European Microfinance Week 2020

Cécile LAPENU, from CERISE, started the panel session by briefly introducing the speakers and mentioning that the focus of the session would be on how different stakeholders try to manage results and customer data aligned with the Sustainable Development Goals (SDGs). She then gave the floor to Rachel BASS of the Global Impact Investing Network (GIIN) to present what the GIIN does and what the general state of the sector is.

Bass started with a general description of GIIN, and how the SDGs influence impact investing. GIIN is a network organisation and a global champion in this field, aiming to increase the scale and the effectiveness of positive social and environmental of impact investing. To do so, GIIN works on three simultaneous strategies: capital mobilisation into impact investing, market integrity maintenance (keeping impact at the centre of investments) and promoting a global movement. One of the key activities of the GIIN is the collection and publication of data and statistics on impact investment.

Bass also shared some relevant statistics from the global Impact Investing Survey. According to this survey, there is a rapidly growing traction of the SDGs among impact investors. Around 73 percent of impact investors are using the SDGs to help inform their investment. She noted that this value tripled in the last three years. According to the same study, the SDGs are mainly being used to communicate impact externally, to align to the global development paradigm, to attract investors, to set appropriate impact objectives and targets and to conceive new investments. Regarding the microfinance and financial inclusion sector, there has been a great uptake of the SDGs. There are three main SDGs that investors seek to address: SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth) and SDG 10 (Reduced Inequalities). Recently and because of COVID-19, the areas of interest have changed and investors have been focusing more on the SDG 3 (Good Health and Well-being). Bass also mentioned that is important to note that SDG 17 (Partnerships for the Goals) has gained a lot of attention on how partnerships are helping to cope with the crisis.

Lapenu reacted to Bass' presentation, agreeing that the results of these surveys are great news, but highlighted that there has also been a risk of ‘rainbow washing’ (social/environmental) by companies intending to externally communicate a positive impact of their activities. Lapenu then gave the floor to Giulia DEBERNARDINI, Impact Officer of the Dutch Entrepreneurial Bank (FMO), to share one of the bank's latest developments: the Joint Impact Model.

Debernardini began her presentation by mentioning that FMO's core SDGs are SDG 8 and SDG 10, but also SDG 13 (Climate Action), which was not mentioned in Bass's presentation. Debernardini hopes that over time people will take climate change more seriously and investors will start paying more attention to this SDG as well. Regarding impact investing measurement, FMO works with an input-output model that was developed in the 1970s and is currently being used by many other DFIs and other institutions. Due to the similarities between the FMO model and those of other institutions, in addition to the growing demand for transparency in the impact along the value chain, they decided to develop an open access tool for everyone that they could share with everyone to harmonise how different institutions are measuring impact investing. The Joint Impact model has three main outputs: value added, employment and GHG emission, which are related to the SDGs 8, 10 and 13. The model tells how many GHG emissions are being generated due to the investments, and how much indirect employment is being supported and being tested by many institutions in the course of 2020. She added that they expect around 90 percent of them to adopt it in the near future.

One of the audience members asked whether this is a model that FMO is sharing at the DFI level, and how investors and MIVs could be more proactive in favour of stronger DFI coordination. Debenardini replied that the tool is open access, meaning DFIs and any other impact investor can use it. It is not open source, meaning the code itself cannot be changed as this would defeat the purpose of harmonisation. FMO has made the methodology document available to the public, and Debenardini emphasised that they are currently working with MDBs and DFIs to further enhance and improve it.

Lapenu reacted by mentioning that this is a good model, as it provides good indicators on job creation and other outcomes, and that it would be interesting to see if these indicators match reality later on. Lapenu then gave the floor to Safeya ZEITOUN, from Symbiotics, to understand, from an investor perspective, how they are using the SDGs to measure impact investing.

Zeitoun began her presentation by mentioning that Symbiotics is a Swiss impact investor that also maps its portfolio to the SDGs. She mentioned that, while Symbiotics maps all its transactions to the SDGs, she will focus in this session on how they do so through outcomes measurement for two investment funds. To collect data at the outcome level, Symbiotics collaborates with local consultants where the investments are being made. For the first of these investment funds, she noted that the organisation collects data from the end-clients of 14 different institutions in 12 countries, having followed this methodology for the last 4 years. Through this approach, Symbiotics is able to map its outcomes to the SDGs at the target level. Each SDG has several targets, and this is what they measure to contrast with that goal. For example, for SDG 8, they focus on measuring targets 8.3, 8.6, 8.8, 8.10 and their respective indicators. For the second investment fund, she mentioned that they collected data from end-borrowers in six countries in Sub-Saharan Africa, most recently in the context of COVID-19. She noted that this example demonstrates that the SDGs, even though they are now a universal framework for impact management in the industry, are not always relevant for analysing end-client outcomes. 

Lapenu reacted that, while the FMO model works by estimating impact proxies, Symbiotics' work is based on direct data collection. However, according to Zeitoun, this is a demanding process from which they have learned a lot in recent times. On occasions, their surveys to collect outcome data reveal that interviewees do not want to share numbers with precision, but rather the change in their trends. They have also learned to create short questionnaires that allow for the extraction of the relevant and necessary data.

Finally, Lapenu asked the three speakers to share their views on what the main challenges for the sector are. According to Zeitoun, the main challenge is turning data into action, specifically in the context of COVID-19. More generally, the biggest challenge is really fostering more of a culture of performance measurement at both the investor and the investee levels. Bass concluded that there is a need for more alignment with resources and tracking outcomes to shape business decisions. Finally, and according to Debenardini, it is important to triangulate the macro and micro data to obtain a better understanding of investment studies.