Some more BACO-bits of investing knowledge from Acumen

Previously, ThinkChange India posted on the Acumen Fund’s investing strategy. In that post, we pointed out how a major factor in the Fund’s decision-making process is the BACO, or best alternative charitable option.

Due to a comment posted in response to this article, Brian Trelstad chose to follow up with Acumen’s readers on the BACO’s limitations and what steps are being taken to improve social investing criteria even further. The entire post is after the jump.

Thanks for the post. BACO is a helpful tool, but we would love to do away with it! We developed the framework because we found that absolute measures of social return (e.g. SROI) are too hard to implement in practice, but we needed something to help us think about the marginal use of our philanthropic capital.

Over time, we would love to see a world where the “output per dollar input” of a range of activities is made transparent and comparable. We have been working with volunteer engineers at Google on the development of a portfolio data management system (PDMS), which allows us to track our own investments and their progress against key metrics internally.

In January, we completed a beta test of the PDMS (which needs a new name – any suggestions?) with about a dozen other social investors and foundations. We wanted to know whether the tool would meet their needs for tracking social, operational and financial performance… and whether we could aggregate multiple social investors who would use a common information platform and shared definitions for a handful of metrics, among other things. If so, it could allow for comparisons across the sector. The feedback has been promising and we are in the process of charting a technology development path forward to make this happen.

If the day does arrive when there is a large enough group of organizations with high quality enough data using roughly the same definitions for “jobs created” or “customers served”, we might see the day when Acumen Fund no longer needs to use the BACO to assess the social impact of one of our investments, but we can benchmark our performance against the performance of our peers.