As the world of finance embraces impact, the binary calculus of balancing risk with return has been forced to give way to a third factor; risk, return and impact.
In the past, accounting for business success was easy, whoever made the most profit wins. But when you’re factoring in your impact performance, the metrics get more complicated.
For impact investors the challenge is comparing the performance of a portfolio of different investments all operating in different fields, and impacting very different sets of beneficiaries.
As Adam Milgrom, partner at Giant Leap, explains “It can sometimes feel like comparing apples to oranges to spaghetti.”
Adam and the team have tried to make the process a lot less intimidating by building an easy-to-use impact calculator, so that company founders and investors alike can get a feel for the metric and issues that are important when measuring impact.
“It helps us compare investment opportunities across a broad house of impact issues. For instance, we can compare a company focussed on improving diversity against a company that is drawing down carbon from the atmosphere.” Adam says.
The Impact Management Project (IMP) works to help social enterprises define the extent of the impact they seek to make in the world, they offer three levels of impact:
- Avoid Harm
- Benefit Stakeholders
- Contribute to solutions
The ABC framework by IMP offers a high-level perspective that gives businesses and investors a starting point for measuring their impact.
Giant Leap used this framework as the basis for the questionnaire at the heart of their impact calculator.
It asks some qualitative questions about the issue you’re trying to impact, who will potentially benefit, and then it shifts to some more quantitative assessments of how much impact you think the solution will have.
Yes it’s subjective, that’s unavoidable in the world of impact measurement, but the process shows the baseline of questions that need to be asked to begin to build an impact thesis around a company or a project.
You can jump on to their website and give it a go yourself.
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