Holiday Hallelujahs and my Wish List for Sustained Impact(s)

There are six bright Hallelujahs on the sustained impact journey this Holiday. I’ve paired each of them by a wish, so appropriate this Holiday Season.

1. Netherlands Greatness! The government of theNetherlands has recently started talking with their implementing agencies about how to track and prove sustainability six years after exit, as one Dutch colleague told me at the European Evaluation Society Conference this Oct.

WOW.

As we know, demanding evaluation of sustainability after project closure is rarer than vegan turkey on Thanksgiving, and the Dutch Ministry of ForeignAffairs is tacking the issues of a) how will they pay for it after project funding has ended (hint: see 3ie), b) how will the data disseminated and influence which decision-makers? Note: Japan’s development agency JICA is the only other bilateral to have this as a mandated aspect of their ongoing evaluations. We congratulate the Dutch for joining Japan in sustained impact evaluation leadership!

My Wish: For the other bilaterals and multilaterals for whom such evaluations are exotically occasional learnings to see the value from learning about the successes and failures of how(un)sustained your results are. Also to fund such evaluations for at least 10% of all programming per year, and do better programming focused on helping locals sustain the results they want. See, that wasn’t such a huge wish was it?

2. USAID Transformation to Self-Resilience is a promising analysis USAID is doing under the leadership of AdministratorMark Green. This Transformation “Journey to Self-Reliance” is “reorienting the way it does business to focus on supporting our partner countries… to solve their own development challenges.” It consists of a variety of policies, from using more private sector money for development to two exit-related initiatives including Financing Self-Reliance “to strengthen support for our host country partners in their efforts to finance their own development journey”and includes continuing to build local capacity and Partnering and Procurement such as using adaptive approaches and “principles of supporting locally-led development and long-term sustainability.”

Will USAID really follow the SDG aim to Leave No one Behind in terms of focusing on the poor? Metrics of USAID’s Country Roadmaps, range from national economic growth and democracy/governance to sectoral measures in health, food security etc. Maybe this is not just a way to use national data to justify exit of aid programs due to shrinking funding, but instead is a way for USAID to determine who is actually self-reliant among their recipient countries and focus more resources on those who aren’t on more needs-based criteria than politically strategic bases than in the past.Maybe it will look hard at assumptions rather than Uganda’s CDCS which projects sustainability in 30 years but will program on until then. OXFAM’sAid Localization may be a better, faster route.

My Wish: that bilateral donors like USAID test how well their current aid projects support self-reliance and how well they’re furthering sustainability. This includes learning what has been self-sustained and not renewing what hasn’t. We offer our database of 25 catalytic organizations’ ex-post project evaluations at Valuing Voices which were informed by local voices of our participants and partners. These fascinating evaluations need to inform new programming as sustainability is only high occasionally, unlike what we assume. We ask commissioners of such evaluations to tell us what they have learned and how they have done things differently (e.g. have they funding differently, chosen what projects are selected as implementers differently, and while adaptive monitoring is a terrific addition, how has evaluation changed -other than pending OECD DAC Criteria and Ofir’s blog commentary plus the WorldBank’s sustainability blog) and how has exit, sustainability planning and handover to national government using data about sustainability and impact changed and people really can sustain themselves? NOTE: this may lead to less money being spent over a longer time, more flexibly and locally-directed. We donor nations may benefit less as locals take their own ‘development’ in hand. Hallelujah.

3. Recently I did a webinar for InterAction webinar with dear sustained impact aficionados from Catholic Relief Services and World Vision on “How Sustained and Resilient are our Impacts?” Lessons about accountability for locally sustainable development was front and center. We all shared that ex-posts project evaluations have, shall we say, mixed results of success and failure. This can be difficult for agencies to absorb as the projects selected are not only typically selected to showcase success, but normally these are selected to be showcased as the best projects. Also, unsustained results can question the quality of funder’s design the agency’s and implementation, risking reputation and funding for both. But hiding failure is worse. A recent Evidence Action statement admitting failure of a promising intervention, promising to evaluate why and learn from it only gained kudos. Conversely, great results can show where future focus could be, or much can be (rightly?) attributed to unexpected new conditions which led it in very different directions.

My Wish: My CRS colleague was challenged by a younger American colleague who asked him “are we liable if we don’t deliver sustainable development?” Astonished, he answered “yes.”. Let’s get over our infallibility and inclination to promise something only the countries themselves can deliver. Yes, we are liable for wasting money and locals time and hopes. Yes, we can claim success when partnerships go well. May we all learn from failures, celebrate successes –especially those locals consider successes, and replicate only those.

4. Impact Investment is slowing inching forward in helping move more of the Sustainable Development Goals (SDGs) toward fruition.  The pressure on many global funders and countries alike to meet the 17 SDG targets set in 2015 is rising.  Funding needs to accomplish the goals is $4 trillion a year, yes, trillion, compared to $150 billion available now in foreign aid. Accessing private capital is a wise investment if such development could unleash up to $12 trillion in growth. Repeatedly people like myself and Impact Guild read that “demand for SDG-aligned investment products outstrips supply“ which is true not in terms of the actual business and civil society non-profits trying to generate Social, Environmental, Governmental and financial Return on Investment (SROI and ESG), but in terms of profitable and stable investments.  Investors tend to be risk-averse yet there are a range instruments that cover the range of development to humanitarian needs. It is not a mechanism to ignore as for-profit funding will sharply increase in coming years with up to $8 trillion of impact investments moving into global disasters recovery alone and vital “climate finance” investments only going to grow, as $100 billion are year is being raised for poor countries to stem the rising effects of climate change. Combined with a $10.3 billion private Green Climate Fund that privately funds climate resilience projects all over the world to meet SDG13, we can no longer rely on diminishing foreign aid alone.

While patient pessimism is needed to overcome the hype that now private capital can replace philanthropy, INGOs are – cautiously innovating. As this month’s Amplify report from 40 international NGOs dipping their toes into impact investment collaborations notes, there are a wide array of collaborations. Some are investing their own private donors funds – or those leveraging other donors’ and investors’ funds in Development Impact Bonds (DIBs) or Social Impact Bonds (SIBs), and other instruments to the tune of $545.1million in assets. These are mainly in profit-low-hanging fruit development sectors of agriculture, livelihoods, and financial inclusion. Yet some of the INGO’s greatest strengths are least appreciated and what the relatively risk-averse and ‘due-diligence-focused’ impact investors do not yet know they need: ”their deep knowledge of local environments, programs, and technical solutions; their long-standing networks and sophistication in partnering with multiple actors; their financial sophistication from their wide-ranging donor relationships; and their experience in complex, multi-year measurement of impact.“

My Wish: that these two industries listen to one another. Non-profits can be mired in a can’t spend-can’t-risk mindset while being queasy about generating revenue, while impact investors can be torn between profits being king and claims of ‘impact’ from just investing in a sector without monitoring actual effects on the ground. There is simply too much good to be done.

5. Brazil/ France’s Corporate Social Responsibility (CSR) – The French renewable energy company Voltalia has created their first CSR-funded Social Projects for Social Responsibility. It is using some excellent sustainability principles as well as leveraging Brazilian Bank BNDES social sub-credit seed financing. I met Voltalia’s small CSR team at the EES conference. They started working in impoverished northeast Brazil, using great non-profit processes of communities identifying needed projects and processes that overlapped with what CSR could offer, over half of which were in education, health and ‘social responsibility’ (aka livelihoods linked to water access and use such as fisheries etc). They invested substantial funds into these grassroots projects, alongside interesting Social Management Tools that included cost management tracking of local co-investment, great collaborative communications plans, sustainability reporting, including Social Return on Investment (SROI). Like many non-profits before them, it has been hard, but also enormously rewarding and their work has led to greater employee engagement and was recognized by global headquarters – kudos! – interested? Contact them.

My Wish: Walking in the shoes of our partners and participants teaches us about their capacities and needs, and how to adapt what we can offer to be of greatest use. We need more companies with ‘dust on their shoes’, as my PhD advisor called my fieldwork. This epitomizes the Sidekick Manifesto approach where we offer local leaders help, rather than ‘solving’ poverty, hunger, ill-health, un-representation for them (which our efforts only accomplish for a short-term anyway, see #1, 2).

6. Climate Conference COP24 corralled nearly 200 nations to create technical targets and measurements to try to keep us below IPCC’s dire projections that we are not on target to limit the temperature increase to 1.5C degrees, and that it will cost billions to the economies of the world, not to mention jeopardize past development gains. You may wonder why this is a Hallelujah. It is because for those I most care about – my children and future generations-especially those in the ‘less developed countries’ who have least-caused yet are least able to mitigate climate change effects- are finally starting to be seen and heard. Conferences such as COP24, as well as a huge range of ‘non-state actors’, including corporations, non-profits, philanthropies, tribes, even individuals like you and me.  Whether it is our self-interest or expenditure-avoidance which propels us to decrease our emissions and increase our use of clean technologies, or our altruism toward the millions of species on earth, we have globally begun turning to sustainability of the ecological kind. Scientists are proposing remarkable inventiveness to capture already present CO2, studies are showing how we can be more energy efficient, buy more sustainable fashion, to eat more kindly, etc.

My Wish: We have begun changing our consumption and carbon emission and our youth are pushing us to conserve our planet. I am hopeful that we will come together to address this threat to all species. Is it far enough? Is it fast enough? Santa – help! So since it’s my holiday hallelujah, read Hans Rosling on how it’s all getting better anyway.

Happy Holidays and New Year everyone!

Impact Investing – International Development’s New Holy Grail?

 

Impact Investing – International Development’s New Holy Grail?

 

There are so many things I love about the private sector such as Forbes 18 Dec Quote of the Day: “You’re going to be wrong a fair amount of times. So the issue is, how do you be wrong well?” asked Ray Dalio, Founder of Bridgewater Associate. This is a key issue for impact investors and international ‘developers’ alike.

International development suffers from the myth that failure must be downplayed. Too often only success is highlighted, whereas project shortcomings are framed as: “less successful” “numerous issues affected a less optimal…” Yet by downplaying the less great (Aka awful) results we miss vital learning that private sector expects, learns from and integrates toward the greater success. Why? Many in foreign aid believe (rightly?) such admissions might endanger winning more funding for more projects. Even as recently as 2014, U.S. foreign aid industry websites such as DevEx are still posting: “One can be forgiven for forming the impression that our development efforts are nearly perfect if typical annual reports, scientific conferences and event social media content are the basis for information. Successes are proudly packaged in glossy formats and heavily disseminated, whereas any objectives not achieved are relegated to the obligatory, and typically short, lessons learned section. This practice does not accurately represent an important reality: development efforts do in fact fail” [1].

Admitting failure, posting failure reports are awfully rare in international development, but how bad is it? The Asian Development Bank wrote in a large overview of the sustainability of post-project results, “Some early evidence suggests that as many as 40% of all new activities are not sustained beyond the first few years after disbursement of external funding” [2]. A 2017 Cambridge University study found that “using an original database of over 14,000 small development projects in Ghana, I estimate that one-third of projects that start are never completed, consuming nearly one-fifth of all local government investment” [3]. Even when they do start, complete, and even have salutary results at the end of the project, Valuing Voices research shows quick declines toward failures in as little as two years post exit, such as these post-project results at the AEA 2017 conference. The foreign aid industry is so focused on showing results while conditions are (relatively) conducive, that far fewer than 1% of all projects are evaluated for what was still standing in as little as two years after project closeout, and those are mostly those projects expected to be successful. Sustainable, long-term results suffer from what CGDev researchers are concerned “that pressure to demonstrate results in the short term may undermine efforts to ensure any impact is sustainable….Unfortunately, the pressure to show immediate results can encourage pursuit of agricultural investments unlikely to be sustained” [4]. Luckily there’s a place to go. DevEx reminds us that “Venture capitalists and corporate investors understand that less than 20 percent of new businesses will succeed,” hence my love of the private sector’s admitting, learning and improving that ‘aid’ needs [1].

As a former investment banker (Solomon Brothers) and management consultant (Price Waterhouse & Coopers and Lybrand), I know that the corporates care for results, and do not shy away from pulling money from where things don’t work and put it where they do. 30 years in international development showed me that rigid bureaucracies and fixed ‘project cycles’ and an industry focused on ‘getting money out the door’ lead to a focus on accounting for all funds, but not for changing lives over the long term. Virtually no one calculates return on (our) investment compared to the cost of projects, especially including the value of what projects generate and participants can sustain.

I am quite fervently hoping Impact Investors focused on financial ROI to firms and investors as well as Social Return on Investment will step in, fund gathering and learning from the whole range of ‘returns’. Will they share both financial profits/ losses and feedback from the whole social ‘value chain’ of stakeholders of those involved on what succeeds and fails? Will investors learn from national partners and participants on what should be done better? If yes, all of us will win. I am heartened by cautiously optimistic statements such as Next Billion’s “a core characteristic and challenge of impact investing is the measurement and management of social and environmental impacts alongside financial returns. Development cooperation and impact investing communities can build on their respective experience in results measurement and learn from and with each other” [5]. We can IF we are going to the same place.

 

 

From my early look at impact investing, it is a ‘game changer’ with $250 billion in assets looking for a profitable home [6]. UBS Asset Manager Baldinger says “In the past you sold products to your client, now you empower your client to create a desired impact. As an industry, we’ve had to rethink everything we do — impact and sustainability is the Silicon Valley of finance and we want to be the Google” [6]. These are happy words to someone focused on sustained (and emerging) impacts but among impact investors, so far, ‘impact’ seems to be thrown about as specifically as ‘results’, and GIIN ‘sustainability’ metrics are so wide ranging as to illuminate less quality than quantity. So far, much of their metrics look more like outputs relevant to companies (‘clients served’, ‘new investment capital’) that results of SROI. While there is something to be said about measures of ‘organizations trained’, ‘poverty assessments’ done, at least as a start, yet does ‘gross profit’ indicate that corner of the world is better off (and does this measure the investment into the enterprise, or is this of the investment fund itself)? Does ‘communities served’ and ‘social impact objectives’ illuminate the quality of the impact on lives changed? Is anyone asking how long-lasting, and sustained these investments, measuring what I call SUStained Return on Investment (SUSROI), will be after these investors leave (which is what I suspect most investment participants and millennial investors think they’re buying)?

This is the start of a series of blogs exploring how we who care about generating and evaluating sustained impacts can learn from, inform, (gasp) shape impact investing’s gargantuan footprint in international development. Powerhouses such as the Rockefeller Foundation, Ford Foundation and Soros are looking, teaching, investing, and all public and private equity as well as a whole range of other investors now invest in this new hybrid [7][8]. Who else is? What can we learn to make the world better? What do you think: Is impact investing development’s holy grail?

 

 

Sources:

[1] Petruney, T. (2014, December 12). Facing global development’s fear of failure. Retrieved from https://www.devex.com/news/facing-global-development-s-fear-of-failure-85078

[2] Asian Development Bank. (2010, October 31). Post-Completion Sustainability of Asian Development Bank-Assisted Projects. Retrieved from https://www.adb.org/documents/post-completion-sustainability-asian-development-bank-assisted-projects

[3] Williams, M. J. (2017). The Political Economy of Unfinished Development Projects: Corruption, Clientelism, or Collective Choice? American Political Science Review, 111(4). Retrieved from https://www.cambridge.org/core/journals/american-political-science-review/article/political-economy-of-unfinished-development-projects-corruption-clientelism-or-collective-choice/1351C9A6EB64B39B0D3A2B0A2D748412

[4] Elliott, K. A., & Dunning, C. (2016, March 1). Assessing the US Feed the Future Initiative: A New Approach to Food Security? Retrieved from https://www.cgdev.org/publication/assessing-us-feed-future-initiative-new-approach-food-security

[5] Next Billion. (2017, November). Financing Global Development – Leveraging Impact Investing for the SDGs. Retrieved from https://nextbillion.net/calendar/financing-global-development-leveraging-impact-investing-sdgs/

[6] Kennedy, E. (2017, December 18). Impact investing: A $250 billion game-changer for finance. Retrieved from https://www.cnn.com/2018/09/27/investing/impact-investing-wall-street-banks-asset-managers/index.html

[7] Ford Foundation. (2017, April 5). Ford Foundation commits $1 billion from endowment to mission-related investments. Retrieved from https://www.fordfoundation.org/the-latest/news/ford-foundation-commits-1-billion-from-endowment-to-mission-related-investments/

[8] Karabell, S. (2013, August 14). Impact Investing, Soros-Style. Retrieved from https://knowledge.insead.edu/responsibility/impact-investing-soros-style-2576