Why does this dimension matter?
We consider whether the effect is likely much better or much worse than what is likely to occur anyway, based on whether the effect:
- Leads to more or less important positive or negative outcomes. and/or.
EXAMPLE: A new service might contribute the same amount to our physical health as a service currently available to us but less to negative greenhouse gas emissions for the planet.
- Delivers a more or less significant effect, and/or
EXAMPLE: Using the new health service might be likely to contribute more or less significantly to our physical health than other services currently available to us.
- Occurs for people (or the planet) who are more or less well-served than those currently experiencing it.
EXAMPLE: The new health service might reach other people who do not currently have access to the service at all.
This dimension matters because, even if we assess an effect to be material and positive, we will only be confident that we are helping to improve the world if we think what we are doing is better (across any one of the dimensions of what, how much or who) than the effect that would likely occur otherwise. It also forces us to recognise that we might make things worse.
This dimension is called contribution, rather than additionality or attribution, because it is often an estimation of whether we think what we are doing will help to improve the world, not a scientific study of whether we did. Running a control trial of what would otherwise have happened is often not possible – ethically or financially – although it is very helpful to do so when we can. But just because we can’t run a control trial in every situation, it does not mean that we shouldn’t estimate, based on data about what is likely to occur anyway (across the (what), (who) and (how much) dimensions) whether what we are doing will improve the world, or of course make it worse. Factoring this consideration into our decisions means that we are likely to make better choices. For commercial businesses, this sort of benchmarking is typically relevant for understanding market opportunity and competitive advantage and is therefore collected anyway as part of general management.
What information do we need?
To understand how far an enterprise has contributed to the effects experienced, we collect baseline information on (who) is currently experiencing (how much) of an effect in relation to (what) outcomes, and assess whether the effects we seek to deliver will be likely better or worse than what would likely occur anyway across those dimensions.
In this section, we bring the dimensions to life through examples of how of a number of enterprises work to deliver employment outcomes for young people with different needs in different geographies. The examples are drawn from specific organisations but illustrate useful approaches for any enterprise or investor – big, small, for-profit or non-profit – managing impact across the five dimensions.
Meet ‘Jobactive’, the Australian government’s initiative to get more people into work. Leading non-profit organisation SYC, who deliver government contracted services, (including the Jobactive service) have developed a programme called ‘Sticking Together’, a 60 week post-placement coaching service for young people and their employers. It aims to improve young people’s ‘stickiness’ to employment: something which isn’t currently covered by the government scheme and has involved service users from the start of pilot development.
To understand what effects would likely have occurred anyway, SYC is undertaking a randomised control trial comparing the outcomes of 50 of those engaged in the pilot scheme against 50 of those involved with Jobactive. In doing so, SYC hope to understand whether the programme is contributing to outcomes that would likely not have occurred anyway, and therefore to the evidence base on what works in order to influence the Jobactive service’s direction when it is reviewed in 2020.
How does this help us to manage our impact?
We may use this information to ensure that the effects delivered are likely better than would have occurred anyway.
To try and ensure the important positive outcomes experienced were likely better than those that would otherwise have occurred, SYC will use the results of the 60 week pilot to build a counterfactual. However we do know that at the start of the pilot the average period out of work for the group of 100 was 2.1 years, and that 60% are now in work, including examples of young people who have been out of work for more than 5 years.
DCED: Demonstrating Additionality in Private Sector Development Initiatives
A paper providing guidance on making informed and credible judgements on investor contribution, as well as guidance for maximising the contribution of public funds.
Insper Metrics: Additionality Guide
A guide to assessing the likely enterprise contribution of a project or investment.
IPA: Randomized Control Trials in the Social Sciences Dataverse
Database of evidence from randomised control trials that include analysis of the likely enterprise contribution made.
What is an investor’s contribution and why does it matter?
When we set goals related to our (contribution), we do so from the perspective of where we sit in a system. For example, an investor sets goals about the contribution that the businesses that they support will make but they also set goals about the contribution that they will make as an investor to enable those businesses to have a positive impact, or prevent negative impact, for people and the planet.
Investors use a variety of strategies to contribute to a business’s ability to generate impact. They can:
- Signal that impact matters: choose not to invest in or to favour certain investments that, if all investors did the same, would ultimately lead to a ‘pricing in’ of effects on people and planet by the capital markets more broadly. Some people think of this as ‘values alignment’.
- Engage actively: use expertise and networks to improve the environmental/societal performance of businesses. Engagement can include a wide spectrum of approaches – from dialogue with companies to investors taking board seats and using their own team or consultants to provide hands-on management support (as often seen in private equity). While a significant dialogue with companies, including about environmental, social and governance factors, is a normal part of the fund management process, the phrase ‘engage actively’ reflects a strategy that involves, at a minimum, significant proactive efforts to improve businesses’ effects on
people and the planet.
- Grow new or undersupplied capital markets: anchor or participate in new or previously overlooked opportunities to enable businesses to generate impact. This may involve seeking out non-traditional illiquidity, complexity or perception of disproportionate risk, which some investors may do in pursuit of financial alpha. In public equities, bonds or infrastructure, an investor might move from holding mainly well-subscribed issuances (which is just a signalling strategy) to participating in a higher proportion of undersubscribed issuances.
- Provide flexible capital: recognise that certain types of businesses will require acceptance of disproportionate risk-adjusted financial return in order to generate certain kinds of impact. For example, creating a new market for previously marginalised populations can require very patient capital that cannot offer a commercial financial return.
The level of contribution that we are happy with is also driven by our constraints. For example, a smaller retail investor – who does not have the expertise to engage directly with businesses, who needs significant liquidity and who cannot afford to provide much flexible capital if they are to meet the needs of their family – may be satisfied with making a different type of contribution than the contribution that a foundation or an ultra high net worth individual might want to make.
Bringing impact management to life
What organizational conditions support continuous improvement?February 7, 2018
Tara Murphy-Forde, VP of Impact & Research at Global Partnerships, shares her experience on building the necessary organizational conditions to improve impact management practices.Read More
Signposting: Mars’ Sustainable in a Generation PlanJanuary 26, 2018
How do businesses apply the five dimensions to deliver and improve their impacts? We talk to Kate Wylie, Global Vice President of Sustainability at Mars, to learn more about how they manage impact – with a specific focus on income.Read More
Investor’s Perspective (PGGM): Mapping a portfolio by its effects on people and planetJanuary 9, 2018
PGGM has mapped its entire multi-asset class portfolio in terms of effects on people and the planet. The results, along with insights gained along the way, are showcased in this paper.Read More
Phase 2: From Theory to PracticeJanuary 8, 2018
The next phase of the Impact Management Project is underway. The objective is to make the practice of impact management as easy-to-understand and accessible as possible. It’s time to move from conceptual agreement to practical application. Phase 2 runs through September 2018, and the project will continue to be multi-disciplinary and collaborative. Read on to make sure you’re involved in shaping what comes next.Read More
Guidance on engaging all affected stakeholdersDecember 12, 2017
How can we really understand and be accountable for the effects of an investment or enterprise’s activities, without understanding the experience of those affected by it? Download guidance on stakeholder engagement and read more about work underway to create survey questions across the five dimensions.Read More
Infographic: How do we know if we’re contributing to the SDGs?December 1, 2017
To understand an enterprise’s contribution to the SDGs, we need to understand performance across the five dimensions of impact.Read More