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Impact Investing: Toward Impact Consensus


Editor's Note: The following post comes courtesy of Brian Cayce, vice president of investments at GrayGhost Ventures, an Atlanta-based impact investing firm. Brian is a member of the steering committee of the Georgia Social Impact Collaborative, which has partnered with SECF to present Impact Investing 101 for Foundation Executives and Trustees on Tuesday, September 19 – view details and register here!

A prevailing narrative has developed that impact investing offers investors pre-defined financial returns. This has many in the philanthropic community confused whether impact investing is about the needs of investors or the needs of the communities which their funding seeks to benefit. Indeed, the more recent debate has framed the discussion as one in which investors attain nothing less than market-rates of return for their impact investments.[1] However, impact investing was originally conceived to improve the lives of others; that impact investing could also deliver financial returns to investors was a means to an end.[2]

For decades, the financial instruments used to improve the lives of people living in poverty included making grants to nonprofit organizations, or possibly offering below-market-rate loans instead of grants to support low-income housing. The microfinance movement dramatically expanded access to credit for people living in poverty. Gradually, new financial instruments coupled with innovative business models could benefit marginalized communities.[3]

In the past decade, a mix of nonprofits and for-profits has pursued a wide range of activities to deliver social benefit alongside financial return. At the same time, the first impact investors began deploying debt and equity in ways more sustainable than the provision of grant funding. Several enterprises are now using business-based approaches that are both impactful and financially viable, including Root Capital, which connects small farmers in emerging economies with global markets, and M-KOPA, which introduced new pay-as-you-go financing for solar power.[4] Importantly, these examples demonstrate how impact investors have worked in alignment with grantmakers to provide critical and pivotal grant funding to create the desired social value.

As the impact community has grown and social entrepreneurs have advanced their understanding of how to engage with capital providers, there are a growing number of impact investments which might complement the grantmaking activities of private foundations. Identifying targeted community impacts may provide a guide for the best use of capital. Among the variety of strategies, philanthropic impact investors can signal that impact matters, engage actively, grow new or undersupplied capital markets, and provide flexible capital.[5]

Greater transparency with regard to impacts would help. Even though many want to use impact measurement frameworks and resources that suit their own context, whether proprietary or off-the-shelf, an approach based on shared fundamentals would allow all to observe and share the same information. To address this, the Global Impact Investors Network (GIIN) has introduced the Impact Management Program, a multi-stakeholder effort of 700+ practitioners seeking to build consensus about impact goals and performance. 

This effort is underpinned by five dimensions of impact: What, How Much, Who, Contribution and Risk. “What” relates to the positive (or negative) impacts on lesser-served communities. “How Much” refers to the depth to which an intervention penetrates or how broadly it occurs across a community, as well as how long the impact lasts. “Who” prioritizes those who are not well-served in relation to the desired outcome. “Contribution” assesses how the effect compares and contributes to what is likely to occur anyway. “Risk” factors in how likely is it that the outcome is different from expectations.[6]  

Businesses will need certain types of data to measure and manage impact, and investors will need certain information. There are current efforts underway to summarize performance. These include ratings of an enterprise’s performance, assurance services, and aggregation against a specific set of metrics that demonstrate positive or negative effects.[7]

One unique aggregation initiative may be found in Gray Ghost Ventures’ (GGV) definition of Social Value to Paid-in Capital (SVPI). GGV sought a metric that resonated with the migration of the industry toward investors familiar with terms such as Total Value to Paid-in Capital (TVPI), a standard benchmark of performance for private capital funds. SVPI expresses the amount of societal value created in underserved communities per dollar invested into GGV’s impact fund. SVPI allows for the aggregation of the positive net effects of its investment portfolio across a specific set of metrics. This incorporates the five dimensions and provides a benchmark for impact performance.

As we clearly describe impact goals across the five dimensions, we have a road map to the performance data we need for impact investing. We can begin to promote metrics which benchmark our work. We can even establish pre-defined impact returns. Perhaps then the impact investment community and the traditional investment community – which certainly has pre-defined financial returns – could better co-exist?

Brian Cayce is vice president, investments, at GrayGhost Ventures.


[1] Cambridge Associates, “Introducing the Impact Investing Benchmark,” 2015.

[2] Bolis, Mara and Chris West, Stanford Social Innovation Review: Marginalized Returns, Fall 2017.

[3] Bolis, Mara and Chris West, Stanford Social Innovation Review: Marginalized Returns, Fall 2017.

[4] Bolis, Mara and Chris West, Stanford Social Innovation Review: Marginalized Returns, Fall 2017.

[5] GIIN, Overview of the Impact Management Project, 2017.

[6] GIIN, Overview of the Impact Management Project, 2017.

[7] GIIN, Overview of the Impact Management Project, 2017.

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