6 Reflections on Impact Evaluation
by Tara Murphy Forde, director of fund performance
What does “better evaluation” mean to an impact investor like Global Partnerships? Last week, I attended the Next Generation Evaluation Conference to explore this very question. Conference hosts Stanford Social Innovation Review and FSG convened impact evaluation thought leaders, nonprofits, government entities, funders, corporations and academics to engage in cross sector dialogue. While there weren’t many impact investors in the room, there was a shared understanding that growth, experimentation and innovation within the social sector require new frameworks for how we think about evaluation.
We discussed three game-changing approaches that are shaping the future of impact evaluation:
- Developmental evaluation: a real-time, learning oriented, feedback-based, and insight- driven evaluation approach used to inform program design and implementation;
- Shared measurement: when groups of organizations come together to co-determine outcomes and indicators, share data and learn from each other; and
- Big data: a term coined by experts to explain the volume, variety, and velocity of the data becoming available through the explosion of digital infrastructure.
Over the course of the day, it became increasingly clear to me that we as impact investors need to find our seat at the table. As participants in an emergent market looking to harness the positive power of enterprise, it is crucial that we reach across sectors to discuss what we mean by “impact”. As an industry we talk a lot about impact measurement. However we need to be better prepared to ask and answer why, how, for whom, and under what conditions specific interventions might really work. Quantitative data will undoubtedly play an important role in informing our investment decisions, but that data cannot be consumed in isolation.
With this in mind I walked away from the conference with the following reflections on what the “next generation of impact evaluation” might look like for Global Partnerships and the impact investing industry as a whole:
- Expected outcomes will be rooted in a clearly articulated theory of why and how we think an intervention will yield a certain level of impact.
- Measurements will be simplified, clearly defined, and analyzed in context.
- Data collection will be feasible, cost effective and scalable.
- Technology will be harnessed to increase real-time visibility and decrease reporting burdens.
- Evaluation cycles will be shorter, involve key constituents, and will be oriented towards improvement.
- Evaluation results will provide stakeholders with the information and confidence they need to make timely decisions.
I think the impact investing industry can build on learning from other social sector actors while bringing a fresh perspective and set of demands to the table. In doing so I am hopeful that we can collectively rise to meet the challenges of the rapidly changing, increasingly complex and highly interconnected nature of the problems we look to address.
Learn more about impact evaluation:
1. FSG published a learning brief featuring a dozen interviews with foundation leaders and many others. The brief starts a conversation around the next generation's impact evaluation characteristics and approaches. Read it here.
2. Is focusing too much on impact measurement detracting nonprofits from their mission-oriented work? A Huffington Post Impact article explores this and two other debates around impact measurement that arose from the Global Social Business Summit held in Kuala Lumpur, Malaysia on November 8, 2013. Read it here.
3. The Stanford Social Innovation Review explores the Seven Deadly Sins of Impact Evaluation. Read it here.
4. Global Partnerships' view on why measuring impact is so complex. Read it here.
Innovations That Allow our Social Investment Funds to Catalyze More Impact
Since the launch of Global Partnerships’ (GP) first social investment fund in 2005, we have provided debt financing to social enterprises with the objective of expanding already-proven solutions that help people living in poverty increase their incomes and improve their lives. Two examples of this approach are scaling access to microcredit for underserved entrepreneurs and pre-harvest finance for smallholder farmers.
Yet, our team is increasingly discovering business models that have potential to create significant impact in the lives of the poor, but have not reached sustainability, or represent levels of risk our social investment funds aren’t designed to absorb.
However, as a mission-led nonprofit impact investor, we are working hard to be catalytic with all of our capital. This means becoming creative with credit enhancement as well as building our capacity to deploy all types of capital to meet our partners’ needs.
In our latest Investors Report:
- Our Chief Investment and Operating Officer, Mark Coffey, highlights specific capital enhancements, and different types of capital, that we're using to catalyze impact (read here).
- We introduce MiCrédito, a new partner in Nicaragua with whom we're working to connect rural families to solar lights (read here).
- We provide updates on our social investment funds' performance (read here).
Global Partnerships’ Annual Progress Report 2013: Milestones, Case Studies, Stories of Impact, and More
We are pleased to share our annual progress report for fiscal year 2013. We have had an incredible year, achieved through our partners and team's hard work, and through our donors and investors' generous support of and belief in us.
Since our beginning, we've deployed $98.2 million to our partners, who are providing essential goods and services to poor families, helping them lift themselves out of poverty.
Here are just a few of the highlights from the report:
- Rick Beckett, president and CEO, shares an overview of our past year in his CEO Letter,
- Check out this timeline to see major milestones from the past year.
- Learn, through impact investing case studies and inspirational stories, about the challenges, approaches and successes we're seeing, implementing and achieving in each of our four impact areas:
As always, we welcome your feedback. Please leave a comment below or send us an email at email@example.com.
Catalytic Capital: 3 Views
How can we spark and amplify social impact? Lately, many mission-driven organizations have been wondering how they can use existing capital to achieve more impact. It seems that "catalytic capital" might be the answer. We highlight three different sectors' approaches to using "catalytic capital" to achieve greater social impact:
1. Catalytic Capital in Impact Investing: "First Loss Catalytic Capital"
The Global Impact Investing Network (GIIN) raised awareness about "catalytic first loss capital" as a form of catalytic capital. It did so by releasing an issue brief that:
- Explains what catalytic first loss capital investments are; and
- Presents five case studies of investors who have used first loss catalytic capital.
The GIIN defines catalytic first loss capital as “socially—and environmentally—driven credit enhancement provided by an investor or grant-maker who agrees to bear first losses in an investment in order to catalyze the participation of co-investors that otherwise would not have entered the deal. [It is] a tool that can be incorporated into a capital structure via a range of instruments [such as] grants, equity, subordinated debt, and guarantees.” Catalytic first loss capital was also a major theme at last month's GIIN Investor Forum (read our highlights here).
2. Philanthropy's Approach to Catalytic Capital: Funding the Roadblocks (AKA Opportunities)
Laurie Michaels of Open Road Alliance, a grant-maker, explains that grant funding can be used as catalytic capital if it:
- is deployed to high-impact projects that are facing unanticipated or unavoidable obstacles; and
- if it is deployed in a quick, timely manner.
Michaels reasons that many well-intended initiatives fail because they hit unexpected roadblocks and need more funding than anticipated. She argues that funding these opportunities keeps worthy projects moving forward. Furthermore, she explains that this approach could help change commonly-held attitudes towards obstacles or challenges in development work; they should be supported rather than frowned upon. Michaels also delves into why nonprofits might need this type of funding in the first place.
As a side note, Michaels has contributed catalytic capital to Global Partnerships' Green Technology Fund. Her grant helped GP and its partners launch an initiative to raise awareness of the benefits of solar technologies in rural Haiti. Awareness-building is key to increasing electrification rates in the area, which would improve families' lives by extending their ability to work and study after sunset.
3. Catalytic Capital in Development Aid: Examining How Existing Development Aid Can Be More Effective
Development Initiatives, a consultancy and research firm, released a report looking at the different sources and kinds of development aid. It explains that development aid can catalyze more impact if it is (1) better understood and (2) used more effectively. For example, the report points out that:
- "There is much misunderstanding about what aid is. [...] Aid is a bundle of different things. Some of it is money. Some of it is food and other goods. Some is people. [...] The type of aid affects the impact it delivers. A dollar spent on food aid will have markedly different economic effects from a dollar spent on debt relief. [...] Getting the most value for poverty reduction from every aid dollar requires deploying different aid instruments for different contexts."
- "Aid can [...] provide catalytic funding, leveraging other resources [such as private investments]."
- Better poverty data is needed. "A Development Data Revolution is needed to end poverty. With timely, forward looking, disaggregated data, resources can be allocated more optimally, progress can be properly monitored, and lessons can be learned about effective and efficient policies and programs."
GIIN Investor Forum: Common Themes Emerge from Inaugural Meeting
by Jason Henning, director of investor relations, Global Partnerships
Blended capital. Bottom of the pyramid. Pay for success contracts. MFIs, CDFIs, IRIS and SMEs. Dive headfirst into a conversation on impact investing and it’s likely you’ll need a glossary of terms within reach.
Fortunately, the Global Impact Investing Network (GIIN) was established not only to help industry participants navigate the field, but also to build the field itself. The GIIN is aimed at increasing the scale and effectiveness of the impact investment industry by creating infrastructure and developing education and research. I recently had the pleasure of participating in the inaugural GIIN Investor Forum, an event designed to address common themes and best practices from the industry.
Topics covered a range of salient issues facing the sector, including a focus on specific impact areas (viable food systems, financial services for the poor) and discussions on the legal, operational and political aspects of investing. But two themes were given consistent voice throughout the two-day conference:
1. market-rate solutions in impact investing; and
2. the need for catalytic first-loss capital in getting more money flowing to viable programs.
As more institutional investors with financial obligations look to link their investments with social impact, capital that seeks market-rate returns is stacking up. Fund managers can often be caught in the middle, as some investors look to maximize profit while others are seeking high social performance within the same fund.
Speakers at the forum, however, mostly issued words of caution. Matt Christensen, Global Head of Responsible Investment at AXA Investment Managers, warned that if investors don’t adjust return expectations to risk, an impact investing bubble is on the horizon, much like the shock Andhra Pradesh sent through the microfinance sector. Investors were urged to tie pricing and time horizon directly to the impact they’re seeking; in rural settings, for example, where there are fewer economies of scale, investors must be more patient and be realistic on rate.
The value of risk capital also permeated the conference. With the GIIN’s most recent issue brief as a backdrop, many presenters spoke to the importance of catalytic first-loss capital in generating the flow of more traditional capital into the impact investing space. Most capital within the industry is sitting on the low-risk end of the spectrum, while most impact investment deals are higher risk. A range of credit enhancement products aimed at unlocking private capital was explored—including grants, subordinated debt and guarantees—all designed to peel back the first layer of risk.
Topics discussed at the GIIN Investor Forum parallel much of what we’re trying to accomplish here at Global Partnerships. Our goal is for 100 percent of our capital to be catalytic and aimed towards impact. We see the importance of philanthropy within impact investing to seed early-stage opportunities and later attract private investors. And we work closely with our investors on establishing rate expectations to align with the specific impact we’re seeking. We look forward to continuing to add our voice to the conversation and help build the industry.
Global Partnerships Featured in Annual List of Experienced Impact Investment Fund Managers
We are honored to share that we have been chosen for the ImpactAssets 50 (IA 50) list for the third year in a row. The IA 50 is a free online resource for impact investors and their advisers which shows the diversity of available impact investment opportunities by highlighting fund managers that have demonstrated experience and impact.
The list is selected annually by industry experts and thought leaders, such as Jed Emerson, ImpactAssets’ chief impact strategist. We look forward to continuing our mission of expanding opportunity for people living in poverty.
The Impact of Giving
by Carol Gullstad, Global Partnerships donor
All parents want the same thing for their children—they want their kids to be healthy, educated and have sustainable economic opportunity. We heard this sentiment expressed in every household visited during our recent PartnerTrip to Peru. However, not all have the access and opportunities to succeed.
My own family is lucky. We are educated, healthy and economically secure. Knowing that only a very small percentage of the world population enjoys these comforting thoughts, we want to help others. However we always struggle to determine the right mix of personal time and money to apply to all the great causes just in our own backyard, let alone the rest of the world.
As a family we want to do the most good for the most people with our available resources. Thus, after attending the Business of Hope luncheon for many years, we decided to learn more about GP’s impact work first hand.
This past June I traveled to Peru with my 12-year-old son and saw Global Partnerships’ (GP) support of microentrepreneurship in action. We visited 10 clients with businesses ranging from seamstress to fruit cart vendor to farmer. We observed training sessions provided by GP's Peruvian partners and attended communal bank meetings.
Since its inception GP has invested nearly $100 million in loans and grants to 66 different partner organizations—who together now serve over 2.26 million people. These are impressive statistics, but it’s not just the numbers and the money. It’s the method. For an entrepreneur it’s about planning, budgeting and support networks. It’s about how to create a customer experience, deliver the service or product at a good value and get repeat business. All of this takes time, money and training. We saw how GP’s approach knocks it out of the ball park and has been such an important catalyst for change.
Adelaida Quispe, a client we visited in Tomilla, outside Arequipa, used to earn $30 per week sewing for someone else. She began with a $75 loan that allowed her to purchase a sewing machine. Initially she sewed traditional costumes for holidays. Then through the training received by GP partner ADRA, she broadened her product line to include costumed dolls. These dolls are now sold in several area shops and she was able to buy a second machine to expand her business. She now earns $350 per week. A loan of $75 has transformed the life of her entire family and will allow her to educate her children.
In Urcos we attended a “tambo” (communal bank) meeting conducted by partner Credivision. We witnessed a training session on the five key elements of marketing and sales presented in a visual of a hand. This was business literacy provided in a way that was actionable for clients who may have left school in 5th grade. The women enthusiastically chanted the tenants and said they looked forward to the meetings. They loved the learning, support and the camaraderie of their peers.
We visited a communal bank meeting in Chincero that had a session focus on customer service. One member of this group known as Las Leonas, Hilda Huallpayunca Callanuapa, had embraced the training thoroughly and was encouraging others. Through interactions with tourists she learned enough words in five languages (Italian, French, English, Chinese and Portuguese) to converse with customers. She insisted we go to her store. She was so effective in her presentation of product and customer interaction that we fondly called her the “Nordstrom” of Chincero for the rest of our journey.
On the last day of our trip we were buying last minute souvenirs in Cusco. I asked my son if he was ready to negotiate price. He said, “I really don’t feel comfortable bargaining because I know that one sol (Peruvian dollar) means so much more to them than it does to me.” At that moment I knew he understood the importance of Global Partnerships’ work. GP has made an incredible impact on people’s lives in a way that is measurable, scalable and sustainable. That is why I can so enthusiastically support GP. We have seen that every dollar my family donates or invests will creates exponential leverage, right in our own “backyard.”
Opportunity: The Value of a Chance
by Enrique Godreau, III, board member, Global Partnerships
In honor of the International Day to Eradicate Poverty (October 17, 2013), we wanted to share remarks from Enrique Godreau, III, keynote speaker at our 11th annual Business of Hope Luncheon, held on Oct. 8, 2013 at the Westin Hotel in Seattle. He spoke about the value of having the opportunity to create a successful life for himself, and how people living in poverty around the world also deserve to have a chance at success.
As a kid living in Puerto Rico, I often swam in its warm surrounding oceans. While looking for the next larger wave to body surf, the current would pull me further and further out. And when I had to swim back in, it was only then, fighting the invisible forces of nature, that I knew that I had swam too far. I took chances, and as a result, struggled to make it back to shore.
All of us here have stories to tell of chances we took while young. And many of us have stories to tell of the chances we are taking today. We take chances in business. We take chances with relationships. We take chances when we take that new job. Every day, we make decisions that consider the possible outcomes, and we choose to take a chance.
Now, stop for a moment and imagine a world where there are no chances to take. A world that because of where you were born, when you were born, or the circumstances that you were born into, that your life is choice and chance free. Where that sacred geometry of chance combines to say, "No, you don't have a chance."
I have lived a life that could easily have been chance free. This in spite of the fact that I had two parents that gave all they had, and didn't have, so that my brother and I would have a chance. As a Hispanic going to school in the South Bronx in the early seventies, there were few chances to be had.
As a fourth grader, I remember crying all the way home because a 6th grader had forced me to take a puff of a cigarette. With urgency, I apologized to my mother believing I would die of cancer by morning. “If only I had a chance,” I remember thinking; “I would go to a better school.” Ultimately, I got a chance, made some choices, and changed my life.
In 2005, Mike Galgon, a member of the board of directors of Global Partnerships, approached me about a nonprofit organization he was involved with. That organization was Global Partnerships. He told me that they were thinking about a different model for supporting the organization’s mission. Mike asked if I could meet with the Chief Investment Officer and comment on the idea. Ten minutes into the conversation, I was hooked. Even to a geeky, computer scientist turned entrepreneur, the concept seemed innovative, simple, and scalable.
The gift of Global Partnerships’ concept is based on leveraging our relationships with microfinance institutions (MFIs), built with the support of many of the donors and investors in this room, to create a distribution platform for a suite of life-changing services. Across five funds, Rick Beckett, Global Partnerships’ President and CEO, and his incredible staff have developed a sustainable model for helping people living in poverty that otherwise would have few chances. People that live on less than $2 a day. People that lay awake at night wondering how they can get a break, how they can get a chance. And with that chance, the opportunity to make a different life for themselves, for their families, and for others.
In April of this year, the Board of Directors of Global Partnerships took a week-long trip to Nicaragua and Honduras. The purpose of our visit was to meet with some of our MFI and cooperative partners and their members in those regions. What was most striking to me about the trip was reaffirming the tremendous, life-changing value of a chance. When we met with Elma and Olivio who run a pharmacy, a convenience store, a pool hall, an auto garage, and grow coffee in their 2 acres of land so that they can feed and educate their immediate family, I witnessed the value of a chance. When we met these women who told me in Spanish, “Take our picture, because we are the prettiest things here,” outside of a women’s health clinic providing their inaugural pap smear, I witnessed the value of a chance. When we visited with Raphela in her home in the hills of Nicaragua and toured the land that she, her husband, and 7 kids harvest, allowing many of them to go to school, and even some to build cinder block homes, I saw the value of a chance.
And take a close look at this picture. Hanging from the ceiling is a solar light that had been installed just 30 days prior. This family had owned this property for years and years, yet it was the first time that they had an electric light in the house. Though Edison’s first demonstration of the electric light bulb was on December 31, 1879, this family got theirs last April thanks to the support of one of our MFI partners. This solar light also charges their cell phones. Before they had this charging capability, they had to walk an hour into town, pay up to 4 US dollars, and waste the better part of a day charging phones.
Global Partnerships' Impact and Catalytic Investment model has been consistent, and frankly, executed better than many for profit companies I know.
They thoughtfully test the viability and sustainability of a new service. They identify and fund partners to enable a distribution channel. And finally, they assess the impact and refine the operational model as needed.
For nearly 20 years, Global Partnerships has been singularly focused on one mission, providing opportunities for people living in poverty. The brilliance of what Paula and Bill Clapp founded is an organization driven by shared values and a shared vision that harnesses the power of shared responsibility and shared opportunity.
As we dine together in this room, I ask you to join with the Global Partnerships’ family and take advantage of this opportunity to help us give many, many more people a chance. One of the persons that we collectively help may be the one with the insight that finds the cure for cancer, that advances our understanding of the laws of physics, or that dramatically increases agricultural yields. Providing opportunities to those that don't have them actually gives all of us a chance to realize a better life.
Earlier, Margaret mentioned that we have a very special guest with us. Florinda Salinas, an Honduran wife, mother, and entrepreneur is here to tell us what the value of a chance has
meant to her and to her family. Let’s watch this brief video and learn a bit more about Florinda. Thank you.