EverFi, a decade-old social enterprise providing online education and training, experienced the rigors of evidence-based impact investing firsthand when it received an equity investment from The Rise Fund. A $2-billion impact fund created by private equity firm TPG, Rise evaluated EverFi’s potential for generating social returns. Drawing on applicable research studies, Rise projected that EverFi’s college-level programs aimed at boosting financial literacy, curbing alcohol abuse, and preventing sexual assault would result in significant social benefit. Taken together with EverFi’s market-leading position and growth potential, Rise bought a major stake.
The data Rise collected also had an unexpected spillover effect on EverFi’s operations. It showed greater impact for high school and middle school financial literacy programs compared to college programs, an insight that prompted EverFi to launch new programs for younger students.
Like a growing number of companies across the globe, EverFi’s business strategy embraces profits and social uplift. And Rise exemplifies the investment community’s increasing interest in using evidence to steer investments that aim for both profits and measurable social good. Yet, how to bring evidence to bear remains an open question for many investors.
Impact investors have experimented for years with methodologies that gauge social value. Examples include REDF’s Social Return on Investment, Root Capital’s Efficient Impact Frontier, and Bridges Fund Management’s Impact Radar. More recently, the Impact Management Project (IMP) has tapped the thinking of more than 2,000 practitioners to achieve consensus on five dimensions of impact measurement and performance. And the International Finance Corporation (IFC) released its nine Operating Principles for Impact Management to help establish a common discipline around managing investments for impact throughout their lifecycle.
Against this backdrop, The Bridgespan Group has worked with a number of impact investors to determine how to put evidence of both a company’s products and services, and its means of production (e.g., labor practices, environmental impact of supply chain, etc.), center stage when deploying capital in pursuit of impact. From this work, we have identified three essential practices that complement the emerging industry standards: (1) use quantitative evidence, (2) assess impact potential in due diligence, and (3) manage impact during ownership.
- Use quantitative evidence.
- Assess impact potential in due diligence.
- Manage impact during ownership.
Read the full article about impact investing by Mariah Collins and Michael Etzel at The Bridgespan Group.