As with many such events, at the most recent Social Investor Breakfast Club, held in London on 21 March, the discussion on ‘Impact Investing in Africa’ led to an acknowledgement that the term impact can be very subjective. So how can impact investing be defined and impact measured? This is a topic that has been raised many times. However, what was perhaps a more interesting feature of this discussion was whether measuring impact is what investors should be focusing on.
It was acknowledged that the kind of monitoring that is required for impact reporting can be a burden for projects which feel they need long complicated reporting systems to satisfy investors. During the discussion, fears were voiced that money that is put towards measurement within the sector would go into creating more metrics rather than looking at how to improve the industry as a whole. Some believe the reason the money isn’t flowing into impact investing in the same way as in conventional markets is that there is no measurement. But could we end up with more metrics and still not see a significant increase in the amount of money available? It was noted that having a small number of relevant metrics for a particular project could be far more effective than having many very complex ones.
Geetha Tharmaratnam of the Abraaj Group illustrated that there are many ways to define impact. In her presentation she provided some fascinating instances where projects have developed in unforeseen ways that have led to additional social or environmental impacts. For example, their Africa Healthcare Fund supported a hospital in Kenya which has grown exponentially to provide general, medical and surgical procedures for women and their families. As part of this overall growth, the hospital now has a Gender Violence Recovery Centre which offers free medical and psychosocial support to survivors of domestic and sexual violence. While supporting victims of domestic violence was not a planned impact of this investment, this can still be viewed as a positive result.
Tharmaratnam also outlined an investment in a secondary steel manufacturer to expand its capacity. The impact of this on the network of scrap collectors across Kenya who provide materials is said to be huge. This success has led to plans for breaking up ships that are no longer in use. Again, this investment was not made from a desire for a specific environmental impact, but the effect of removing abandoned ship metal from the seas will certainly be positive.
From an investor’s perspective, the things that were said to fundamentally matter when choosing projects such as these are to ensure it is a good deal and that the expected returns are clearly defined. It was suggested that deals should be viewed in the same way as other investments – with consideration of the project’s track record, business model, scalability, etc – but that alignment of outlook and goals should perhaps be the main focus. Clarity, honesty and transparency with investors could be viewed as more important than entrepreneurs having complex impact reporting systems. Tharmaratnam said that the Abraaj Group’s investments have all achieved their financial targets and they are prepared to embrace all positive impacts from these, including the unmonitored and unintended.
From the number of posts on this blog in recent weeks that relate to impact in one way or another – Pilotlight’s Fiona Halton: ‘Impact measurement: what charities and donors need to do’; NPC’s Sally Bagwell: ‘Donors demand more evidence that their money is doing good’; and Charity Navigator’s Ken Berger on ‘expanded methodology that examines results reporting’ – it would appear that impact measurement is a central concern of many charities. Having an impact is unquestionably very important. But these examples illustrate that positive impact can also be achieved without projects having to develop overly complex reporting systems.
Jenny Conrad is Communication & Circulation Officer at Alliance magazine.