Social Impact Investing

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SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE the role of SII in meeting social needs, and thus the extent to which it should be supported through policy incentives. The first area is the development of relevant social outcome measures, that capture quality of life measures and their changes in both in the population (to identify need), and amongst recipients of the social intervention (to identify effectiveness). Second, contextual data, including general socio-economic conditions in households and communities and the levels and nature of general and specific social interventions, is required to develop appropriate controls for evaluation models. Third, robust and timesensitive evaluations of policies, and/or aspects of policy innovation to more broadly inform implementation decisions, are needed (OECD, 2014f). 7.29 Some suggested steps to build this evidence base include: Broader social outcomes of each intervention should be defined, including expected spill-over effects. These social outcomes should be measurable independently of the policies’ target measures, and include at least one distributional measure to retain a check on the ‘inclusivity’ of the intervention effect (see 7.4.2). Compulsory evaluations should be incorporated into the publicly funded interventions, publically incentivised forms of SII, or as part of formal regulation practices; and encouraged in independent forms of SII (this may require the development of a business case). o o Evaluations need to be methodologically rigorous, and so support with the implementation of or methods for evaluations should be available as part of the development of a SII market, by sponsored independent researchers, or a formal regulatory body. Timing of all social intervention evaluations should be predetermined and based on when social returns to interventions can be expected. More than one evaluation might be needed, as the same intervention may contribute to more than one outcome over time (see 7.4.3). Data techniques, such as data matching to administrative sources and national surveys, could be facilitated by governments and independent groups to provide access to contextual data in order to and improve the quality and efficiency of evaluation processes. 7.30 It is worth noting at this stage, that there is a trade-off between the need for timely policy interventions and the weight of - and wait for - the most rigorous evidence. Because it is important to act on social need in a timely way, there should be an expectation for ‘learning on the job’. Risks associated with such an expectation can be limited first and foremost by piloting social interventions, by undertaking independent evaluations on untested aspects of the intervention, and preparing a recipient-focussed (pilot) ‘exit plan’ with appropriate funding in place (OECD, 2014f). 7.4.1 Evaluating cost effectiveness or cost-benefit ratios? 7.31 Many governments may not have capacity and systems in place to measure cost-effectiveness of public service delivery, however, social impact investment can present a strategic opportunity for initiating the collection of such data. Clearly, these types of approaches would need to build over time with a balance being found between effective measurement and effective market development.7.32 Two types of evaluation methods are potentially relevant for assessing SII interventions: cost-benefit analysis (CBA) and cost-effectiveness analysis (CEA) (see OECD 2014f for a more detailed discussion of these methods). Cost-benefit analysis (CBA) enables evaluators to compare the costs of a policy or intervention with its 118 © OECD 2015
SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE benefits measured in monetary terms (even if the benefits themselves are not pecuniary). Cost effectiveness analysis (CEA) compares the costs of meeting a given policy objective by alternative means. 7.33 The distinction is important. In the case of CBA, accurate information on the costs of meeting the objective must be available. Secondly, and most importantly, the program benefits must be valued even if they are not market goods (i.e. do not have a price). By expressing costs and benefits in the same units, CBA is used to indicate whether a given policy objective is desirable When used on its’ own CEA cannot help the policymaker decide what the policy objective should be since the benefits and costs are not expressed in the same units. This also means that it is impossible to compare across different policy domains. As such it cannot be used to determine whether the policy is welfare-improving in the strict sense. Rather CEA is used to determine the costs of meeting a given objective, and to compare between the costs of meeting that given objective through alternative means. 7.34 In the context of policy discussions related to SII the role of CBA is limited for a number of reasons. First, social impact investors and investees may have objectives related to social needs which are distinct from (and in many cases be more ambitious than) stated policy objectives. Second, the investor and the investee derive a value from the investment which may or nor may not be identical to that which is appropriate for the evaluation of public policy. 36 7.35 The role of CEA in policy discussions about SII is more obvious. For instance, CEA can be applied to evaluate healthcare policies, for which it can be difficult to assess the monetary benefits but it is relatively straightforward to determine the desired outcome (e.g. “number of lives saved” or “DALYs” [EuropeAid, 2005]). CEA measures costs in monetary terms and compares them with the outcomes, expressed in terms of relevant units which related to the social need in question. The ratio of costs to effectiveness is computed in order to determine the cost per unit of effectiveness; the most effective projects will have lower cost-effectiveness ratios than alternatives. 7.36 This methodology is directly relevant for the case of SII. Firstly, investors and investees may well be interested in knowing whether or not their investments are meeting their objectives in terms of social needs at least cost. Secondly, policymakers would be interested in knowing whether different policy measures which incentivise the development of SII may be a more efficient way to meet their policy objective than more traditional state-managed forms of service delivery. 7.37 The evaluation should be as comprehensive as possible in the determination of costs and benefits, accounting for indirect and long-term effects of the program and reflecting the interests of all stakeholders involved (Better Evaluation, 2014a and 2014b). Interventions with social savings expectations and social outcomes expectation can undertake both forms of evaluations. 7.4.2. Measuring social impact: selecting social outcome measures 7.38 Any type of social intervention is designed to achieve a social goal, SII is not different. The importance of measuring social outcomes was highlighted by the SIITF as well as by the Working Group on <strong>Impact</strong> Measurement (WGIM, 2014). The social outcomes defined by a social intervention should meet some standards, including: being predefined, measureable, valid, repeatable, and independent (not distortable). <strong>Social</strong> outcome monitoring may also include the addition of spillover measures, or timesensitive changes to the social outcomes desired. 36 . For example in the case of CBA it is important to draw a distinction between paternalistic and non-paternalistic altruism, and it is only the former which is relevant when ascertaining whether or not a policy intervention is welfare-improving. See Johansson (1992) for a discussion. © OECD 2015 119
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Fund Azzad Ethical Mid Cap Fund Bri
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development in the US, or are made
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concern, and submitting and voting
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sustain land trusts, to a meeting o
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that are often excluded from market
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Some organisations that have used S
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it helps identify the critical sour
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and shareholder trust through posit
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Approaches Some commentators have i
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Wieland and Handfield (2013) sugges
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EthicalQuote (CEQ) tracks reputatio
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Displaying commitment to CSR is one
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Brand Differentiation CSR can help
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takes health and safety, diversity
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advance with the practice of CSR wh
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Stakeholder Influence One motivatio
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Regulation Fifteen European Union c
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jurisdictions. E.g., some jurisdict
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"Impact investments can be made in
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venture capital community. Investor
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countries via local intermediaries.
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determining views of affected commu
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Another measure of economic impact
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The Board for the CCEG was to inclu
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17 Love Relationship Online dating
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Social Value Act 2012 legislation.
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Development released a report outli
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Benefits and Costs of Social Impact
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UK On 18 March 2010, Secretary of S
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US Massachusetts: The second of two
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US Federal: The U.S. Department of
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would establish a five-year pilot p
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We are dedicated to finding ways to
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In the past, public monies have oft
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indicate that more Americans want t
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Youth" to "Opportunity Youth" in or
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income must file a Form 990. The fo
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In its first three years, SIF has a
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The Office of Social Innovation pri
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of Management at UCLA; and launched
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Notes _____________________________
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Investing for Impact Case Studies A
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Contents What is Impact Investment?
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What is Impact Investment? Impact I
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A case study approach in an asset a
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Segments of Impact Investors High T
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Foundations Like high net worth ind
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in the developed and the developing
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By creating mechanisms through whic
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Asset Allocation Framework Asset cl
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Cash Shorebank Deposit Program fina
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Mezzanine/Quasi Equity Instruments
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Venture Capital Bridges Ventures CD
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Real Estate JP Morgan Urban Renaiss
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absolute return (hedge funds) BelAi
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senior debt Root Capital Impact Fir
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Venture Capital Aavishkaar Impact F
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eal estate Ignia Impact First Inves
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senior debt Root Capital Layered St
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The New York City Acquisition Fund
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Appendix Methodology The Investing
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Websites •• Bridges Ventures: h
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Cash Quasi Equity Public Equity Buy
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Page 301 and 302: Global Research 29 November 2010 Im
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Impact Investments: An emerging ass
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Advocacy Foundation Publishers The
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XVI for Drug-Free Communities Landm
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Vol. VIII 2022 ComeUnity ReEngineer
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Vol. XV 2029 Inner-Cities Revitaliz
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The e-Advocate Journal of Theologic
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Issue Title Quarterly Vol. I 2015 I
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The e-Advocate Juvenile Justice Rep
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2018 - The Theological Law Firm Aca
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About The Author John C (Jack) John
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