In impact investing and socially responsible business, measuring and communicating impact is key. Summary analytics turn customized impact metrics into clear environmental and social outcomes, along with their economic value. This makes it easier for mission-oriented companies to discuss their social return on investment with investors and clients, and allows investors to compare and combine impact across their diverse range of companies.
All Impactable customers receive their Total Impact Value (TIV), Impact Multiple of Revenue (IMR), and Impact Multiple of Capital (IMC), providing a clear picture of how effective and efficient a company’s business model or an investor’s portfolio is in generating impact. Each of these measures is calculated at all levels of aggregation—from a single metric in a single year, to a model sum of all metrics over five years, to a full company level across all products and geographies, and for investors, across the entire portfolio.
The Total Impact Value (TIV) is a comprehensive metric that sums the complete financial valuation of the social and environmental impact outcomes generated by an organization or investment. By combining data from various impact areas, TIV provides a clear picture of the cumulative benefits of an organization's efforts.
When presenting this value to stakeholders, you might say, “The social and environmental outcomes generated by our innovation—such as reduced greenhouse gases, increased job opportunities for women, and reduced incidences of waterborne infection—are projected to create $834M in impact value from 2024-2028.”
Impact Multiple of Revenue (IMR) measures the impact value created per dollar of revenue. Mathematically, it is the total impact value divided by total revenue. This metric highlights the efficiency of an organization's business model in generating positive social and environmental outcomes relative to its revenue, giving stakeholders a sense of how impact scales with business growth. For a company's customers, it shows how much impact is generated by purchasing the company's product or service.
When promoting this value, you might say, “For every $1 spent on our service, $834.52 of impact value is generated.” If your clients are government or public goods-oriented organizations, you can also phrase it as “saved costs.” For instance, “By spending $1 with our company, you are saving $834.52 in long-term social and environmental costs.”
Impact Multiple of Capital (IMC) measures the impact value created per dollar of capital invested. This metric is crucial for understanding the return on investment from an impact perspective, highlighting the effectiveness of capital and grant deployment in generating positive outcomes. It allows investors to compare the impact performance of different investments, identifying which ones offer the greatest social return on investment (SROI).
When discussing this value as a company, you can say to your investors, “For every $1 invested in my company, your social return on investment is $42.” As an investor, when analyzing your IMC at a portfolio level, you can report to your LPs, “Every $1 of our investment is generating $42 in impact value, or a 42x SROI.”
September 12, 2024
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