When we at Living Cities heard that the Low Income Investment Fund (LIIF) was developing a new tool that puts a dollar value on the social impact of their investments, we were intrigued. Living Cities is committed to supporting ambitious data-driven, results-oriented cross-sector partnerships that are solving complex social and economic problems. We are excited to see LIIF—long one of our innovation partners–helping to bring further rigor to the impact investing space. Indeed, impact investing is one of the key tools that the efforts we support are using to dramatically improve the lives of low income people in cities. And, when we heard that LIIF would release an online version of the calculator as an “open source” tool – we knew that we had to highlight this important innovation for others. This move to ‘default to open’, sharing their own methodologies publicly in an effort to encourage other organizations to assesses the social impact of their work in a measurable way, is just what we’re trying to do at Living Cities too.
“This tool was developed by LIIF, for LIIF, as another way for us to assess the value of our investments to make sure we are achieving our goals,” said Nancy O. Andrews, LIIF president and CEO, in their press release. “While the formulas behind the Social Impact Calculator are specific to our work, we believe the methodology behind them will be useful to others in assessing the value of their own efforts in new ways.”
Naturally, we had a couple more questions for LIIF about the calculator and the move to open-source their methodology for greater social impact – and were able to connect with Nancy Andrews to learn more about the tool and why they decided to make it ‘open-source’! Here’s what she had to share with us:
What prompted you to take this step? / Why develop something new, instead of using other tools?
Like any investor, the Low Income Investment Fund uses financial return and other commonly accepted output metrics as key indicators of our performance. For example, we track the number of affordable housing units created for very low-income families as one of the outputs of our housing investments. However, as a mission-oriented community development financial institution (CDFI) we also want to be able to understand and express the social value of our investments—human impacts such as health improvements and income gains—and not just their financial value. For LIIF, the Social Impact Calculator is a new way to assess how well we are achieving our mission of poverty alleviation.
LIIF’s data tracking system, which allowed us to estimate a few impact metrics, has been in place for nearly a decade. Over that period, LIIF doubled its capital impact and tripled its human impact to reach the goal of investing $1 billion to serve 1 million people. But, we also wanted to measure our social impact, which led to the Social Impact Calculator. We developed a methodology based on an impact-by-proxy approach that is specific to LIIF’s work. At the same time, it was important to us to create an open source tool online for anyone to use, provide feedback on, and customize for other purposes. We know our approach may not work for every organization, but in sharing it with others we hope to advance a broader conversation about social impact measurement.
Why is this important for the field?
Measuring social impact in addition to financial return is a way for LIIF and others in the community development finance sector to gain a deeper understanding of how well we are performing relative to our mission, and it helps us stay on top of the latest research on the impact of our work. Expressing impact is also important in establishing new partnerships and unlocking new sources of capital—which is critical in the current fiscal and policy climate. Finally, we hope a greater focus on results will channel public and private investment to the most impactful strategies. After all, what gets measured gets done.
We hope a greater focus on results will channel public and private investment to the most impactful strategies.
How will you use the calculator to inform your work at LIIF?
For the moment, the Social Impact Calculator is a self-assessment and communication tool—for starting conversations with new partners and capital sources. However, as we continue to improve and refine the tool, we may find opportunities to incorporate the calculator into decision-making processes and financial products. In open-sourcing the tool, we have also made connections with organizations from other sectors that see some applicability to their work—and which were previously unknown to us. We are still in the early days of publicly launching the Social Impact Calculator, and we are excited to see where it takes us.
Who else could use this tool? And why or for what impact?
We initially created this tool for our own purposes, so the most obvious adopters would seem to be other CDFIs. However, we hope other organizations see value in the tool. For example, socially minded investors like foundations or impact investors might be attracted to the way that the Social Impact Calculator expresses social value in monetary terms. Developers and practitioners could also use the tool to communicate the potential benefits of their projects. Advocates could use the calculator as part of efforts to inform public policy. The benefit of the open source approach is that we are encouraging other organizations to read through our full methodology and access a free, downloadable version of the tool so they can change it to meet their needs. We think there are many potential applications but mainly we hope that this sparks conversations about how organizations measure the impact of their work.
Who have you seen using the tool and to what end?
We just released the tool publicly, so we only have an early sense of who is using it. So far, the feedback has been positive with organizations from philanthropy to community development to impact investors telling us that they are going on the site and testing it out. We have also been particularly pleased to see interest from practitioners and the public sector in experimenting with the tool and contacting us to find out more about our methodology. We encourage anyone using the calculator to give us feedback and tell us how they’re using it. We plan to continue to evolve and improve the tool to reflect new research and ideas from the sector. For LIIF, the launch of this tool is just the beginning of a long-term effort to be more effective in serving low income communities.
Visit the Social Impact Calculator at liifund.org/calculator.