By Tom Woelfel, Pacific Community Ventures
Rigorous impact measurement – while widely recognized as critical to the growth of impact investing and core to its definition – is still relatively new and less prevalent than one might imagine. While impact measurement standards and systems like IRIS and GIIRS have emerged to support the efforts of impact investors, there continues to be more discussion around impact measurement than actual adoption of the practice. Consequently, there are relatively few examples of research documenting how investors and investees approach impact measurement in practice, including the metrics they track, how they collect the data, how they analyze the data, and what they ultimately report.
As part of our field building efforts at PCV InSight, we have provided third-party impact measurement services for over a decade. Through our work, we have assisted some of the largest institutions in the world, including CalPERS and smaller community-focused CDFIs like Neighborhood National Bank, in examining and understanding the impact of their investments.
In early January of this year we published Invest Northwest: Eight Year Social Performance Review, a white paper that shares eight years of data, findings, and learnings from our examination of Invest Northwest, a place-based, mission-related investment fund created by the Northwest Area Foundation (NWAF). In 2004 NWAF established Invest Northwest, a $15.3 million private equity fund, that targets later stage companies with established products, services, and markets for investment exclusively within NWAF’s eight-state region of Idaho, Iowa, Minnesota, Montana, North Dakota, Oregon, South Dakota, and Washington.
With the twin objectives of realizing “significant social returns and a 15 percent internal rate of return” NWAF and the Annie E. Casey Foundation (also an investor in the fund) recognized early on the importance of impact measurement and subsequently supported annual examinations to fully understand their investment’s non-financial performance. This white paper comprehensively documents Invest Northwest’s financial and non-financial performance from these annual examinations.
In addition to sharing findings that have informed both NWAF’s and the Annie E. Casey Foundation’s work over the last eight years, the white paper details our approach to impact measurement and offers a real world example of impact measurement in practice. In making our research on Invest Northwest public, we hope that the white paper can serve as a resource for the field to help new and experienced impact investors undertake and refine their own impact measurement practices.
A summary of findings from Invest Northwest’s investee companies is included below:
- 22% job growth since the time of investment
- Employee wage increases in seven of the eight years of analysis, with wages outpacing regional and national wages
- Health and retirement benefits offered at higher rates than private businesses nationally
- Formal and informal training opportunities provided to employees
- Impact was not centered within low- to moderate-income, rural, or racially diverse areas
- The fund did not meet its financial return expectations
The white paper can be downloaded here: Invest Northwest: Eight Year Social Performance Review
Tom Woelfel is the Associate Director for PCV Insight – Pacific Community Ventures’ (PCV) global research and consulting practice in impact investing. In this role, Tom leads and manages PCV InSight’s consulting services, providing research, analysis, and reporting to prominent institutional investors, corporations, foundations, private equity funds, and CDFIs, including CalPERS, Citi, Hamilton Lane, The Annie E. Casey Foundation, PG&E, and others. In addition to consulting to external clients, Tom oversees the tracking and reporting of PCV’s own impact for its small business advising and lending, and affiliated equity fund, Pacific Community Management. Tom serves on the research committee of The Forum for Sustainable and Responsible Investment (US SIF), a US membership association for professionals, firms, institutions and organizations engaged in sustainable and responsible investing.