Can we put a dollar value on impact? Reactions to the Rise Fund’s ‘impact multiple of money’



ImpactAlpha, January 8 – When TPG Growth’s Rise Fund acquired a big stake in the educational technology company EverFi two years ago, the private-equity firm calculated not only its expected financial return, but the dollar value of the social benefits driven by EverFi’s products and services.

The expected results: More than a half-billion dollars of value in alcohol-related deaths reduced, sexual assaults averted and student debt burdens lowered. In the private-equity firm’s new parlance, the EverFi investment is expected to deliver a 5X “impact multiple of money.”

The $2 billion Rise Fund, and its measurement consultant Bridgespan, laid out the methodology behind the calculation last month in an article in Harvard Business Review (that also was excerpted in ImpactAlpha). The article coincided with the disclosure, via a state pension fund filing, that Rise is raising a second fund, with a target size of $3.5 billion.

How TPG’s Rise Fund underwrites impact to guide its global investments

The impact multiple of money methodology relies on academic research to estimate the economic value of social impact associated with a set of business outputs. The Rise Fund’s underwriters adjust that value for the risk that the expected impact may not occur. Finally, the fund attributes its impact in proportion to the amount of capital Rise invested to produce the outputs.

Business have generally accepted tools, such as the internal rate of return, for estimating financial yields, yet “no analog exists for evaluating hoped-for social and environmental rewards in dollar terms,” wrote Rise Fund’s Maya Chorengel and Bridgespan’s Chris Addy, Mariah Collins and Michael Etzel. “Forecasting gains is too often a matter of guesswork.”

Social value

In the case of EverFi, which provides supplemental instruction software to schools and teachers, Rise attempted to tote up the dollar-value of the company’s alcohol-abuse, sexual-assault reduction and financial literacy curricula. For example, Rise relied on a 2010 randomized control trial of that showed alcohol-abuse education could reduce alcohol-related incidents by 11%. That translated to 36 lives saved over a five-year period. At an estimated value of $5.4 million per life saved, EverFi’s AlcoholEdu program “could expect to generate social value of at least $194 million,” the authors wrote.

TPG’s Rise Fund comes out of the gates with a big edtech investment in EverFi

Rise performed similar calculations for the other programs and adjusted the total downward for implementation risks and upward for ongoing impact after a five-year investment period. All told, the social impact for the three program was estimated at $1.1 billion, of which Rise claimed half, per its investment stake.

The case study fudged the actual numbers to preserve confidential information; if anything, the expected returns could be higher. For example, the HBR case study cites a $100 million investment in EverFi; Rise Fund’s original announcement pegged its EverFi investment at $120 million. The fund has said it won’t proceed with a deal unless it can achieve an impact multiple of money of at least 2.5.

For its investment in Dodla Dairy, a dairy in southern India that procures fresh milk from more than 220,000 smallholder farmers, Rise Fund calculated the impact on the annual income of farm families. Rise estimated that its five-year investment in Dodla would increase annual incomes of farm families $425 to $735, a 73% boost.

Rise Fund’s Impact Multiple of Money: A conversation with TPG’s Bill McGlashan

Unintended consequences

Rise Fund has apparently trademarked the term “Impact Multiple of Money,” but impact investors and social and public sector organizations have been calculating the economic value of social and environmental returns for decades. Jed Emerson, who pioneered methods to measure “social return on investment,” recognized elements of approach he developed more than 20 years ago for the social impact investment firm REDF. In a memo to ImpactAlpha, Emerson sounded a warning about the limitations of the methodology.

“Monetizing impact should not be our end-goal in assessing its value,” Emerson writes. Such a focus “side steps the opportunity we have to invest in funds and firms that address larger, systemic challenges.”

Emerson says investments that address systemic injustice at the “expense” of the firm could conflict with promises to generate outstanding financial returns for investors. He says the impact multiple of money methodology could end up penalizing efforts to address systemic injustice.

“By lobbying for policies and business practices that promote greater justice—policies and practices which may result in a lower score for an individual firm or fund according to a so-called multiplier framework—we may actually punish those who seek to advance systemic change.”

The authors acknowledge that a program’s impact is not just about the number of people touched. “Fewer people touched deeply may be worth more than many people hardly affected,” they write.

Increased transparency

The Rise Fund has generally been applauded for making explicit its approach to impact measurement. Other high-profile “world positive” funds, such as Obvious Ventures’ two funds and Steve Case’s Rise of the Rest fund, have eschewed impact measurement as too big a burden on entrepreneurs.

How Rise of the Rest will have impact — and why it’s not an impact fund

The Rise Fund has promised to open its methodology for use by other investors. Maoz Brown of the Wharton Social Impact Initiative told ImpactAlpha that streamlining the measurement and management of impact investments is needed in order attract more capital.

“The IMM demonstrates how investors can use secondary research to build rigorous impact projections,” Brown says. Investors can go further, “by using research findings to improve, not just predict, impact performance.”

Abhilash Mudaliar, the head of research at the Global Impact Investing Network, tweeted that the Rise Fund’s “approach relies on many assumptions.”

In response, Bridgespan’s Michael Etzel agreed “there are many assumptions, as there are many assumptions in underwriting anticipated financial performance!”


Disclosure: The Rise Fund was a sponsor of ImpactAlpha’s “Agents of Impact” events alongside the Global Impact Investing Network’s annual investor forum in Paris last fall. 

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