Data science is making inroads into the world of impact investing, helping program designers and beneficiaries achieve closer alignment between their goals and strategies. While some are building on models from the business world to correlate different pieces of ecosystems to understand how impact flows, others are attempting to marshal next-generation digital technologies such as blockchain to improve outcomes in areas such as disaster response and land titling.

The Rockefeller Foundation has been designing ways to harness data effectively in order to improve the effectiveness of impact investing. “Data really helps you understand the nature of the problem, and thinking about data ahead of time helps you structure your experiments and your interventions,” said Zia Khan, vice president of initiatives and strategy at the foundation. “Measuring data helps you prove what works, what doesn’t work, and then you can monitor and scale things up.”

The data movement is infectious. Khan said he sees “increasing appetite to learn more from some of the countries that have done some breakthrough work,” such as Estonia and India. In particular, he cited India’s biometrics-based identification system called Aadhaar, which has enabled millions of previously undocumented residents to open bank accounts and secure government benefits, education and jobs, among other gains.

The Power of Correlation

Locus Analytics, an economic research and data analytics firm, has developed a new model to locate, map and study the components of an economy, which allows researchers, policymakers, investors, entrepreneurs and anyone interested in economic data to sort, splice and analyze the information in new and innovative ways, according to founder and CEO Rory Riggs.

The company created the Locus Model, which it said enables “a new method of interactive data analytics for business and economic data.” The model is apt for impact investing because it brings more precision in directing resources and maximizes desired outcomes. “If I could give you transparency to all these marketplaces, you now, from a financial point of view, can think through, ‘Where is the most impact for your dollars?’” Riggs said. “It is a way to benchmark and grade your investments and make them much more targeted.”

Riggs explained how Locus harnesses the power of interrelation in data. Much like how geographic mapping uses a so-called “coordinate system,” the company uses location-based services to create “a robust classification system to understand better who you are, who’s around you, and then how to find other people who are like you,” he said. “We’ve taken a production system from inputs to outputs and allows you to figure out where you are in that process.”

“Measuring data helps you prove what works, what doesn’t work, and then you can monitor and scale things up.”–Zia Khan

For example, the model creates correlations between various functions, such as design, production, sales and transportation in a business setting, to create an “activity wheel.” That framework “captures every activity in the economy, and these activities are the same in Kigali as they are in New York,” he added.

Riggs and Khan shared their insights on innovating with data in an episode titled “Driving Data for Impact” as part of a Knowledge@Wharton podcast series From Back Street to Wall Street, where entrepreneurs, investors and policymakers from around the world focus on maximizing impact investing outcomes. (Listen to this episode using the player at the top of this page.)

Widening Interest

Riggs said one user of such data could be an entity like the Farmers Business Network, which crowdsources farmers, connects them with each other and shares real-time information on crop patterns, new agricultural products and others. “This is going to happen industry by industry” by providing participants greater visibility into their individual roles and their impact across their value chains, he said. “I’m hoping that every impact worker will have access to understanding what their business is and how their business is performed around the world.”

Read the rest of Durreen Shahnaz’s article and listen to the podcast at Knowledge@Wharton