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Contribution vs. attribution in impact investing and beyond

As a famous politician once said ‘attribution, attribution, attribution’. Well, maybe I’ve not remembered it quite right, but the point is attribution—linking observed changes with your organisation’s intervention or investment—is an important and thorny issue, and one that NPC often has to grapple with when thinking about measuring impact.

The problem with attribution

While it’s a tricky problem for charities working directly with service users, the problem becomes even more challenging when it comes to attributing impact to funders. Here, the links between the provision of funds and the final outcomes for beneficiaries become less direct, and experimental approaches to measurement are less applicable.

While NPC has done a lot of thinking about this when it comes to grant-makers, we’ve only just begun to dip our toes into the water around the impact of social investors. Our first major attempt was our review of the impact of the KL Felicitas Foundation (KLF), whose founders, Charly and Lisa Kleissner, have pioneered an approach of investing 100% of their asset base for social and environmental impact.

If you’ve had a look at the report you might have noticed that, well, we didn’t fully tackle the question of attribution. Why? There are two reasons.

Firstly, in accordance with the Kleissners’ theory of change—which aims to advocate for impact investing—the report sought to evidence the difference that KLF investees have created. We did this by aggregating impact across KLF’s investments, showing that investees are creating positive social and environmental change across multiple outcome areas. The aim was to demonstrate the viability of an investment portfolio that both generates financial return, and makes social and environmental impact. Our report showed that through the financial support received from KLF, investees had, for example, supported 30,000 jobs in under-served communities in the US and protected 790,000 hectares of land in the Global South.

The second reason why we didn’t get to grips with attribution is because… it’s really, really hard. It’s particularly difficult for impact investing where individual investments at the portfolio level could represent just a small proportion of fund’s capital—which itself has invested in a fraction of a social business.

One option could have been to calculate impact by the level or proportion of investment, ie, if KLF provided 5% of the capital to the charities supporting 30,000 jobs then KLF has supported 1,500 jobs. This, however, seems to be a gross oversimplification. It might, for example, underestimate the Kleissners’ impact where they’ve been instrumental in the development of a social enterprise, or overstate it where they may have provided some finance, but where other stakeholders were more influential.

Focusing on contribution

In attempt to resolve this issue we instead reported on KLF’s contribution to the outcomes achieved, an approach which is increasingly common in the evaluation of funders and investors. As Bond’s guide to Impact Evaluation notes, in complex settings where there are multiple funders or other stakeholders ‘identifying your contribution and recognising the contribution of others is more realistic than searching for evidence of sole attribution.’ In our Investing for impact report we also supplemented this analysis of contribution with an assessment of KLF’s ‘Investor Plus’ activities: ie, where the Foundation had leveraged additional financial, advisory, and advocacy support.

But can we go further than this? I think that the next step could be to take a more descriptive, qualitative approach—possibly taking a small, purposive sample of investments (eg, by asset class, value, or level of influence) and looking more closely to map and describe the flows of capital and non-financial support. This could be combined with SROI’s approach to attribution which involves asking beneficiaries for their view about what has made a difference. By bringing together views on attribution at the beneficiary level with a detailed understanding of the investment flows and networks that connect the investor to the end user, this could help answer questions about what constitutes success in impact investing.

While this may seem like pointless empiricism, recent criticisms of impact investing—following the announcement of the Chan Zuckerberg Initiative—lend a greater impetus to interrogating the causal links that may (or may not) enable investors to create and support positive outcomes.

As the ink’s not long dry on the KLF report, my thinking has only gone so far. So if you’ve got any ideas then let me know and I promise to note your contribution… or is it attribution…?

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