News & Insights
Creating Social Change Through Impact Investing Requires Intentionality & an Understanding of Context
In our latest Investors Report, Mark Coffey, chief investment and operating officer, underscores our commitment to investments focused on social impact and reiterates the challenge of focusing entirely on numbers for impact measurement.
Years ago, as an executive of a publicly traded company, I looked forward to earnings calls with investors and analysts. The company was performing well and each quarter’s news generated enthusiasm and gave a boost to the stock. The focus was normally backward-looking and new regulations required caution to avoid forward-looking statements. Investors were most interested in short-term financial results and what they might mean for the value of their investment.
The story is very different with impact investors. As an impact investor, Global Partnerships certainly has stewardship over the short-term results of our investments, as we know our investors expect careful due diligence and monitoring, and decisive action when trouble looms. We work very hard to have deep and updated knowledge about the repayment profile of each of the underlying debt investments in the funds that we manage in order to deliver the financial return that you expected when making the investment.
At the same time, however, we cannot take our eyes off the larger social goal of providing opportunities with real impact for people living in poverty. In doing so, we adhere to a fairly strict definition of impact investing requiring intentionality, which was outlined in an article by the leadership of OPIC in the Stanford Social Innovation Review:
“investments with partners whose very business models aim to address social or environmental problems while generating sustainable financial returns.” The article contrasted this type of investment with ones which have a positive and even powerful development outcome, but which are undertaken strictly as an economic venture.
None of our investments are undertaken strictly as an economic venture, and our intent is always to support a business model that effectively addresses a social and/or environmental problem. Understanding the effectiveness of business models in addressing social problems is complex, and cannot be limited to measurement of outcomes. Rather, our approach seeks to understand:
the context of the problem, or the unmet needs of people living in poverty;
the activities undertaken to meet those need; and
then measure the outputs, or products and services provided. This does not mean that we ignore outcomes or evidence that the outputs may have caused certain outcomes; rather, we recognize that quantitative output metrics alone may be inconsistent and lead to programs designed to produce selectively attractive numbers, much like those short term results that stirred up investor appetite back in my previous work.
In this report, we provide our “stewardship” of the short term results of our funds. Indeed, we are pleased that all of our investees are meeting their obligations as planned. But we also provide you a partner profile, so you can learn about context, activities, and outputs of one partner. We will continue to develop systems around impact measurement to help us ensure that we are effectively addressing social problems.
Read our Latest Investors Report:
- We highlight our partner Emprender, a nonprofit microfinance institution that aims to break the cycle of poverty and poor health in Bolivia, where 60 percent of the population lives in poverty, and 70 percent lacks access to regular health services (read here).
- We provide updates on our social investment funds' performance (read here).