As we understand the material effects we are having - or could have - on people and the planet, we deliver and improve our impact.

How do we design enterprises that give us the greatest chance of achieving our goals?

We draw on existing information about which approaches have been most effective at delivering performance in line with our goals across the five dimensions of impact. Depending on our threshold for impact risk, some of us will want an approach that has a track record of working; others may support the design or growth of innovative approaches.

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How do investors build portfolios to deliver the impact they want?

As an investor, setting goals across the five dimensions, whether high-level or more detailed, helps us to select investments that have the best likelihood of meeting our goals.

If we have broad goals (in terms of (what) effects we want to see) then considering (how much) of an effect the investment will have, (who) the investment occurs for, what (contribution) the investment makes and what (risk) it carries can help us to choose between potential investments. For example, if we want to make investments that contribute to the Sustainable Development Goal (SDG) of good health and well-being, we cannot assume that any investment in healthcare is relevant. The other four dimensions of impact will help us to understand which healthcare investments are likely to make a real difference when it comes to meeting that SDG.

If we have a narrower set of goals but two potential investments appear to deliver the same amount of change (how much) for the same demographic (who) in relation to the same outcomes (what), we can choose based on:

  • How much better these material effects are compared either to a baseline, or the effects created by other available, investable enterprises (contribution)
  • Whether the level of risk we expect to take is greater in either of the two enterprises, and how this relates to our threshold for impact (risk)
  • How far both meet our financial goals.

Selecting Resources

How do we deliver but also improve?

Once we are confident about the approach we want to take - and have set goals based on our understanding of the material positive and negative effects that will likely result - we ‘deliver’ by putting in place governance and systems to enable us to act consistently on both our financial and impact goals.

At the same time, recognising that contexts change and that there may be other or more material effects we can contribute to or prevent, we also ‘manage’ by making an ongoing effort to learn about the experience of people and planet engaging with enterprise, or portfolio of enterprises, and use that information to adapt our goals and improve the material effects we can have.

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How does organisational culture affect impact management - and why is it important just to get started?

Impact management is driven by everyone working in an organisation, from the sales teams engaging with customers, to human resource teams working with employees, to management teams making big decisions, to finance and accounting teams deciding what to value, to sourcing teams managing relationships with suppliers, to marketing teams managing public communication of the effects that the organisations has on people and planet. Widespread impact management in an organisation relies on a culture of data analysis, learning and decision-making. This needs senior leadership to set the tone, inspire their teams and demand accountability, regardless of whether data shows that we are having positive or negative impacts. Understanding and making decisions about how to reduce negative impacts can be very rewarding.
EXAMPLE: A multinational will find it very valuable to know if the farmers supplying its main raw materials are likely to switch careers because working conditions are so poor, or a small business can act immediately if it finds that the effect of its healthcare product is less significant than that of its competitors.
Outsourcing data collection itself (for example, through customer or employee surveys) can be efficient and remove bias but people throughout the organisation still need to see the value of making time for analysis and decisions. Since much of the data needed to inform our assessment of impact across the five dimensions is commercially relevant, demonstrating its value shouldn’t be difficult. But often it requires a pilot to demonstrate that value for everyone to be convinced.

What organisational conditions are necessary for impact management?

Setting appropriate impact goals requires the ability to:

  • Describe impact goals in a way that everyone else can understand
  • Assess which effects are material for groups of people and the planet
  • Assess probability and consequences of impact risks and set thresholds
  • Identify when goals conflict and make decisions, recognising that some negative impacts may not be addressed immediately

Collecting information to inform decisions requires:

  • The ability to identify a fit-for-purpose measurement approach
  • Appropriate policies and systems to account for impact and provide assurance that information is complete, accurate and relevant

Appropriate risk mitigation practices require:

  • The skills to manage risk as a board and team
  • The ability to analyse data to make a judgement
  • The ability to take appropriate action, using appropriate resource, based on information gathered
  • Appropriate governance policies and systems

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What does this mean for investors?

Investors deliver and improve their impact through their portfolios. Below, we have illustrated the different products available in the market today, through which investors can manage their impact. The products are positioned according to the effects they have on people and planet. Download this document to learn more about how the impact of investments can be usefully classified at different levels of detail to suit different audiences, based on the five dimensions of impact.

Impact Goal of Business

 

Wondering if it is possible to construct a portfolio that delivers impact, or transition your existing portfolio? Download some model portfolios here.

Give me some examples

See how the risk dimension has been helpful to Acumen and NPC to understand the risks they are willing to take, which risk factors matter most to them and how they manage to risk. If you are an investor or funder you may be interested to see how risk can be managed at a portfolio level

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