AEA365 | A Tip-a-Day by and for Evaluators

Feb/11

21

David Erickson on Measuring the Social Impact of Investments

I am David Erickson, the Manager for the Center for Community Development Investments at the Federal Reserve Bank of San Francisco.

In the community development finance and socially-motivated investing worlds, there is both universal agreement for the need for better social outcome measurements and no consensus on how to do it. And yet the pressure to innovate in this area is coming from many sources—from government, consumers, investors, and others.

Lessons Learned: A growing consciousness among consumers and investors about social and environmental issues is already changing the types of products and services that are available in the marketplace. Government, too, is seeking to change the ways it does business by providing more resources to programs that are proven to work and by directing funds away from programs that don’t. Xavier De Souza Briggs, Deputy Director of the Office of Management and Budget, captured this idea at a recent Federal Reserve conference where he explained that leaders in government are trying to change “the DNA of the federal government” so that it can take more risks and reward investments that yield better social outcomes. That change – both in the market and for government – requires better data on social impact.

If it is possible to use investments – by the government and socially-motivated investors – to improve society, the question is how do you know they are succeeding? How do you do this where investments cover a wide range of issues? How do we agree what constitutes impact and what tools can be developed to track it? What is the role government can play to enable standard setting and measurements?

Hot Tip: The Board of Governors of the Federal Reserve System and the Federal Reserve Bank of San Francisco are hosting a meeting titled “Advancing Social Impact Investments through Measurement: New Capital for Community Development” to tackle those questions on March 21, 2011 in Washington, DC.

Resource: Our journal, the Community Development Investment Review, recently devoted the full issue to measuring social impact, including articles exploring social metrics and investing, measuring nonfinancial performance, and the role of the federal government in measuring and defining social impact in the impact investing field. All articles are available for free download.

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