Measurement Key to Attract Impact Investment - Report
11 February 2015 at 9:56 am
A focus on the intention and measurability of impact investment is critical in order to leverage the new pool of capital it is to bring to Australian social sector organisations, new research by NAB suggests.
Impact Measurement: Exploring its Role in Impact Investing was launched in conjunction with a series of roadshows hosted by NAB around the country in recent weeks for those interested in applying for its new Impact Investment Readiness Fund.
The report was produced in partnership by NAB, The Difference Incubator and Benefit Capital and looks at measuring impact for impact investment from both an investor and an investee perspective.
Impact investing, described in the report as having the “potential to transform the social marketplace in Australia,” refers to investments made intentionally with the expectation of both financial and social return – for example, investment in social enterprises.
According to the report, building measurement into the investment process ensures the clarification of not just financial returns but also the social impact expectations and by identifying expected returns and impact early in the process, measurement and reporting post-investment could be simpler.
“Impact measurement has broad application and is rising in prominence in the social sector. While there is a focus on investors and government requirements, service providers in the not-for profit sector have also called for their needs and those of their beneficiaries to be reflected in measurement models,” the report said.
“Developing the same level of rigour and robustness into impact measurement as you would see in financial reporting will encourage more capital, assist to identify opportunities to increase impact and help to understand the concerns of stakeholders.”
According to the report, strong measurement frameworks will be key not only for investors but also for Australian organisations hoping to attract investment.
“Investors tend to be the primary audience for impact measurement, however there is significant value for investees to have well developed, practical measurement systems. This helps to drive business improvement opportunities and supports attraction of future investment, “ the report said.
“The importance placed on measurement by impact investors and the level of detail required varies across the sector and many are still exploring their measurement needs in this emerging area. There is a strong reliance on the organisation being invested in and its ability to provide basic information on the social or environmental outcomes.
“The social sector in Australia is in the early stages of embracing the potential of both impact measurement and impact investment.
“In Australia, the growing interest in measurement is seen through the significant demand for conferences and networks focused on impact measurement. Five conferences focused on social outcomes measurement have been held in Australia over the last two years, attended by close to 800 participants seeking to better engage with impact measurement.
“Opening up private capital for public good unleashes the creativity and productivity of the marketplace and the passion and insight of the not-for-profit sector, allowing for social change to occur at a faster pace and greater scale.”
“Our belief is that impact investment, as an intentional lens on all investment opportunities, combined with appropriate measurement and reporting of social outcomes is key to unlocking private capital for public good,” the report said.
Grants of up to $100,000 to be awarded as part of the Impact Investment Readiness Fund will focus on bridging the current gap preventing investable enterprises and mainstream financial institutions from working together. More information about how social sector organisations can become involved will be available when applications open next month.