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Evaluation 2022 New Actors Working Group Week: How Does Evaluation Look Different for Traditional Actors and Impact Investors? by Farahnaz Karim

Headshot of Farahnaz Karim
Farahnaz Karim

Hi, my name is Farahnaz Karim and I am the founder and CEO of Insaan Group, and Chief Impact Officer at GOODFOLIO. At Insaan, we invest in solutions to poverty. Our background comes from the monitoring, evaluation, and learning (MEL) ethos of traditional development actors such as non-profits, the UN, and the World Bank, but we are also a ‘new actor.’ As impact investors, we work with entrepreneurs and are keen to move the evaluation field forward given the increasing standardization of impact globally.

In this piece, I reflect on the similarities and differences between traditional evaluation frameworks and ‘new’ ones.

The Similarities

The building blocks of impact measurement and management, orIMM, as the new actors call it, are similar to traditional monitoring frameworks based on the logical framework. A simplified example looks like this:

  • Input (money)
  • Activity (build a well)
  • Output (well built)
  • Outcome (clean water)
  • Impact (reduction of water-borne diseases)

For impact investors who are moving toward measuring social and environmental change, the conceptual clarity of the logical framework remains relevant whether the impact sought is a reduction of greenhouse gas emissions or increased income for farmers.

The second similarity is that the story of change is captured best by a mix of quantitative and qualitative data. Qualitative data is inherently harder to standardize but can play a key role in impact verification.

The third similarity is that both approaches require consistent, timely, comparable, and valid data sets to enable meaningful impact analyses or performance overviews over time. The advancement of technology tools, platforms and visualization software provide an opportunity in this space.

The Differences

Whereas in traditional evaluation, the raison d’être is primarily the pursuit of human or environmental change, in the new universe of investing, standard setting, and regulatory changes, these ‘new metrics’ sit along a primary or competing pursuit of financial return. The theory of change is more complex and often leads to a clash and/or complementarity of methods and disciplinary lenses: finance vs. ESG/impact. 

Impact metrics are being standardized and increasingly regulated to offer greater transparency, comparability, and benchmarking within and across asset classes. In simple terms, the question is shifting from, “Where/how can I make money while managing risk?”  to, “Where/how can I make money, managing risk, whilst avoiding harm and/or doing good for society and the planet?” 

Impact frameworks that measure the latter aspects are constantly in flux and include the United Nations Sustainable Development Goals (SDGs),, the Impact Management Platform (IMP), which includes the Five Dimensions of Impact, and IRIS+, which offers standardized lists of indicators. On the ESG front, which pertains to the environmental, social and governance standards that apply to companies andpublic and private financial markets, the regulatory field is evolving.Key references include: SFDR, SSIB, SBTi, GRI, NetZero goals, UN PRI and WEF.

In other words, the fundamental difference from the traditional evaluation framework is a massive global attempt at standardization of data as a result of the merging of finance (all forms of capital) and the planet and people inclusion imperative – alongside the pursuit of prosperity. 

The Next Frontier

Aside from impact verification as the next frontier, I believe that the three challenges that lie ahead are:

  1. A better integration of ESG and impact frameworks.
  2. A new model for return that embeds financial and impact data to measure overall performance such as Impact-Weighted Accounting.
  3. New governance models to enable business models (of all entities) to integrate human or environmental change as part of their core strategy, systems, and capabilities.

Rad Resource

IMM for the SDGs on Coursera

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3 thoughts on “Evaluation 2022 New Actors Working Group Week: How Does Evaluation Look Different for Traditional Actors and Impact Investors? by Farahnaz Karim”

  1. Hi Jane,
    Great questions.
    The simple answer is that people and planet were treated as externalities, not just by evaluators but by our economic system – see Kate Raworth’s Doughnut Economics. So in that sense we are making some progress.
    But the dialectic of human knowledge and change is such that as we move forward, we continue to create new externalities or remain oblivious to our blind spots and/or to thinking across disciplinary lenses. So you are 100% right that we are constantly leaving something behind in our assessment of third parties who bear the costs of our activities. This week I attended a Sustainability Conference ahead of COP27 led by The Economist in London, and already the conversation has shifted from climate (GhG emissions, Co2 reductions, NetZero etc.) to the need for that kind of ‘clarity’ around nature-based solutions and biodiversity. And so new bodies and standards are evolving in this sphere. They will, as you point out, need to be contextualised, local, qualitative and community-based. In other words, the work ahead will require more ‘traditional’ MEL work if we are to work together for a more equitable and sustainable world for all.
    Thank you for your engagement.

  2. Farahnaz Karim’s blog post provides a crystal clear description of similarities and differences between evaluation and IMM/ESG in the impact markets. It also is right on in its forecasting of directional trends IMHO. I do have two questions though. 1) If we talk about human and environment impact- are we omitting system, community, and organizational structures and norms? 2) How do both fields treat externalities?

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