&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

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The impact investing space is growing and benefitting an increasingly diverse array of areas including financial services, agriculture, healthcare, housing, energy, and more. Expanding too is the number of impact investing organizations incorporating impact measurement as part of their investment activities. As more players enter and the industry matures it’s even more important that the industry embraces the capture of impact data and assessment of progress against stated goals. This information validates the industry, helps investors manage investee companies, and improves investor and investee strategic decision-making. It also positions the industry to convince funders, especially new ones, to mobilize additional capital.

Last year the G8 created the Impact Measurement Working Group as part of its Social Impact Investing Taskforce. A few weeks ago the group released its “Measuring Impact” report, which includes <a href="http://www.thegiin.org/binary-data/GIIN_impact_measurement_guidelines.pdf">seven guidelines</a> for impact measurement and <a href="http://www.thegiin.org/binary-data/IMWG_Case_Studies.pdf">five case studies</a> of how investing organizations have put the guidelines to good use. The initiative by the G8 reflects an elevated priority and the development of the industry.

The seven guidelines are adaptable across contexts and align with industry best practices, such as the European Standard for Social Impact Measurement. The report, guidelines, and case studies were developed through a six month research and consultative process which included a review of 60 industry publications and interviews with 45 experts and practitioners in impact measurement. Here are the guidelines with supporting information from the case studies.

Set Goals: Articulate the difference you seek to make. Clear, measurable goals define investor intent, guide action, and create a reference point for judging progress. Goals should link closely to the investor’s investment thesis or theory of value creation.

Bridges Ventures, a fund manager investing in education, transport, and health in the U.K. and U.S. co-develops impact goals with its investees. Bridge has four outcome themes (education and skills, health and well-being, sustainable living, and underserved markets), and each of its funds is designed to achieve specific impact objectives that align with one or more of them. These objectives help determine which impact indicators are employed. Bridge works with investees, including via collaborative workshops, to develop impact goals, and incorporate related indicators.

Develop Framework &amp; Select Metrics: Determine what metrics you will be holding yourself accountable against. Crafting an effective framework with corresponding metrics will outline which data will be collected. Frameworks should include the logic of how data will be applied to the portfolio and should consider the needs of all stakeholders involved.

In 2013, the New York State government launched a Social Impact Bond to improve employment and reduce recidivism among high-risk, formerly incarcerated men. The metrics, developed with assistance from the law firm Jones Day and the Harvard Kennedy School, measured progress against: the average number of days incarcerated per person during the observation period; income in the fourth quarter following release from prison; and the number who started a transitional job during the observation period. The impact of the intervention is calculated using a randomly controlled trial (RCT).

Collect &amp; Store Data: Collect and store the data you need to determine your progress. Best practices in data collection and management lead to improved data integrity, the ability to measure progress, and low reporting burdens. Planning data collection and management requires considerations for all parts of the data ecosystem – information technology, tools, resources, human capital, methods used to obtain and keep track of data, etc.

Investisseurs &amp; Partenaires (I&amp;P) invests in SMEs in 14 countries across Africa. I&amp;P works with investees to put in place “sound ESG and impact data management procedures,” with an emphasis on reliable data collection and storage. Investees report impact data on an annual basis.

Validate Data: Validate that the data you collected is of sufficient quality. Data should be presented in such a comprehensive and digestible way that calculations can be checked and processes reviewed.

Oikocredit, based in the Netherlands and investing in microfinance globally, validates impact data at multiple levels. Regional managers validate country data before it is sent to the global office, which then validates the data again before it is approved for analysis. Ensuring that data is sound is needed to assess individual investments as well as portfolio performance. Oikocredit has also obtained third-party impact data validations, by M-Cril in 2009 and Planet Rating in 2013.

Analyze Data: Distill insights from the data you collected. Strong data analysis and findings can have a big role in steering investment decisions and determining how capital is allocated. Conducting analysis using standardized, objective processes helps findings be widely understood and actionable.

One Acre Fund supports small-scale farmers in East Africa by offering inputs, flexible financing and agricultural training. The impact goal of One Acre’s support is an increase in annual profit of $135 per farmer. One Acre analyzes results against this mark and also studies the data across districts, crop types, and countries to better understand agricultural dynamics and success factors.

Report Data: Share your progress with your key constituents. Progress reports should be evidence-based. Helping stakeholders understand progress and engage with an organization’s activities supports every step of impact investing.

Oikocredit provides performance reports, webinars, and workshops to its partners. The group also has a new dashboard and produces an annual Social Performance Report that shares aggregate partner performance against key metrics.

Make Data-Driven Investment Management Decisions: Identify and implement ways to strengthen your investments and operations. Incorporating data analysis findings as well as stakeholder feedback and recommendations on data can be a source for continuous improvement.

I&amp;P conducts seminars twice a year with its investment teams where impact data and its implications for strategy and practices is discussed. Insights from these seminars might enable investees to achieve greater impact from their work and improve measurement approaches. They may guide I&amp;P in seeking new investment opportunities that will further impact goals.

For more information on the working group’s research on measuring impact, <a href="http://www.thegiin.org/cgi-bin/iowa/resources/research/625.html">click here</a>. For a snapshot of the impact investing industry, looking at the state of the industry and projected trends, <a href="http://cfi-blog.org/2014/06/18/impact-investing-landscape-trends-to-watch/">click here</a>.

Have you read?

<a href="http://cfi-blog.org/2014/06/18/impact-investing-landscape-trends-to-watch/" target="_blank">Impact Investing Landscape: Trends to Watch</a>

<a href="http://cfi-blog.org/2013/03/20/four-challenges-for-impact-investing/" target="_blank">Four Challenges for Impact Investing</a>

<a href="http://cfi-blog.org/2014/02/10/microfinance-equity-investing-different-context-similar-issues/" target="_blank">Microfinance Equity Investing: Different Context, Similar Issues</a>

Seven Guidelines for Measuring Impact Investing

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Alternative Data

Impact Investing

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Michael Schlein

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Inclusive fintech CEOs work in the most highly-regulated sector on earth. They have to hire talented teams, navigate opaque regulations, and work hard for funding. In addition to entrepreneurial challenges, they’re also trying to create impactful businesses that help build a financially inclusive world.

That doesn’t overwhelm the founder-CEOs that we work with. Being in a room with roughly 50 of the most innovative fintech CEOs and company leaders at the Inclusive Fintech CEO Forum in The Hague was absolutely thrilling: they’re all working on a common mission and trying to bring new financial tools to people who need them.

[caption id="attachment_18223" align="alignleft" width="500"]<img class="wp-image-18223" src="https://content.accion.org/wp-content/uploads/2019/04/FintechForInclusionGlobalSummit_2019_NicoAlsemgeest_0116-1-1024x708.jpg" alt="" width="500" height="346" /> At the Inclusive Fintech Summit, leaders came together to discuss how we can drive financial inclusion.[/caption]

Hosted by <a href="https://www.accion.org/how-we-work/invest/accion-venture-lab">Accion Venture Lab</a>, <a href="https://quona.com/">Quona Capital</a>, and <a href="https://www.fmo.nl/">FMO</a>, the Forum allowed CEOs to learn from one another: whatever a CEO’s top problem was, someone else there had solved it, thought about it, or, at the least, could commiserate about it.

More often than not, their conversations returned to basic issues like hiring staff, creating an effective corporate culture, overcoming adversity, or engaging customers. These issues are more important today than ever before: by understanding peoples’ behavior, needs, and goals, we can use technology to provide more customers with better, faster, cheaper, and safer financial products and services. Knowing our customers is the only way to develop a scalable, sustainable, and impactful company — and building those companies is how we’ll create a financially inclusive world.

Our CEOs’ energy and passion were inspiring; I’m still impressed by some of the highlights from their conversations:
<h2>It’s all about people – not technology </h2>
Companies everywhere are wrestling with how to use technology to achieve scale and efficiency while meeting customers’ preferences for <a href="https://www.accion.org/does-human-touch-still-have-a-place-in-a-high-tech-world/">human touch</a>. Being well-informed about and responsive to your customers is the only way to come up with appropriate solutions:
<ul>
 	<li>Technology is not the product. Instead, it’s a background layer that should enable product delivery. For financially underserved customers, the technology tends to work best when it automates internal operations in the background — not when it’s foregrounded as the product itself.</li>
 	<li>Don’t assume. Talk to prospective clients first. What technology do they use? How do they use it? What are they willing to try?</li>
 	<li>Shrink your time zones. Have your tech team near your customers so they can respond quickly. Create a feedback loop where both your tech team and customers inform one another.</li>
 	<li>The more your team knows your clients, the better. Make sure your entire team knows who your customers are. Arrange client visits or allow back-office staff to join customer calls.</li>
</ul>
<h2>Tips for hiring teams in emerging markets </h2>
Hiring is the only challenge that gets more difficult with time: as roles become more complex and as an organization takes on more work, hiring the right candidates becomes harder and inhibits companies’ ability to scale.

This is a challenge for startups everywhere — but it’s particularly pronounced in emerging markets, where top talent can be difficult to recruit and retain. Here are some of the ways our CEOs address this:
<ul>
 	<li>Always be recruiting. Extend your talent pipeline as far as it can go, because even if the seats aren’t open today, they will be soon.</li>
 	<li>Treat recruiters as business partners. Ultimately, you’re both working to build a better organization.</li>
 	<li>Value the right attitude and generalists over specialists. Specific skill requirements can change over time, so it’s better to get someone who can adapt to multiple future needs. And attitude should count as much as skills: <a href="https://news.harvard.edu/wp-content/uploads/2015/11/16-057_d45c0b4f-fa19-49de-8f1b-4b12fe054fea.pdf">Harvard Business School</a> found that avoiding toxic employees is worth twice as much as the returns that top workers produce. Toxic workers also diminish productivity and drive out other employees.</li>
</ul>
<h2>Corporate culture results from CEOs’ choices and behavior</h2>
[caption id="attachment_18217" align="alignright" width="500"]<img class=" wp-image-18217" src="https://content.accion.org/wp-content/uploads/2019/04/Fintech-For-Inclusion-Global-Summit-2-1-1024x678.jpg" alt="" width="500" height="331" /> CEOs’ actions and choices have an outsized role in creating corporate culture.[/caption]

High-performing organizations have great corporate culture: it gives them a competitive advantage.

CEOs’ actions and choices have an outsized role in creating corporate culture; the values they exhibit and the behaviors they reward shape an organization’s character:
<ul>
 	<li>Explain what you believe. Every organization should explain its values in concise, memorable language. Those values should factor into hiring new employees or evaluating current employees.</li>
 	<li>Cultivate psychological safety. The feeling that a team “is safe for risk-taking” was the biggest contributor in <a href="https://rework.withgoogle.com/print/guides/5721312655835136/">Google's</a> review of successful team dynamics. Psychologically safe teams brought in more revenue and were twice as effective as ‘unsafe’ teams.</li>
 	<li>Develop <a href="https://www.accion.org/hiring-and-talent-employee-value-proposition">employee value propositions</a>. These identify why a prospective employee should work for a given startup. They elevate the organization’s mission and explain how an employee could grow from their work at a particular company.</li>
</ul>
<h2>How to help your team get through a crisis </h2>
One session on overcoming adversity resonated with many in the room. Founder-CEOs routinely face any number of crises; professionally, there’s nothing harder than trying to lead your team through a major challenge.

But it’s something that every entrepreneur needs to be prepared for. And while there’s no one way to overcome adversity, CEOs did reflect on a few measures that helped:
<ul>
 	<li>Keep the right people with you. Rely on the team you trust to help turn the ship around. Promote them if that’s what it takes to retain them.</li>
 	<li>If bad news is coming, you want to be the one sharing it. Don’t let someone else tell your story. This is true for your investors, employees, and family.</li>
 	<li>It’s important to be honest and transparent. In good times — and especially in bad times — let people know what’s really happening. That said, you don’t need to bring everyone through every twist and turn. Focus on the most important issues and communicate them well.</li>
 	<li>Protect your health. Founders emphasized basic self-care, including exercise, sleep, cutting alcohol and sugar, and seeking advice from mentors.</li>
</ul>
By focusing on our users and understanding their needs, behaviors, and goals, we’re more likely to create valuable financial products and services. And by building teams that know their end-clients, founder-CEOs can create impactful and successful companies.

That’s easier said than done. But after meeting and speaking with so many extraordinary people who are all working so hard to pursue a common vision and change the world, I’m more optimistic than ever about our chances.

Many thanks to CGAP, Catalyst Fund, Triodos, Citi Inclusive Finance, Mastercard Foundation, and Community Investment Management for helping to convene the Inclusive Fintech CEO Forum.

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Seven Guidelines for Measuring Impact Investing