Standards of Evidence for Impact Investing: a new approach to balance the need for evidence with innovation

This blog post introduces Nesta’s Standards of Evidence, a developed to test whether the products and services Nesta Impact Investments fund make a positive difference. This new approach aims to bring impact measurement in line with academically recognised levels of rigour, whilst managing to ensure measurement is appropriate to the growth trajectory of the products and services we invest in.

This week we launched Nesta Impact Investments. This new fund will support social ventures that can help address major social challenges. To ensure what we fund does make a positive difference we have developed a new approach: Standards of Evidence for Impact Investing.

For the fund good intentions are not good enough. We know that good intentions don’t lead to good outcomes. Programmes like Scared Straight or DARE, which have been found to be harmful to the young people they set out to serve, are good examples of this.

Yet we recognise that the demand for evidence needs to balance against ensuring innovation can flourish, that the bar is not set so far that it becomes an unwieldy milestone or a hindrance to growth and development. This is why we have developed Standards of Evidence which are tiered and incremental, helping grow the evidence behind products and services at a rate that is appropriate to them.

The diagram below outlines our Standards of Evidence for Impact Investing:


Source: Puttick, R. & Ludlow, J. (2012) Standards of Evidence for Impact Investing, Nesta, UK

The Standards of Evidence are on a 1 to 5 scale. The starting point for all those we will fund is Level 1, this involves a clear articulation of why a product or service could have a positive impact. As the levels are progressed it will be expected that data is collected to isolate the impact to the product or service, the findings are validated externally, and by level 5, demonstrable evidence that the product or service can be delivered at multiple locations and still deliver a strong, positive benefit.

We have just published a report which outlines the Standards of Evidence in greater depth, but to summarise the key features are:

  • The Standards of Evidence recognise the need to ensure the demand or evidence is appropriate for different stages of product or service development so that it doesn’t hamper innovation
  • We know what we expect to see at each stage, but are not prescriptive about how individual organisations meet this, enabling them to select approaches appropriate to them.
  • The evidence requirements are realistic and proportionate
  • The different levels are intended to be dynamic and developmental

It is worth noting that standards of evidence are not new. There are numerous examples used in academia, such as the Maryland Scientific Methods Scale, or the Project Oracle Standards of Evidence used in youth services, which were the starting point for our own Standards.  Yet, as far as we can tell, this is the first time standards of evidence have been used in an investment fund context.

This means our Standards of Evidence for Impact Investing are something of an experiment, a new innovation in the field to assess the impact performance of investments. We therefore welcome feedback to help us reflect on the Standards of Evidence, recognising that we may need to adapt and change over time, all helping contribute towards ensuring that what we invest in has the biggest impact possible.

If you would like further details about the Standards of Evidence for Impact Investing please see our latest paper.

Further information about Nesta Impact Investments.

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