Understanding the Impact of Impact Investing

the impact of impact investing

Understanding the Impact of Impact Investing has been an area for debate and discussion for quite some time. So what are the options in measuring this impact? At the Caban Group has long been interested in ascertaining the impact of its work, not only to gauge where we are being effective with impact investing in South Africa, but to understand how effective we are being at promoting our broad pro-venture and pro-impact agenda.

At The Caban Group Impact Investments our aim is to source high impact solutions to some of Africa’s biggest challenges and through investment and support take those solutions to scale. To achieve this, the first step is to understand the impact each venture has on our target outcomes.

Sectors where impact investing is typically deployed

the impact of impact investing

Measurement is certainly not unique within the impact sector. In fact, is that we live in a world of increasingly sophisticated streams and sources of data, organsiations of all shapes and sizes are looking at data to understand if their strategies are being executed to the intended level. The reason you for instance increasingly see the inclusion of hashtags on television and printed advertising campaigns is in part to measure the effectiveness of those campaigns by the number of people who use the hashtags on targeted social media platforms. It makes complete sense, as we want to see if it works and explore opportunities for improvement.

Measuring the impact of Impact Investing

The circular model of measuring impact investing used at the university of Stanford’s School of Social Innovation

the impact of impact investing

Let’s consider a more relevant example inline with our own investment activities, if a school is looking to buy in new technology or education activities, it will certainly want to know if the tool or technology has proved to work in a similar environment. If the provider of this product can go a step further and actually demonstrate and verify the improved learning experience, then it is our belief that, with all other things being equal, the school will be more inclined to purchase a product with evidence of impact.

Impact measurement framework from Harvard Business School

Understanding the Impact of Impact Investing

Of course, there might be many similar examples in the modern-day economy. Let’s face it, we all want proof that something is working before we make a financial commitment. Would you honestly buy something from Amazon if the ratings it receives is only at a one- or two-star level? Even if the financial commitment is lower, you will be hesitant to purchase from such a low rated product. It’s quite clear that the most valuable proof of concept or measurement within the organisation is the demonstration the effectiveness if its offering.

At The Caban Group we are committed to understanding the impact of impact investing and the performance of each venture we work with, both in terms of the numbers of people benefiting from a product or service and the effect of the product on people. We are clearly not alone in our commitment in ensuring that the interventions of our financing needs to cary proof it its impact. The impact investment community has been striving for some time to increase the practice and effectiveness of measuring and reporting of social impact. Let’s face it, the sustainability of our industry depends on our ability to prove impact. Governments are also increasing its focus on understanding the role of impact and how, perhaps a more standardised model can be used to ensure a fair measure of impact across the board.

The Impact Investment Enhancement framework from Global Executive Business School

Understanding the Impact of Impact Investing

As an organisation we take the view that we need to be able to evaluate all elements of operations in order to succeed. Our focus on measurement needs to be clear and transparent in our own organisation in order to effectively apply it to the companies we invest in. Having a clear impact policy certainly assist is simplifying the process of both measurement and communicating the importance and process of measurement within investee firms.

Our experiences of defining and measuring impact within investments have very much bedded down the importance of aligning commercial and social impact. With a number of opportunities showing strong potential in the pipeline we have been investigating since 2018, those who show the most promise, interestingly enough, show a very strong alignment of their commercial and social impact goals.

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