Mapping relates to general investment criteria, and the need to match these up with the investor’s interests and aims. Mapping can be used in conjunction with screening to refine the pipeline of potential investments down to those that meet whatever conditions or requirements the investor may have, and therefore be deemed suitable.
Mapping can also be used to create a basic organisation profile, which can in turn be used for classification purposes. Mapping organisations against a simple set of defined criteria offers two key benefits:
- categories for comparisonMapping facilitates the sorting of organisations into different groups of peers according to various criteria (e.g. on one front, organisations of similar size; on another, organisations working with similar outcomes or beneficiaries; on another, organisations at a similar stage of development, and so on). These peer groups can be used for performing comparisons when carrying out subsequent analysis, and can form the basis for suggesting standard measures, pertinent questions, and performance benchmarks.
- portfolio managementWhen building and managing a portfolio of impact investments (e.g. for a fund), information from mapping can be used to understand the contents of the portfolio, and to maintain the desired balance (e.g. the proportion of the fund invested in various geographic or outcome areas, the proportion in debt or equity, and so on). The sourcing of potential new investees, and mapping them for suitability, may respond to the balancing needs of the portfolio.
Typical criteria used when mapping may include (though are not restricted to):
- key outcome areas or sector
- target beneficiaries
- products or services
- location and geographic focus
- years of operating history
- stage of development (e.g. start up, early stage, growth, established)
- ownership and legal and governance structures
- organisation size (taking into account, e.g., turnover, total assets, number of employees)
- investment size
- investment type (e.g. equity, quasi-equity, long-term debt, short-term debt)
- financial return (prospective)
- term (liquidity / fixed term and number of years)
- proportion of project / investee organisation represented by the investment and by the investor’s potential stake
- partnerships, subsidiaries or affiliated companies
Often these will relate to the key outcome areas and objectives of the investor, as determined at the planning stage.
The classifying power of the map, or profile, created is greatly enhanced by using standardised categories, which define peer groups for subsequent comparisons and portfolio analysis. Categories may be bands (e.g. 0-1 years, 1-3 years, 3-5 years; £0-£50k, £50-£100k etc.) or predefined lists (e.g. regions of the UK, global regions etc.). Where pre-defined lists are used, it is important to ensure that the list is complete (covers all the potential answers) and the categories it creates are distinct (there is as little overlap as possible between categories, with different items falling clearly into one or another).
For understanding outcome areas and beneficiary types, the outcomes matrix can be a helpful tool — either to construct a list, or to check a list for coverage.