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Applied Learning

Measure what matters

Jasjit Singh, Academic Director at INSEAD Social Impact Initiative argues that, as well as meeting academic goals, impact must be measured by its effect on society

What are some of the barriers to measuring impact in education?

Education is not one sector. The reality is that, in some segments, by their very nature, it's easier to have business models that offer competitive returns, which, in turn, will attract institutional investors. Absolutely, whenever we can, we should facilitate that. At the same time, let's not forget that there will always be some segments where finding somebody able to pay you at a level at which you can give financial returns is problematic. Very often, these are exactly the segments where the potential for impact is greatest.

How can impact investing have a multiplier effect?

Within the education sector there is room for high-impact interventions when a business solution alone is not adequate. Take the example of funding high-quality pre-school programs for at-risk children from deprived inner cities in the US. We know that it's very hard to make money in this instance. But, at the same time, we know that, for every dollar invested, society benefits in other ways, such as reduced crime levels.

Impact investment’s multiplier effect comes from the fact that it's not a one-time grant, but the money lays the foundation for something much bigger. Whether it’s each dollar of investment making a $10 return because of a sustainable business model, or each dollar effectively generating $10 of value for society, both are hugely important. Both are solving problems in the education space.

What will give a clearer sense of this multiplier effect?

There is still confusion about outputs (number of schools built, children attending, etc.) versus outcomes (what children are learning). You can invest in schools in rural Nepal, but are you having an impact on the children, the community? Going from outcome to impact is a further leap. Are the children learning because of what we are doing, rather than something else in their environment being better? We must tighten that link.

Do you believe that investors are beginning to think differently about impact?

In the future, there will be three measures of return on investment: risk, financial return and impact. Investors will differ in the degree to which they are willing to accept high risk or lower returns to promote greater impact. But the reality is everybody, to a lesser or greater extent, will put some weight on impact. The better we can facilitate transactions – the exchange of somebody investing in me to help create impact – the more the market will grow.

How do you see the future of impact investing?

Ten years from now, the world will be very different. Anybody not taking this seriously is going to lose out; even if they personally don't care about impact, they'll lose out in terms of business. I was invited to run a workshop on impact investing with ultra-high net worth individuals from the next generation in Asia. The audience was 25-30-year-olds saying, “I want to help my family move in the direction not just of doing business, but investing through the lens of how it is affecting the world.” Interestingly, for them, the challenge was as much, “Let's figure out what impact investing is” as “How do we convince our families?” I am amazed by how active and motivated this generation is.

Certainly, most of the money is in their hands. That’s why I can see huge amounts of money being invested very differently from the way it’s being invested today.

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