Assessing the impact of sustainable development programmes, especially ongoing performance measurement and management, has gained momentum in recent years. The interest and growth in numerous approaches, technologies, processes and systems that aim to understand the difference a development intervention can make can be attributed to impact investors’ and other stakeholders’ expectations. But determining impact and return on investment can at times seem a bit like searching for a holy grail.

These stakeholders are:

Social investors who want to understand if their programme has had the desired effect and whether the outcomes they sought were achieved.
Impact investors who want the assurance that their investment yielded the desired returns – financially, socially and from an environmental perspective.
Social service and non-profit organisations that want to account for the resources invested in and entrusted to them.
Social scientists and development practitioners who want to understand and prove that their theory of change and logic models – and their assumptions about how to address a social issue – were correct.
Governments that want to understand that their voting constituents’ basic needs and expectations are adequately addressed.
Global humanitarian organisations that try to understand that their efforts, interventions and investments make a difference to communities around the world and that people’s quality of life is improved – globally.

Finding a single method to address all these stakeholders’ expectations as far as measuring impact (change) and return on investment are concerned – one that will work for each type of intervention – is impossible. For years, global institutions and funders have tried to standardise the practice of measurement and evaluation. Global measurement frameworks and guidelines as well as reporting standards were developed to provide insight into the success, impact and outcome of development interventions. Everyone agrees that evaluating, measuring and comparing different risks and impacts across different topics are complex. Nevertheless, various projects demonstrate that it is possible to properly quantify and evaluate such impacts.

One such initiative is the Investment Impact Index™ that Next Generation Consultants developed over a period of 10 years. The methodology takes a stakeholder-based approach to impact assessment and has its origins in impact and development evaluation. It does not standardise performance management and measurement and recognises that each development programme seeks to achieve specific outcomes and impacts.

Through stakeholder engagement rigorous new evidence on what works in development directly enhances project implementation. The Investment Impact Index™ looks for evidence of impact by engaging with all stakeholders of an initiative. This evidence offers insight into the depth, width and range of impacts and returns achieved by such an intervention.

It tests the different assumptions and theories that informed programme design (attribution), it considers programme implementation (activities and outputs), it identifies the factors that contributed to change (causation) and provides insights into how interventions can be changed to affect greater impact (enhanced outcomes). In effect, it highlights and reorientates development toward more effective approaches or greater impact. The Investment Impact Index™ also goes a step further in that it assesses the impact of the inputs – the resources invested to determine return on investment.

Over the last ten years, we have learned a lot about impact assessment by working with investors, intermediaries and beneficiaries. Here is what we learned:

Investors: The term “impact” technically means long-term, sustained change experienced by stakeholders that would not otherwise have happened. Therefore, investors’ intent for the impact they envisage must be described clearly. Notwithstanding any other impact an intervention delivers, if the original intent for such envisaged impact is not achieved, all other impact is unintentional.
Intermediaries: Intermediaries generally present proposals to funders. These are based on their existing programmes, or newly created ones that address a specific community’s needs. There may (or may not) be a link between the funder and the implementer’s envisaged impact. What needs to happen during the initial phase – generally the due diligence stage – is that the funder and implementer of the programme need to agree and estimate future social impact. Discussion of impact at this stage also provides the opportunity to build understanding around shared impact goals, and to establish both parties’ expectations around metrics, reporting and impact targets, which reduce the risk of conflict about these matters down the line.
Ongoing performance measurement and management: Once the investment has been made, ongoing impact measurement and management practices employed by investors range from simple to complex. At the simple end are measuring quantitative outputs (through reporting and monitoring) but this process, which is generally easy to track, does not provide enough information about actual qualitative change that matters. At the more complicated end are more sophisticated measures that demonstrate change for beneficiaries, that take into account other material changes (whether positive or negative), additionality (change that would not otherwise have occurred) and cost-effectiveness (through evaluation). However, tension remains between the adoption of standardised indicators and more flexible, context-specific indicators. Many investors feel standardised indicators would be useful and cost-effective in theory, but in practice they tend to limit understanding of a particular investment’s results. On the other hand, many investors see more flexible, context-specific and qualitative indicators are necessary because of the need to measure what matters, but they are both incomparable and costlier to implement, and thus not fit to manage investments at scale.

Next Generation’s Impact Investment Index™ specifically addresses these three aspects. It can mediate between investors and disparate, non-standardised information about impact. More importantly, it verifies information and impact. And it delivers an impact report. For more information, the Investment Impact Index™ can be downloaded as a free resource.

Author Reana Rossouw presents practical, useful, interactive master classes on
(1) Stakeholder engagement and management, (2) Human rights management, (3) Strategic social investment and (4) Monitoring, evaluation, impact and return on investment assessment. See the full brochure (including dates and booking details).