There are many ways for funders to assess the potential impact of a grant or impact investment. One popular approach is to assess a potential investment (using "investment" to mean either a grant or impact investment) with the five dimensions of impact, developed by the Impact Management Project. Each potential investment could be rated on a rubric scale assessing its strength against the five dimensions.

Rubric-based scoring alone may fall short for funders wanting impact expressed in more detail such as the average annual income change that participants experience after going through a workforce training program. Impact valuation is the step that moves beyond rubrics alone and estimates the social value that an investment may create for its participants or stakeholders. How a funder defines social value is subjective and there have been more than a dozen published approaches.

This primer covers what that step is, why funders take it, and what it can and cannot tell you.

Measurement and valuation are different steps

Impact measurement tracks what a program produced and what changed for the people it reached. The outputs are the direct products of the work, such as the number of people trained or treated. The outcomes are the changes that followed, such as higher earnings or better health. Measurement tells you those things happened and how large they were.

Valuation is the next step. It puts a value on those outcomes so they can be set against what the program costs and against what other programs achieve. A jobs program might train 500 people, move 300 into work, and raise their earnings by an average of $4,000 a year. Measurement gives you those figures. Valuation asks what that gain is worth and whether it justifies the money spent, which turns a description of results into a basis for comparison.

Why funders value impact

Three reasons come up most often.

The first is comparison across programs that share no obvious yardstick. A literacy program, a cash transfer, and a malaria intervention produce different outcomes in different units. Until those outcomes are valued on a common basis, a funder has no principled way to say which did more good per dollar.

The second is the cost question for a single grant. Knowing that a program raised earnings is not the same as knowing whether the gain was worth its price. Valuation puts the benefit and the cost in the same terms, so a funder can judge whether a grant cleared a reasonable bar.

The third is reporting. Boards, investment committees, and limited partners often want one figure that captures what a portfolio achieved. A valued number gives leadership something defensible to report, with a line back to the outcomes underneath it.

What the value is measured in

A funder has to choose the unit the value is carried in, and the choice shapes everything downstream.

One option is money. Monetized methods convert every outcome into dollars, which gives a single denominator and speaks directly to a finance audience. The cost is that some outcomes resist a credible price, and putting one on them invites the objection that the figure is arbitrary.

The other option is a common non-money unit. A quality-adjusted life year (QALY), a wellbeing-adjusted life year (WELLBY), or a standard deviation of a test score lets a funder add up impact without converting it to cash. This keeps the underlying evidence closer to the impact area, with the drawback that fewer outside audiences may understand that bespoke unit and it may be harder to compare across diverse impact areas.

The main families of methods

Most published methods fall into a few families. Each is defined where it is used here, because the names get applied loosely in practice.

  • Cost-effectiveness analysis (CEA) reports cost per unit of a single outcome, such as cost per life saved or cost per job created. It is clear inside one sector and quiet across sectors, because two different denominators cannot be compared directly.
  • Cost-benefit analysis (CBA) converts every outcome to dollars and adds them up. It buys comparison across sectors at the price of pricing outcomes that resist a price. This approach and model can then produce metrics like the Benefit Cost Ratio or Return on Investment (ROI).
  • Social return on investment (SROI) is a form of social cost-benefit analysis that grounds the valuation in what matters to the people affected, so what gets counted is set by them rather than only by what proxy an analyst can find. It reports the result as a ratio of social value created to money invested, and it covers economic outcomes like income and tax alongside social and environmental ones rather than restricting itself to non-market effects.
  • Benchmark methods report a multiple over a fixed comparator rather than an absolute figure, often a cash transfer to the people a program serves. For example, GiveWell builds their cost-effectiveness work around a benchmark of this kind.

What impact valuation does not do

A monetized impact number is easy to over-read, so it helps to be clear about its limits.

It does not establish causation. Valuation runs on top of whatever causal evidence a program has, and a precise dollar figure attached to a weak causal claim is still a weak claim wearing a number. The usual way a number drifts from reality is an assumed counterfactual rather than a measured one. The eye-catching multiples in the field tend to come from models that build impact out of internal monitoring data and assumptions about what would have happened anyway, not from a rigorous evaluation. The quality of the estimate is set by the evidence underneath it.

It does not remove judgment. Someone chose the unit, the time horizon, the discount rate, and the assumption about what would have happened without the program. Most of those choices are invisible in the final figure, which can make a method feel more settled than it is. The value placed on each outcome is rarely derived from the program itself. It is usually borrowed from other studies and applied to the case at hand, a practice known as benefit transfer, so the contestable step is often the imported price rather than the arithmetic. The discount rate is its own unsettled question. J-PAL applies a flat 10% across its analyses, while others argue that discount rates are effectively unknowable and that reporting results over several time horizons is the better course.

Comparison is also harder than a common unit makes it look. Two valued numbers can be set side by side only if you can see and reconcile the choices behind each one. Reviews of practice keep finding that organizations use different metrics, time horizons, and rules about what to include, even within the same sector, so a 3x from one analysis and a 5x from another are often not measuring the same thing. The way to make them comparable is for each analysis to publish its formula and its inputs, so a reader can reproduce the result and adjust it. Without that, lining up numbers from different sources produces the appearance of a common basis more than the real thing.

And a single number hides as much as it shows. It compresses a distribution into a point, drops the evidence quality behind the estimate, and says nothing about what was left out because it could not be valued. A funder who treats the number as the whole answer will miss the parts that did not fit inside it.

Where to go next

If you are weighing whether to add an impact valuation layer, the harder questions are not always about which method is most rigorous. They are about which method your team can actually run, which one your board will accept, and how the resulting number gets owned and used once real money is attached.

Those questions are the subject of the main piece, Match the model to the mission, which treats impact valuation as a system design problem rather than a framework choice. The accompanying Framework Tradeoff Map shows where the published methods sit against each other, so you can see the tradeoffs before committing to one.

Impact valuation resources

Cost-effectiveness defined

SROI

Impact valuation

General impact screening framework

Funder examples