these uber-blue chip firms, firms that collectively represent more than $4.5 trillion in assets. While it’s early in the journey for both Bain and Blackrock, it’s clear that their actions could have a huge influence with other mainstream financial players and beyond.

As I left the conference and made my way back to New York, I was struck with the feeling that we are entering a new phase in our sector. Having passed through the teething pains of our early days and our loud, sometimes impulsive childhood, we’re ready to start growing up a bit. This means harnessing — rather than just shouting about — the increased momentum building in our space, thanks to the entrance of major new players, while also taking a much more sober and serious look at the ultimate goal of this work, which is to make a real, large-scale and lasting difference in the well-being of people and the planet.

If, in this next chapter, we can find a way to have impact investing go deeper on impact and bigger in terms of scale and reach, we will truly be in a position to take this work to the next level.

[Note: you can also follow the conversation about this post on Medium]

History of Monopoly

I’ve just gotten back in to playing the board game Monopoly (now with my kids).  The game is truly no worse for the wear 30 years since I last played every chance I could – including early in the morning, alone, before anyone else in the house woke up.

I had forgotten that Monopoly was made by an out-of-work game-maker and inventor, Charles Darrow, trying to scrape by during the Great Depression.  And I’d never known that the first few hundred copies of the game sold by word of mouth after late-night games at Darrow’s kitchen table; or that Parker Brothers rejected the game, telling Darrow that it had “52 fundamental errors” (nice job, experts); or that the history of who really invented the game is hotly disputed.

Here’s a picture of the earliest complete version of the game, handmade by Darrow on oilcloth, and recently sold at auction for $146,500 (HT: The History Blog).

The power of belief

The other day, while I watched my kids frolic in the sprinklers in a recently-revived Central Park playground in New York City, I couldn’t help but wonder where belief comes in when we think about measuring social outcomes.

My son, who wouldn’t change into his bathing suit (“it’s too cold to play in the sprinklers”), was pulled in, splash by splash, until he was soaked head to toe, fully dressed.   Around us were gaggles of proud parents who reminded me why I love New York: Mexicans and Swedes and Spaniards and Hasidic Jews fussing as happily and with as much ease as the Upper East Side moms with their fancy strollers.

How do you calculate whether or not to revitalize a playground?  To turn an expansive but drooping block of concrete and sand into something that glows with the smiles of exuberant children?  Can you calculate all the ancillary effects – the extra ice creams purchased, the carousel rides, the trips on the Circle Line and the trip that another family will take across the Atlantic because New York has beautiful public spaces again – and all the hotel rooms filled and show tickets sold and extra restaurant diners?

Somewhere, belief comes into play.  Someone believed that public spaces matter, and then they assembled the constituency and the funds and the power to change these spaces for the better.  I’m sure that they figured out – by benchmarking and studying and analyzing – the best WAY to refurbish and expand a playground, but none of this analysis told them WHETHER to refurbish a playground, to do something else, or to do nothing.

The world is a complex place, and you never capture the full complexity of a problem nor the nuances of the impact of an intervention. Which means that belief that something’s missing, combined with the guts, determination and gumption to build that new thing, is where real change begins. This is very different from “finding the right answer.”

We in the social sector aspire to better measurement, bemoaning the fact that we lack the clarity of the for-profit world, where a single metric (profits) ostensibly provides as a scorecard of who wins and loses, of what works and what doesn’t (while all the while the big players in the private sector are realizing how poor a yardstick profitability is to measure their own long-term value to customers, employees, communities, and their stakeholders around the world…would that we all converge someday soon).  Measurement will allow us to compare one program to another – will allow us to figure out whether the playground we rebuilt was completed cost-effectively than others; in a way that brought in more or fewer kids than others. But we’ll never win at comparing playgrounds to soup kitchens to preschool programs to job training, unless we go all the way back to first principles.

Once we’ve decided what we’re going to do, the numbers can tell us how well we’re doing it.  But they’ll never tell us what to do in the first place.

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