Measuring social impact very challenging, say panelists at Social Finance Forum
Many organizations use different metrics to assess investment results in capital markets compared to investing in social impact funds, says Betsy Martin of Jackson-Martin consulting.
At the Social Finance Forum 2012, held this fall in Toronto, Ms. Martin said that institutional investors, such as foundations, often compare their own mandates with the missions and reputations of impact investment opportunities. She joined a panel of four during a break-out session at the conference.
Especially when foundations are investing with local organizations they know well, narrative and anecdotal evidence are important tools to assess social impact of an investment, says Martin. That’s true even if the same organization requires objective, comparable metrics when buying mainstream investment products.
“Relevance, cost, and internal capacity [to assess the investment opportunity] are key issues for foundations using metrics to evaluate social impact of investments made in the community,” says Martin. She adds that many foundations hesitate to ramp up staff to build and maintain assessment criteria for relatively small investments in local impact funds.
Stories versus facts
Serge LeVert-Chiasson, of Sarona Asset Management based in Waterloo, says “people usually understand more through stories than through facts.” He adds that investors should ask themselves what outcomes they hope their investments in social finance will achieve and how they plan to measure them.
Meantime, Simon MacMahon, of Sustainalytics, says it continues “to be very, very challenging” to actually measure social impact. “Fundamentally, what we’re measuring is not impact. It’s a bridge too far.” He adds that most organizations can only hope to measure their exposure to environmental, social and governance risks (ESG) and prepare to manage those risks.
However, he says that a corporation’s preparedness to manage ESG risks is a good proxy for overall organizational strength. Such companies tend to outperform their peers, he says.
Investment opportunities
Canadian individuals and organizations have access to many social impact investment opportunities that support their values. For example, if an investor is interested in supporting sustainable agricultural development around the world, it may make sense to invest in village banks offering microcredit. A global organization such as Oikocredit sells 5-year bonds in Canada that raise capital for microfinance institutions located in 70 countries.
On the other hand, if an investor wishes to support the development of green energy in Ontario, affordable housing, or micro-entrepreneurs facing mental health issues, a number of Canadian social impact investment funds are available. SolarShare community bonds, ACCESS Community Capital Fund and Rise Asset Development are just a few examples.
The MaRS Centre for Impact Investing organized Social Forum 2012 and offered two full days of workshops and speakers to several hundred participants from main stream organizations such as Royal Bank of Canada and KMPG to fledgling social finance start-ups.
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Nandy Heule is Director of Investor Relations at Oikocredit Canada-Central. Oikocredit is a financial co-operative that manages an international social impact fund focused on providing microfinance services in 70 countries around the world.