Impact Measurement and Reporting: Lessons from the McConnell Foundation

As an impact investor, I've been concerned about the often-overlooked aspect of this field: the rigorous measurement, reporting, and evaluation of outcomes. Too frequently, impact investing appears to revolve around the notion of “feeling good” rather than yielding tangible, quantifiable results. However, change is on the horizon. Because, as more resources are marshalled towards impact goals, organizations like the McConnell Foundation are leading the way in showcasing how impactful investing can be measured.

Need for Impact Measurement

For impact investing to evolve beyond feel-good narratives, its imperative for investors to demand thorough reporting and evaluation of non-economic outcomes. This involves not only supporting investment funds that prioritize such measures but also engaging with direct investments where robust impact reporting hasn’t been established. Its also crucial that the insistence on accountability does not translate into an onerous compliance burden for investees and grantees.

Supporting Partners in Reporting

Impact investors have a role in enabling their partners to provide the necessary data and analysis. This support could manifest as connecting them with service providers that already have processes for impact measurement in place. Or, it can come from utilizing the internal resources of investors themselves to assist in data collection and reporting. The objective is to receive data, particularly Key Performance Indicators (KPIs), that genuinely reflect the outcomes and progress made over time. However, all too often, impact reports are reduced to mere marketing tools rather than instruments for critical decision-making.

The McConnell Foundation’s Approach: A Case Study

The McConnell Foundation, a private Canadian foundation, provides a helpful example of how impact investors might proceed. I recently reviewed their latest impact report and was pleasantly surprised to see they have greatly improved their impact reporting framework. What also sets them apart is their commitment to an entirely impact-driven portfolio within five years and their development of an impact ratings rubric that clearly delineates their investments’ impact.

With two-thirds of their portfolio in mainstream public securities and a significant portion actively dedicated to impact investments, the Foundation’s approach is both pragmatic and forward-thinking. Their report not only includes quantitative metrics like the number of social enterprises created or the amount invested in renewable energy but also narrates the stories behind these investments, catering to both analytical and emotive stakeholders.

Key Takeaways from the McConnell Foundation’s Reporting

1. Comprehensive KPIs: The Foundation reports on a variety of KPIs that are objective and can be evaluated over time. This not only tracks progress but also influences investment decisions for optimal impact.
2. Balanced Reporting: Their report includes both hard data and impactful stories, providing a holistic view of their investments.
3. Setting Targets: The Foundation has set ambitious goals aligned with their focus areas and is committed to refining these targets, acknowledging the challenges in setting them as an indirect investor.
4. Impact Rating Assessment Tool: At the end of their report, the Foundation offers an Impact Rating Assessment Tool for other investors to utilize, demonstrating a collaborative spirit in the impact investing field.

Challenges and Opportunities for Smaller Investors

As someone managing a family office with a keen interest in impact investing, I’m intrigued by how to adopt a similar approach to the McConnell Foundation’s, particularly with limited resources. I encourage readers to share suggestions on how smaller investors can efficiently implement such impact measurement and reporting processes.

Furthermore, I’m curious about the resources required by McConnell for their impact measurement and reporting work, both in total dollars spent and as a percentage of their Assets Under Management (AUM). Understanding this is crucial, as the feasibility and profitability of such initiatives directly impact their practicality and long-term sustainability.

Concluding Thoughts

The McConnell Foundation’s latest impact report offers valuable insights into how impact investments can be rigorously measured, reported, and evaluated. This kind of transparency and accountability is not just beneficial but essential for the future of impact investing. The question remains; how smaller investors can emulate this model effectively and efficiently. The journey towards better impact measurement is complex, but with collaborative efforts and shared learnings, we can certainly make significant strides in the right direction.