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Charity Navigator Begins Rating Nonprofits on Impact with Acquisition of ImpactMatters

The integration of the two organizations means that Charity Navigator is now rating nonprofits on their impact.

October 14, 2020

 
 

We are thrilled to announce today that Charity Navigator has acquired ImpactMatters. Founded in 2015 as a 501(c)(3) public charity, ImpactMatters is the first ratings organization to successfully develop a method for assessing nonprofit impact at scale. In November 2019, ImpactMatters released over 1,000 ratings. The release, which was profiled in The New York Times (twice), was, and still is, the largest collection of publicly available impact estimates, covering $15 billion in annual nonprofit spending. The integration of our two organizations means that Charity Navigator is now rating nonprofits on their impact — starting with those that have already received an ImpactMatters rating, and gradually growing to include more nonprofits over time. We have long hoped of rating nonprofit impact in service of our mission to “make impactful philanthropy easier for all.” We are excited to take the first step today.

Why impact?

We dedicate our time and money to nonprofits because we want to change the world for the better — to have an impact. It’s what motivates 12 million nonprofit staffers, 64 million volunteers and board members, and tens of millions of donors to do the work they do. And yet, real measures of impact have long eluded the nonprofit sector. Today, very little information is available on how well nonprofits are actually delivering on their missions. In this information vacuum, donors are left in the dark. They cannot find the nonprofits that do the most good with their dollars. Why does this matter? The stakes are high. If we don’t choose our charities well, we lose out year after year on the thousands or millions of preventable deaths, nights spent homeless and violations of human rights that we could be saving.

The “holy grail”

Among nonprofit raters, impact has earned notoriety as the “holy grail” — and for good reason. Impact is the mission-relevant change caused by a nonprofit. But missions differ, one to the other. And the best way to measure impact also differs from one to another. There is simply no one-size-fits-all solution for measuring the impact of the very many, very varied nonprofits that exist — and so we stopped searching for one.

Our methodology

To rate impact, we’ve embraced the complexity of the nonprofit sector. ImpactMatters (now, the Impact Unit at Charity Navigator) develops methodologies for one type of nonprofit program at a time (e.g.food banks, clean water, college scholarships). For each type of program, we build a mathematical model for estimating impact based on the research literature. And for each nonprofit, we fill out the model with data from the nonprofit’s website, annual reports and financial statements. The result is an estimate of the nonprofit’s causal effect on the outcomes of its beneficiaries. We then weigh its impact against its programmatic cost, providing you with a measure of the amount of good achieved by your donation. This is the methodology behind the first 710 Impact & Results scores released today as part of the Encompass Rating System. (Nonprofits currently rated under Charity Navigator’s Star Rating System are unaffected.)

We’ll be the first to admit our methodology’s limitations. For starters, it works well for nonprofits that deliver charitable services directly to beneficiaries to achieve a specific health, anti-poverty, education or similar outcome. But we will need a different methodology for nonprofits that seek to change entire systems through activities like advocacy, research and alliance-building. These activities are no less or more impactful or important, but there are significant challenges to analyzing them. When we do rate them, we’ll want to do so thoughtfully, responsibly and with the guidance of practitioners in those fields. In the meantime, we have a “do no harm” policy. Our ratings don’t penalize nonprofits for falling outside of our current methodological scope. We’ve written more about our methodological limitations here.

The Charity Navigator Impact Unit

Leading this work is the newly established Impact Unit at Charity Navigator, made up of the former ImpactMatters team. Elijah Goldberg and Dean Karlan, co-founders of ImpactMatters, now serve as Charity Navigator’s Vice President of Impact Ratings and expert advisor, respectively. Former ImpactMatters President Michael M. Weinstein also serves as advisor, and Tamsin Chen (Director of Nonprofit Reporting) and Masha Winchell (Impact Ratings Manager) complete the Impact Unit. The Impact Unit will be working as part of the Charity Navigator Programs Department to evolve the ratings system.

What’s next?

Today, we celebrate a historic day for Charity Navigator and a real sectoral achievement. Tomorrow, we face the mammoth task of growing the quantity and quality of our impact ratings. Without exaggeration, we cannot do this without your help. Please, send us your ideas for improving our methodology and tell us where we have erred. If you are a nonprofit, share your impact data with us; we are eager to work on a rating together.

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