Impact Voices | December 14, 2023

Seven ways to maximize the potential of health investments through better impact measurement

Maximus Ateba, Kusi Hornberger and Divya Karan

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Guest Author

Maximus Ateba

Guest Author

Kusi Hornberger

Guest Author

Divya Karan

Investors bring diverse approaches towards defining, measuring and managing the impact of their investments in health. But how can that be done in a way that cohesively advances healthcare quality and progress towards universal health coverage (UHC)? Following a recent Investors for Health (I4H) member meeting on impact management, we have uncovered key insights on this question from leading impact experts.

Impact measurement and management (IMM) continues to gain traction – and sophistication – among investors seeking to amplify long-term health impact. Impact investors are increasingly looking beyond access to healthcare and considering metrics across health quality, affordability, and equity – fundamental prerequisites for achieving UHC. 

Industry standards, such as the Ethical Principles for Healthcare (EPiHC) developed by the International Finance Corporation (IFC) and its partners, together with the development of proprietary investor-level impact frameworks, have helped to support investors in this journey.

Yet, poor data quality, inadequate insight into common measurement practices, and limited standardization of impact metrics serve as roadblocks towards robust IMM. Scarcity of accurate medical records in emerging markets dampens data availability. Where data does exist, it often informs output-level metrics such as number of surgeries or employed individuals, rather than progress towards improved health outcomes. 

Furthermore, the selection of metrics tends to differ among investors. This risks overburdening investees, who must conform to different standards from investors, and precludes investors from accurately comparing performance across their own funds.

Pathways to standardization

I4H recently convened development finance institutions, corporate ventures, private equity funds and impact investors for a rich discussion on IMM for healthcare. Following this, we share seven leading practices for investors to maximize the impact of their investments.

1.   Assess health system gaps towards affordable UHC

Understanding constraints towards achieving UHC – whether those relate to capacity, infrastructure, or service delivery – is critical for designing fit-for-purpose investments. Investors should start with a needs assessment when targeting new markets or deepening investment in existing ones. For example, British International Investment (BII) conducts deep-dive gaps analysis into its key markets to understand country-level progress towards UHC and the role for private investments vis-à-vis government funding. 

“In tandem, we sit with investees to discuss the targets we want to achieve [related to UHC], how to measure against those, and how can BII support beyond capital,” shares BII’s Ushnisha Ghosh. Tailoring investments to a country’s UHC journey can contribute towards higher quality, inclusion and equity.

2.   Align on metrics for long-term impact right from the origination stage

Investors should work with investees to co-define an IMM strategy that maintains a laser-sharp focus on long-term impact while minimizing additional effort required from investees to track metrics. For example, Quadria Capital initiates discussions with companies prior to investment confirmation. 

“We sit down with [investees] early to understand which metrics are important for long-term impact,” shares Quadria’s Shivani Sahai. “Investees have input and output data, but it’s really about how you convert that data into real impact that they can achieve even once you exit.”

Understanding how companies currently assess and track impact not only helps to ensure mission alignment, but also allows for metrics to be refined to track impacts that extend beyond the lifetime of the investment. 

3.   Be rigorous and refine your methodology

Methodologies for IMM must prioritize rigor. TPG’s Rise Fund developed the Impact Money Multiple to assess the potential impact of investments before a single dollar is committed. Its metrics extend from relevance and scale of investment, to the estimated economic value of the SDG outcomes to society. 

“This serves as the basis for the underwriting”, shares Rise Fund’s Ritu Kumar. “All our definitions of impact are taken from externally peer-reviewed research that have been tested. And because it is an operational approach, it can be conducted at scale, as opposed to a definitional framework based on principles.”

Similar comprehensive approaches can help investors deepen the thoroughness of their IMM from pre- to post-investment.

4.   Identify the contribution of the investment when quantifying and comparing impact

Understanding your investment’s exact contribution towards the investee’s activity provides a more realistic estimation of impact. For instance, Merck considers the percentage of the company it owns. If the company reaches 100 people and Merck owns 5%, their impact is calculated as 5 people reached. This method avoids overcounting and prevents multiple entities from claiming the same impact, even though it may yield a conservative impact estimate.

“This approach helps us to be mindful not only of what we measure, but how much of it we measure,” says Merck’s Ken Gustavsen

Being more thoughtful when measuring and comparing impact can lead to more precise results.

5.   Leverage qualitative impact metrics and possible “proxies” in data-scarce environments

Some of the most impactful investments in healthcare occur in data-poor environments. Proxies can be particularly helpful in these settings. For example, IFC works with investees and market participants to understand local conditions. “We compliment this with various data sources,” shares IFC’s Andrew Myburgh. “For example, if we want to understand service availability in an area…We collect primary data on facilities, including the quality of services provided, and identify population characteristics in the area using household surveys, remote sensing data from satellites and other sources.” 

Such proxies can provide a holistic understanding of impact in data-poor settings.

6.   Translate useful methodologies across the public and private health sectors

Private health investors should identify and apply successful practices for IMM from the public sector. For instance, LeapFrog Investments considers disability-adjusted life years (DALYs) – the number of healthy life years lost due to morbidity and mortality. Widely used by the public health sector, DALYs help to determine cost-effectiveness of investments and inform funding decisions. 

As Niyati Dangi of LeapFrog describes, “Metrics like scale, reach, and accessibility are useful but may not assess long-term impact. Metrics like DALYs can enable deeper analysis of the comparative economic impact and health outcomes of different interventions.” 

Transferring proven methodologies can provide the means to magnify impact without reinventing the wheel.

7.   Have a common baseline understanding and set of practices to measure impact

Common denominator metrics that are measurable at the portfolio level and across the field are critical for aggregating and comparing impact seamlessly. Crucially, these enable thematically appropriate comparisons where portfolios have diverse investment types and timelines. Investors should identify and use a set of baseline metrics that are relatively easy to measure, account for risk, and align with other portfolios. 

“You need to have a common denominator across investments to get to a set of standardized metrics,” shares Dalberg’s Max Ateba. “Doing so will help to aggregate impact at a portfolio level, while being able to compare investments within it.” 

Once a common denominator is reached, investors can complement each company’s unique impact with more sophisticated metrics or qualitative data.

There’s a wealth of expertise on impact measurement for health. We need to create and elevate the fora like I4H to share this knowledge and amplify our impact together. By fostering more standardized approaches – and adhesion to these approaches – we can ultimately deepen progress towards lasting change in health systems.

Maximus Ateba, Associate Partner, Dalberg; and Executive Committee Member, Investors for Health

Kusi Hornberger, Partner & Global Knowledge Lead, Dalberg; and Executive Committee Member, Investors for Health

Divya Karan, Health & Nutrition Practice Manager, Dalberg; and Community Manager, Investors for Health