April 21, 2005
Measuring Social Returns on Community Development Venture Capital Investment
by William Baue
The Community Development Venture Capital Alliance releases the Measuring Impacts Toolkit, which
attempts to quantify social returns from community investments.
There is a wealth of different metrics for measuring financial return on community investment, but
a dearth of methods for measuring social returns, or the benefits for target populations such as
low- to middle-income (LMI) individuals. To begin filling this void, the Community Development
Venture Capital Alliance (CDVCA) Return on
Investment (ROI) Project commenced a process 18 months ago to develop a tool to measure social
returns from community development venture capital investment.
Impacts Toolkit (MIT), an electronic survey in Microsoft Excel format, is the result.
field of impact assessment has taken center stage recently, as investors increasingly demand that
their social returns be measured with rigor similar to that applied to financial returns," stated
Kerwin Tesdell, president of CDVCA. "And just as important, practitioners need useful measures of
the social impacts they produce in order to improve their practice."
Funded by the FB Heron Foundation and the Rockefeller Foundation, the MIT focuses primarily on
employment factors as indicators of social impact. Community development venture capital tends to
invest in startup companies that benefit communities by providing jobs, benefits, training, and
advancement opportunities not readily available to LMI individuals. Employment also lends itself
to quantitative analysis.
"The goal of the Project was to create an efficient and
practical social impact assessment program that funds could adopt 'off the shelf,'" states the
CDVCA paper on MIT. Five community development venture capital (CDVC) organizations, selected by a
competitive process, participated in the development of the tool. These participants included CEI
Ventures, a subsidiary of Coastal Ventures Inc. (CEI), Northeast Ventures Corporation, and Pacific Community Ventures.
facilitate uptake and enhance usability, MIT allows for standardization of data across the
industry. The quality of the data derives not from its breadth but rather from its depth and
The MIT methodology "emphasizes getting correct answers to the right questions,
rather than a lot of information that might be impossible to collect," states the MIT paper. "The
practitioners believe that fewer questions means better, more accurate answers."
survey questions, contained in a Core Survey as well as in Enhanced Modules, address three major
social impact areas: employment, wages, and career ladders. Employment questions cover metrics
such as number of employees, jobs retained, and jobs created. The questions also address job
quality, specifically focusing on employee benefits, wealth building opportunities, and training.
The survey also addresses other social impacts, such as environmental impacts,
export-oriented sales, and taxes. For example, the survey asks if companies are certified
according to ISO 14000 (an
international environmental management standard), the Ceres Principles (a set of
environmental guidelines), or LEED (Leadership in Energy and
Mr. Tesdell states two caveats involving limitations of the MIT
methodology. First, it does not answer "but for" (or counterfactual) questions, namely what the
social impact would have been in the absence of the community investment. Second, MIT does not
measure social impact after the end of the investment.
MIT's "methods do not produce
apples to apples numbers that investors should use, in isolation, to make investment decisions
among competing social investment opportunities," states Mr. Tesdell. "At best, they produce very
useful data that investors and practitioners can combine with other information to build a full
picture of the social benefits an investment creates."
One way to contextualize the
quantitative data is to augment it with qualitative information from narrative-based responses.
"Telling stories--or more technically, qualitative data--about the impacts of CDVC funds
does not just put a face on the numbers--though that is important--it actually explains how CDVC
works," the paper states. "Thus, the MIT methodology includes a range of open-ended questions
[...] intended to raise funds' awareness of important social impacts, which the quantitative data
cannot fully capture."
To illustrate methods for capturing information not encompassed in
the MIT methodology, an addendum to the paper contains a study conducted by CEI Ventures. The
longitudinal study tracked individual employees, a prohibitively expensive method to include in the
MIT procedure. The findings were somewhat "perplexing," as a significant number of employees
voluntarily left jobs at CEI-financed companies without a plan or for jobs with lower wages, often
citing external pressures such as pregnancy, child care, or transportation.
"created more introspection about [CEI's] program assumptions," wrote Carla Dickstein of CEI. "It
led staff and board to reevaluate CEI's focus on creating access to quality job opportunities as
the keystone for its theory of change."
"The finding that many people left the CEI job for
a job with lower wages and fewer benefits has made CEI reconsider the link between job quality and
retention and develop new programs that can reduce barriers on-the-job and reduce external
impediments to work," Dr. Dickstein concluded.
The Measuring Impacts Toolkit, which is
available for free by request from CDVCA, is applicable not only to community development venture
capital investment but also to any community investment that generates social impacts, Mr. Tesdell