15 December 2019

Supporting investors to measure impact in education investments

Identifying and assessing the impact of an education investment is challenging. Over two-thirds of impact investors only measure the positive impact of their investments and many measure impact purely through counting output, such as the number of training sessions delivered. Much less consideration is given to the potential negative impacts of an investment. The majority of investors think this lack of good measurement is a barrier to growth for the impact investing industry.

Measuring impact is arguably more important in the education sector than any other. Education is a public good and providers across the globe largely operate in a regulated environment. Reputable education providers have an acute responsibility to think deeply about their social impact in order to achieve SDG 4, ensuring inclusive and equitable quality education and promoting lifelong learning opportunities for all. There are significant risks to consider; when a learner spends time in education there is an expectation that it will lead to better life outcomes such as a job or more knowledge. It’s critical to avoid negative impact on the learner’s wellbeing and future.

From an investor perspective, there are few frameworks which help think through the impact of investments in education, and those that do exist have limitations. This is in part due to a ‘sector gap’; there are fewer investable companies in education than in other areas such as microfinance or agriculture, so there has been less appetite for the creation of a thorough and practical framework. Secondly, the majority of impact assessments in the education sector currently focus on institutionalised education such as schools and universities. These frameworks do not meet the needs of investors. With the advent of “EdTech” and a shift in the type of skills needed to thrive in the 21st century, many investors are looking for investments outside the traditional education providers. Learning apps and coding schools are becoming popular targets.

At the moment, many investors use a mix of sector-agnostic impact assessment tools or think through impact on a case-by-case basis. Approaches often only focus on direct impact at the ‘institution or company level’ (that is, how many people are served). To date, no framework has attempted to consider impact at the ‘systems level’, i.e. whether the investment increases capacity and equity in the overall education system and what effect this has on economy and society at large.

CDC has developed a framework that enables investors to weigh up positive as well as negative impact across all sorts of education providers. We’ve looked rigorously at evidence, studied over twenty existing frameworks and consulted over forty experts in the field. We use this framework to assess our own education investments. Now, we are publishing the framework to support other investors to comprehensively assess their impact and enhance the social outcomes of their investments.

Applying the framework should create value for both investors and investees. Having a measurable positive impact should translate into tangible business value for companies and therefore investors. There are several ways in which measuring impact could add business value. These include accessing underserved customer segments; improving government relations; enhancing a company’s brand; providing a competitive edge; reassuring current learners, customers or parents by reporting on efficacy; attracting and retaining talented employees; and helping to secure future investments by demonstrating the impact already achieved.

You can download the Education Impact Framework and please get in touch if you have thoughts or questions.

 

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