Impact is much more than a number!

Impact is much more than a number!

Impact! How many times have we heard this term and believed that we truly understood it. In the social development world, everyone is eager to show the impact they are having on different populations or groups of people, climate change advocates want to show the impact their work is having on reducing greenhouse gases, politicians want to demonstrate how their proposals will impact their constituencies… meanwhile, investors hope they can direct money into ventures with a proven positive impact.

The GIIN (Global Impact Investing Network) estimates that the current size of the global impact investing market is around USD 1.2 trillion, making it a pretty attractive sector. You would therefore assume that all stakeholders involved feel comfortable with the way they define impact.

The reality, however, is very blurred, particularly because impact is a subjective concept and its measurement even more so. Deciding which elements to consider when evaluating a project will depend greatly on the preferences of the investor, who generally does not have much time and wants to get an easy number that is comparable throughout their portfolio. Which is better: investing in a start-up that provides solar panels to remote villages or one that provides financial education to women in the same village?

But even if you managed to sort this out, you will encounter the next big hurdle: how reliable is the collected data? (if there is any at all) and will you then unfairly advantage venture that can easily collect data but might not be as impactful?

There are many organisations that are attempting to figure all this out while ensuring that resources destined for impact are equitably distributed and that impact can be comparable. However, the pressure to standardise measurement forces subjective assumptions and ignores many important elements (sometimes even leaving negative externalities out). 

This is clearly reflected in the case of inclusive insurance, where microfinance institutions (MFIs) that offer protection to their clients have the exact same score as similar ones that don’t, offering this type of product, however, does have a substantial impact on the lives of the families that receive it.

The Oxford Impact Measurement Programme (OIMP) made it very clear that impact measurement still had a very long way to go and that it will be very hard to create effective standardised tools. It did however challenge the need to find perfectly standardised tools and encouraged participants to develop the measurement methods that were most appropriate for them.

The growing interest in this discipline is a sign of positive change and it should be considered with a certain degree of flexibility, something that is not always appreciated by financial sector professionals. However, if we truly want to make a difference, we need to keep in mind that impact is much more than a number.

This is the first article written by Asier Achutegui, Senior Manager @ Microinsurance Network, about his insight of the Oxford Impact Measurement Programme attended thanks to an InFiNe.lu scholarship.