BACO to help Acumen rate investments

Acumen Fund’s focus on metrics is an integral part of its work. Understanding the social impact and financial performance of its investments is critical to informing portfolio decision-making and providing support to its investment enterprises. One of several core metrics tools that have evolved at Acumen, BACO (Best Available Charitable Option) helps the global portfolio team understand the social impact and cost-effectiveness of an investment as compared to other charitable alternatives that address the same issue.

In the case of Acumen Fund’s investment in long-lasting anti-malarial bednets, for instance, BACO compares the investment costs and social output of its debt investment in a Tanzanian bednet company to the costs and social output of a traditional grant to an NGO for distribution of nets currently available in the region. This provides a quantifiable indication of whether Acumen’s social investment will outperform a plausible alternative in the ‘charitable marketplace’.

BACO is a work in progress and not without its limitations, but it does provide a framework for how Acumen Fund thinks about impacting the poor through a market-based approach, spelling out the cost savings from financial leverage and enterprise efficiencies. BACO involves a number of nuances, which are explored in greater detail in a draft concept paper available on the Acumen blog.

Acumen Fund is a non-profit venture fund that seeks to prove that small amounts of philanthropic capital, combined with large doses of business acumen, can build thriving enterprises that serve vast numbers of the poor.  It invests equity and loans − and intensive management assistance − in for-profit and non-profit enterprises that bring health, water, housing and energy to the poor, focusing on Africa and South Asia.

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