Impact-financial integration – a Handbook for investors

Executive Summary

After years of framework development, metric definition, and data collection, many investors are increasingly able to anticipate, measure, and manage the social and environmental results of their investments. But for investors to play an even greater role in solving social problems, impact management must leave its silo and integrate with financial management.
The challenge is that financial and impact management methodologies are not designed to be interoperable.
Impact specialists at investment funds typically have their own teams with their own vernacular, frameworks, and datasets, all of which exist in varying degrees of isolation from their financial counterparts.
Siloed approaches leave impact, money, or both on the table. Yet investors who wish to integrate financial, social and environmental considerations are faced with a custom job.
To address this challenge, our organizations have participated for the past two years in the Impact Frontiers Collaboration, an initiative of the Impact
Management Project (IMP), to pioneer new ways to integrate impact management with financial management.
This handbook presents the methods of impact-financial integration that our organizations developed and implemented, along with examples
and lessons learned.


EVPA: A Practical Guide to Measuring and Managing Impact


Introduction from Daniela Barone Soares, Chief Executive of Impetus Trust

What’s Impact Measurement for? Ask a social purpose organization (SPO), and they’ll tell you it helps them prove that what they do makes an impact, gives funders reassurance that their money is well-spent, and provides the stories and case studies they need for further fundraising. They might add at the end that the data helps them refine and improve their programs, and inform their decision-making.

Venture Philanthropy Organisations (VPOs), like Impetus, work for a social sector where the work of impact measurement is driven by the need to extract maximum value from our finite resources. Where SPOs stop doing things that don’t work, even if funders love that project. Where new projects are explicitly based on learnings from previous work and bear the imprint of past successes and failures.

“Managing impact” might not be a phrase to set the world on fire but we believe the benefits of embedding the concept across the social sector would be transformational – and immediately tangible. SPOs are often experts in the needs of their beneficiaries, but lack the data on their own activities to make informed resource allocation decisions, or build an organization that really plays to its own strengths. Data doesn’t just reveal impact – it is a prerequisite for making an impact. It’s also the mother and father of innovation. Innovation isn’t just about ‘new’; it has to be about ‘better’. Data reveals where an SPO could do better and tells them when they’ve got there.

This Practical Guide to Measuring and Managing Impact is a timely resource with a wealth of much-needed information for Venture Philanthropy Organisations (VPOs), and the SPOs they back. It’s one of the many reasons we’re proud to partner with the EVPA Knowledge Centre because sharing best practices is an essential part of the development of our sector. VPOs are in a strong position to take impact measurement and management practice to the next level. Collecting relevant data, and crucially putting it to good use, is a key challenge for SPOs. Our unrestricted funding backs the unglamorous, but essential, work of building capacity. And we’re in it for the long haul: we know this sort of organizational change cannot happen overnight, and we don’t expect short-term projects to do the trick.

At Impetus, we are committed to building this capacity in the organizations we support. We build relationships of trust that allow us to push our organizations to achieve more than they might have thought possible. Our deep understanding of the sector is complemented by the private sector expertise we bring in, and our long-term engagement means that support packages can see an SPO right through the process of finding out what to measure, collecting the data, and putting in place the virtuous circle that connects performance data to performance improvement.

And of course, we are an SPO too! We are acutely aware that we have a duty to expend the resources entrusted to us for maximum impact, and that we only identify impact through data. We need to know what wouldn’t have happened without us – whether that be more lives changed, improved cost-efficiency, greater sustainability, or all of the above, in the organizations we support. This is undoubtedly difficult to measure. But we are committed to finding better, and more useful ways to do so; we know our own funders value this information, but first and foremost we are doing it to ensure that, year on year, we do what we do better. This guide helps us on our journey.

A final word: managing impact is not about removing risk, as this is often the partner of innovation. We believe SPOs should be intelligent risk-takers, with venture philanthropy providing the ultimate risk capital. Data allows you to know when you are taking a risk, as well as whether it pays off. And when the “pay off” can mean changing the lives of thousands, or even millions, we all need to know about it.

Daniela Barone Soares
Chief Executive, Impetus Trust

Expert Group composition

EVPA is grateful for the contribution of the following Expert Group to the development of
this manual.

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Harries, Hodgson, Noble: Creating Your Theory of Change – NPC’s Practical Guide


NPC’s theory of change

I first became aware of the term theory of change during NPC’s research into campaigning, which led to the publication of Critical masses in 2008. It seemed like a valuable concept, capturing a causal model of an organisation’s work, and the links between its activities and the outcomes sought. But I met with scepticism from colleagues who feared it would be of little practical value: there was a perception that it was just evaluation jargon.

I am glad to say that this initial scepticism has been found to be entirely unwarranted. Since NPC first began to explore using theory of change to work with charities around impact measurement and strategy, it has become a core component of our work. We have found it to be enormously useful in helping charities to articulate what it is that they do and why: what they are trying to achieve, and how their strategies aim to get them there.

Today, we recommend that all social purpose organisations—charities and funders, social enterprises and investors—build their work on a theory of change. It is at the heart of strategy. It is the foundation for the development of an impact measurement framework. It should be the cornerstone of attempts to work out whether and how well you are achieving your mission. NPC’s approach to impact measurement, set out in our Four pillar report, is built around the concept of theory of change.

Of course, a theory of change is only as useful as its practical application and we should not get lost in the quest for theoretical perfection. But taken at face value, as a theory to explain how your work is supposed to function, it is immensely powerful. For us in the charity sector, committed to achieving the best possible outcomes for those we aim to serve, it helps test whether our understanding of the world is backed up by what happens in reality. Theories of change, therefore, should not be static—they evolve and improve as our understanding and knowledge is advanced by evidence and observation.

NPC published its first paper on theory of change in 2012, and it has since become our most popular publication, downloaded more than 13,000 times. Theory of change is also our most popular training course, with 169 participants over the last two years. In our consulting we have worked directly with 47 clients to help them develop their own theories of change. While most of this work has been with charities, funders are increasingly seeking our help too. At the same time, we have seen growth in the wider theory of change market: other consultants and advisors have built up their own offerings to help social purpose organisations make use of the concept.

After a long time in development, NPC has also published its own theory of change. This process has helped us to understand the opportunities and the challenges developing a theory of change can present. As an evolving model of our work, it is sometimes hard to know when it is finished. And producing a theory of change is not the same as embedding it throughout our work, and using it to drive our strategy and impact measurement. We are on a journey with theory of change, as is the UK charity sector today.

I am delighted to mark this step with the publication of a new paper on theory of change, sharing the insights we have gleaned through our work with clients and partners. I hope it helps you get an even better grip on what is at the core of your work—what you are trying to achieve, and how you plan to get there.

Tris Lumley, Director of Development, NPC

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