AEA365 | A Tip-a-Day by and for Evaluators

TAG | impact investing

I’m Robert Picciotto, director general of the Independent Evaluation Group at the World Bank from 1992 to 2002. I oversaw evaluation there and in its sister institution, the International Finance Corporation, which uses equity finance to promote private sector development.

Evaluators charged with assessing the growing impact of the private sector in the social sphere face a significant challenge.  The United Nations Conference on Trade and Development estimates that $4 trillion to $5 trillion in annual investments are needed to support the United Nations’ Sustainable Development Goals. Because development aid and charity represent only a fraction of this investment, private investment is a critical component of achieving these goals. Impact investing is a highly promising strategy, although currently only a fraction of all investment is channelled toward social impact.

Ethical investors expect a financial return and want corporate decisions to take full account of the public interest. Their concerns range widely and can include the environment, consumer protection, community relations, human rights, etc. Reliable information about the social and environmental effects of ethical investments is necessary to meeting their needs. Luckily, development assistance agencies have already laid the groundwork by collecting and reporting data to satisfy public and philanthropic funders who demanded results as a condition of continued funding.

As highlighted at the Impact Convergence Conference, impact investing has largely focused on articulating goals and tracking progress through a battery of indicators. By relying primarily on self-assessment, it is failing to do the independent analysis required in financial reporting. 

The promise of impact investing could be fulfilled by bridging the impact investment and development evaluation worlds to share their vast operational experience, local country knowledge, and technical expertise in evaluation and investment. The multilateral development banks provide a starting place from their years of embedding independent evaluation into their corporate governance to identify, appraise, and fund major social programs.

Lessons Learned:

The Sustainable Development Goals and their adoption for goal-setting by the impact investing community may signal a relationship between social impact assessors and experienced development and evaluation practitioners. For example, ethical investors vitally concerned with results could seek the comfort of accurate social reporting by investing in derivatives that package social interventions funded by the loans and credits of multilateral development banks in Sustainable Development Goalbonds. These investment vehicles would be backed by existing systems to attest to the social value of each intervention. Finally, evaluation societies worldwide could establish communities of practice connecting impact assessment professionals and development evaluators.

The American Evaluation Association is celebrating Social Impact Measurement Week with our colleagues in the Social Impact Measurement Topical Interest Group. The contributions all this week to aea365 come from our SIM TIG members. 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.

Hi, Veronica Olazabal, senior associate director of evaluation at The Rockefeller Foundation here with Karim Harji, director at Purpose Capital. As many of you already know, market-based approaches to poverty alleviation are gaining traction across the social sector. A range of innovative strategies are being used to finance these initiatives, including impact investing—an approach to deploy various types of capital to intentionally deliver social impact alongside financial return.


Mapping of the Impact Investing Industry (courtesy of E.T. Jackson and Associates)

There is clearly a strong need to strengthen impact measurement and evaluation in this space. Many evaluators have had limited engagement to date, but it is an emerging topic of interest, as demonstrated by the focus at the Evaluation 2014 AEA annual conference. Below, we outline a few ways the evaluation community can become more engaged with evaluating impact investing:

Lessons Learned:

  1. Break out your Theory of Change facilitation skills! Like more conventional social sector program-designs, impact investors have theories of how they expect change to happen, including assumptions and goals.While they may use an ‘investment thesis/approach’ instead of  ‘theory of change,’ they often use these models to select, assess and monitor investments. Thus, it should not be surprising that theory of change has become a tool of emerging importance to impact investing. Rad Resource: Interrogating the theory of change.
  1. Use monitoring strategies to generate timely data: Monitoring can be an important strategy for tracking social performance, especially since investors already use financially-focused tools in this way. When designed and implemented well, monitoring data can provide timely and relevant information that can be used to adapt operational plans for investee enterprises or funds. For example, in the access to finance sector, monitoring has been used effectively to validate that target beneficiaries and clients are actually being reached. Rad Resource: Portfolios of the Poor
  1. Gain familiarity with emerging standards and approaches: There are a range of initiatives in this sector that seek to assess social change for a range of uses and users. For example, the Impact Reporting and Investment Standard System(IRIS) seeks to build a standard vocabulary/taxonomy at the output level, while Global Impact Investing Global Rating System (GIIRS) is a standards-based rating system that assesses impact funds and social enterprises.

As this area continues to evolve, more evaluation capacity will be needed at every level, and particularly around moving from lives touched (reach) to validating lives impacted (depth) in the field. Evaluators will be important not only to assess the intended and actual outcomes from individual transactions, but also to critically analyze how the field is contributing to market-based approaches to poverty alleviation.

 Rad Resource: Assessing Impact Investing: Five Doorways for Evaluators – Ted Jackson and Karim Harji.

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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