Measuring and assessing the impact of healthcare investments is a complex task. A recent panel discussion hosted by Investors for Health shed light on the strategies, challenges, and best practices involved in evaluating and managing the impact of investments at the portfolio level.
This article highlights insights on the standardization of metrics, balancing short-term and long-term impacts, and the unique challenges presented by the healthcare sector, as shared by the panelists. Moderated by Dalberg Associate Partner Maximus Ateba, the panel featured expert voices from the healthcare investment sector: Shivani Sahai, Head-Impact & ESG, Quadria Capital; Kenneth Gustavsen, Executive Director, Social Business Innovation at Merck; Niyati Dangi, ESG and Impact Investing, LeapFrog Investments; Andrew Myburgh, Senior Economist, International Finance Corporation; Ushnisha Ghosh, Manager–Development Impact and Sustainability, British International Investment; and Ritu Kumar, Senior Director, Sustainability and ESG, Emerging Markets, TPG.
1. Standardization and Common Metrics
Standardizing impact metrics facilitates a cohesive understanding of impact across diverse sectors. By identifying common denominators, investors and fund managers can aggregate data effectively, providing a streamlined view of the overall impact at the portfolio level.
Implication
Standardization aids not only in ease of comparison but also in establishing a foundation for comprehensive impact measurement strategies. This consensus lays the groundwork for developing universally applicable metrics, fostering transparency and accountability in the impact investment landscape.
2. Case Studies and Qualitative Approach
While standardized metrics offer a structured overview, case studies capture the nuanced impacts of investments in the healthcare sector, providing a more holistic understanding of the diverse outcomes achieved.
Implication
Incorporating qualitative approaches enriches impact narratives, offering stakeholders more profound insights into the real-world changes brought about by investments. The emphasis on case studies encourages a multidimensional assessment, going beyond numerical figures to convey the human stories behind impact metrics.
3. Sector-Specific Metrics
Moving beyond output-based metrics is essential to gain a deeper understanding of the outcomes and impact of investments in the healthcare sector. Specific metrics such as disability-adjusted life years (DALYs) and quality-adjusted life years from the public health space are applicable to various diseases, ranging from amputation to schizophrenia, and allow for more effective investment decisions in terms of overall health.
Implication
The use of DALYs in impact measurement provides a more nuanced understanding of the long-term impact of healthcare investments. Cost-effectiveness, as measured by DALYs, can be a critical factor in evaluating the success of private healthcare investments. Applying such metrics to private investments can enhance the transparency and comparability of impact assessments.
4. Time Considerations in Healthcare Impact
Impacts in healthcare, particularly in healthcare delivery, might have longer incubation periods compared to other sectors. Accounting for these extended timelines is essential in impact measurement.
Implication
Recognizing the temporal differences in impact incubation is critical for realistic expectations and effective measurement. Investors and fund managers operating in the healthcare sector need to adopt methodologies that accommodate longer timeframes for assessing the true extent of impact.
5. Balancing Short-Term and Long-Term Impact
Balancing short-term and long-term impact measurements was recognized as a crucial challenge. While some impacts align with the investment horizon, others with more extended outcomes may require extended evaluation periods.
Implication
Striking a balance between short-term and long-term impact measurement is essential for comprehensive assessments. This insight highlights the need for flexible evaluation frameworks that cater to the diverse nature of impacts across different investment horizons.
6. Consideration of Evaluation and Investment Horizons
There may be a temporal misalignment between evaluation and investment horizons. The evaluation of impact may extend beyond the investment period, prompting a consideration of how to navigate this discrepancy.
Implication
This recognition emphasizes the importance of forward-looking impact measurement strategies. Investors and fund managers must align their methodologies with the understanding that impact evaluation might continue even after the financial investment has concluded.
7. Thematic Appropriateness
Thematically appropriate comparisons are important especially in portfolios with diverse investment types and timelines. Thematic alignment ensures that comparisons are meaningful and relevant to the specific impacts targeted by each investment.
Implication
Recognizing thematic appropriateness promotes fair assessments, preventing apples-to-oranges comparisons. It underscores the need for a nuanced approach that considers the unique characteristics and expected timelines of each thematic category.
8. Risk Assessment in Impact Measurement
Considering risks associated with impact measurement is necessary, particularly in the context of longer-term impacts. Understanding and managing these risks contribute to more realistic expectations and evaluations.
Implication
Integrating risk assessments into impact measurement strategies enhances the reliability of results. Acknowledging the inherent uncertainties in measuring longer-term impacts allows for a more informed and pragmatic approach to impact evaluation.
9. Narrative Approach to Impact Reporting
Beyond quantitative metrics, a narrative approach to impact reporting can be a critical lever. This involves telling the story of impact, incorporating qualitative aspects, and providing a richer understanding of the changes brought about by investments.
Implication
Embracing a narrative approach enhances the communicative power of impact reporting. It enables stakeholders to connect with the human aspect of impact, fostering a deeper appreciation for the positive changes generated by investments.
