SIM TIG Week: Transformative Evaluation and Impact Investing: A Fruitful Marriage by Courtney Bolinson and Donna M. Mertens

Hi! We’re Courtney Bolinson, MS and Donna M. Mertens, PhD. Our work focuses on marrying the transformative evaluation paradigm with impact investing. Our chapter in the Global Handbook of Impact Investing demonstrates how transformative evaluation can be used across the investment cycle to effectively improve social and financial investment outcomes. 

Rad Resource: We tailored the transformative evaluation approach to the impact investing context to demonstrate its application throughout an investment cycle (impact thesis development, pre-investment, investment, post-investment, and exit). This modified framework includes:

Phase 1: Build Relationships

  • Build relationships with a diverse group of stakeholders, including investment professionals and the vulnerable and marginalized individuals intended to benefit from possible investments.

Phase 2: Contextual analysis

  • Conduct a contextual analysis including consultations with diverse stakeholders and a literature review. 
  • Based on the contextual analysis, draft an investment thesis (i.e. theory of change) with an explicit description of how the investment portfolio will directly or indirectly benefit (or harm) different communities economically, socially and environmentally.

Phase 3: Pilot

  • Share the draft thesis with relevant stakeholders and request their feedback/gauge their reactions. Revise the thesis accordingly. 

Phase 4: Implement

  • Use the impact thesis to guide the development of an investment strategy and set up monitoring systems to assess the impact of the impact thesis over time. 

Phase 5: Determine impact

  • Collect and analyze data, ideally using mixed methods, on the impact of the investment thesis. 

Phase 6: Use findings for transformative purposes

  • Refine the investment thesis to better reflect the needs and desires of vulnerable and marginalized beneficiaries. 
  • Use data to improve and expand relationships with stakeholders.
  • Use data to support policy changes to increase justice for vulnerable and marginalized populations. 

Lessons Learned: In the chapter, we illustrate a transformative approach to evaluation in impact investing using several examples, such as this one from Village Capital:

Effective use of Transformative Evaluation Gaps in the application of Transformative Evaluation
Recognized a problem characterized by oppressive structures that sustained inequality and discrimination (gender and race biases in awarding funds to entrepreneurs)
Formation of partnerships for mixed methods data collection
Disaggregation of results by gender
Data utilization for transformative purpose
Partnerships didn’t include women, Black, and Latinx entrepreneursResults were not disaggregated by race
Did not have training for investment reviewers on internal biases or improvements in the review process
Did not have interventions to support women and members of racial minority groups in the development of their proposals and business models 

We conclude with a call to action – If impact investors embed a transformative framework early on in their investment processes to design the intervention, set impact goals for the portfolio, and to source, screen, and evaluate potential investments based on their alignment with community interest and need, investors will select appropriate investments with higher potential to outperform economically, socially, and sustainably.

Rad Resources:

Check out the full chapter in the Global Handbook of Impact Investing, scheduled to be published by Wiley in December 2020. You can preorder at Amazon or  Barnes and Noble.

A description of a transformative evaluation conducted by Engineers without Borders and a social enterprise in Kenya is available for free here: Using Transformative Evaluation in Impact Investing 

A Transformative Evaluation Toolkit for The Impact Investing Sector (free) illustrates how impact investors, evaluators, or other stakeholders can apply concepts of transformative evaluation in impact investing. 

Do you have questions, concerns, kudos, or content to extend this aea365 contribution? Please add them in the comments section for this post on the aea365 webpage so that we may enrich our community of practice. Would you like to submit an aea365 Tip? Please send a note of interest to aea365 is sponsored by the American Evaluation Association and provides a Tip-a-Day by and for evaluators.

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