Doubling down on analytics: Our vision for the future of impact investing

At the very end of 2016, we reached a major milestone in our impact investing research: we now have 100 impact investing private equity funds in the Wharton Impact Research and Evaluation Database (WIRED).

The participating funds make investments around the world – in developed and emerging markets – and they represent a spectrum of financial return expectations.

This work is ongoing, and there are nearly endless questions we could ask of these data. But this is just the beginning, and that’s why, as the foremost research-led business school in the world, we are doubling down on our impact investing analytics work in 2017.

Looking back

Two years ago, I wrote about the need for more objective, rigorous analysis in order to mainstream impact investing, and I’m happy to see promising progress in the field.

Since then, we released Great Expectations: Mission Preservation and Financial Performance in Impact Investing, which explored the financial performance of impact investing private equity funds.

Fortunately, we’re not alone in this pursuit.

In the same year as Great Expectations, we saw the Global Impact Investing Network (GIIN) and global investment firm Cambridge Associates release Introducing the Impact Investing Benchmark, which also analyzed the financial performance of impact investing private equity funds. In the UK, we saw EngagedX, with the Social Investment Research Council, issue The Social Investment Market Through a Data Lens, which gave us a glimpse into the financial performance of impact investing debt transactions.

Meanwhile, leading private equity firm TPG announced a $2 billion impact investing fund and other major financial services firms, like Bain Capital and BlackRock, began offering impact investing products as well. Even major pension funds are examining their social or environmental footprints.

While many in the industry – including us here at the Wharton Social Impact Initiative – are encouraged by these early efforts, we believe there’s much more work to be done, with many more questions than answers.

The path forward

Our latest data collection milestone represents the next step forward in our research.

The types of data range from quarterly and annually audited financial statements, fund marketing documents, and legal contracts (e.g., limited partner agreements and term sheets). The information found in these sources allows us to go beyond self-reported data and see what’s happening in practice from start to finish.

But that’s just in private equity. Some investors are utilizing impact investing strategies across asset classes, including in public markets.

For instance, we’re currently working on a project to better understand the dynamics of public equity funds that market themselves as having a focus on women and girls.  What gender-related factors are these funds tracking, and what’s the financial performance?  As a possible gender-lens investor, what does the research base show about which indicators might improve the lives of women and girls?

Questions like these naturally remind us of the discussion around the ‘impact’ in impact investing and the variety of strategies and philosophies there. Some investors are interested in the impactful outcomes of their investments’ products or services. Others are more concerned with the business operations of the specific companies in which they’ve invested (for example, energy and water efficiency or human resource practices). And still other investors are considering impact-related factors as a potential way to better measure and quantify their exposure to possible risks in the market.

We’re not shying away from these topics. Indeed, we’re refining the questions, and as “data omnivores,” we’re building new data assets for researchers around the world to answer a whole host of big hairy audacious questions (or B-HAQs).

But it’s not just data for data’s sake: better analytics can fuel more informed decision-making and cutting-edge training opportunities.

We’re already seeing how a stronger evidence base drives learning and practice for students in Wharton Impact Investing Partners, the MBA Impact Investing Network & Training (MIINT) program, and Wharton Africa Growth Partners.

In my new role as the Senior Director of Impact Investing at WSII, I have an ambitious vision for our activities in 2017:

  • Streamlining our activities to reflect the way impact investing naturally connects our work in gender-lens investing, Africa, and Philadelphia.
  • Strengthening our data collection and analytical capabilities so that we can better support researchers across disciplines.
  • Releasing several new reports based on our impact investing private equity data, in collaboration with faculty from Wharton and beyond
  • Creating new educational opportunities for our students and industry practitioners to develop and empower the next generation of visionary and pragmatic impact investing leaders

The impact investing industry has come a long way over the last decade, and as an academic institution, we have a unique opportunity to not only add to the evidence base but also effectively communicate scientific knowledge to policymakers and practitioners.

We’re well-equipped to take on this challenge at Wharton, and I’m excited about continuing to engage in a meaningful dialog about how impact investing strategies can contribute to more inclusive economic growth here in the US and around the world.

NickHeadshot-665x1024Nick Ashburn, GED‘12, is the Senior Director for Impact Investing at the Wharton Social Impact Initiative.  Nick is a co-author of “Great Expectations: Financial Performance & Mission Preservation in Impact Investing” and also co-hosts “Dollars & Change” on SiriusXM Channel 111.