Monitor, learn and adapt

Track and evaluate implementation and performance for continuous improvement

Last updated: July 3, 2023

Description

Having implemented their strategy and activities for managing impact,  enterprises, investors and financial institutions need to monitor, learn and adapt. Monitoring is the action of repeatedly measuring and assessing (or “tracking”) an organisation’s practice and performance, so they can evaluate progress towards their objectives. This information can be used to make adjustments to the organisation’s strategy and implementation, to improve the likelihood of achieving these objectives.

Tracking practice

This involves the repeated measurement of an organisation’s practice indicators, to inform whether the implementation of its activities is happening as intended. Organisations should use the same indicators and metrics related to inputs, activities and outputs used during their initial assessment process to track the evolution of their impact management practices.

Tracking performance

This involves understanding an organisation’s performance in relation to an identified impact topic over time. The repeated measurement of the organisations’ outcomes and impacts enables it to know whether its performance is improving or worsening. The change in outcome over time is sometimes referred to as the “degree” or “depth of change”.

Example: A clothing manufacturer tracks the implementation of the minimum wages paid in its workforce over time. In doing so, it reviews whether change is positive or negative in direction (whether it has improved or worsened), and it places the level in context relative to a sustainability threshold, in this case the living wage. See Figure 1 for an illustration.

Figure 1: An example of the degree or depth of change

When it is not possible (because of a lack of data) or too soon to measure impacts, measuring a related outcome or even practice indicators (e.g. input, activity or output indicators) enables some tracking of progress. To this end, the causal linkage between practice and performance needs to be well established.

Evaluating practice and performance

In addition to tracking practice and performance over time, organisations need to evaluate whether its activities are effective in achieving its desired outcomes and impacts.

In some cases, the causal relationship between practice and performance is clear (e.g. the emission of greenhouse gases and climate change). In other cases this is less clear, and organisations need to assess whether the activities are leading to the desired outcomes and impacts. This is important to ensure that activities do actually deliver the desired outcomes.

In order to evaluate the effectiveness of their actions, organisations can conduct analyses that leverage counterfactual data. This means comparing how the outcomes of certain activities compare to the outcomes of other activities, controlling for external variables. These types of evaluations are more within reach for organisations with reasonably close distance to impact.

Example: An enterprise that implements a diversity and inclusion training programme for its managers may consider the outcomes and impact of its activity by evaluating information on representation, experiences of opportunity and safety in the workforce. The enterprise can track changes in such outcomes and impacts across groups of employees, including among the employees whose managers did receive the training, and those employees whose managers did not (otherwise known as a “control group”). The data gathered against these two groups can show the degree of change, and therefore the effectiveness of the training.

Figure 2: Evaluating the effectiveness of policies and interventions

For sustainability-focused organisations with sufficiently close distance to impact, collecting and understanding counterfactual data can also be a means of evaluating whether their organisation is causing a change that would otherwise not occur (versus the change that might have occurred anyway, in the absence of the organisation’s activities). This is known as assessing the organisation’s additionality.

For those sustainability-focused organisations with greater distance to impact (such as impact investors), assessing additionality can be more challenging. These organisations still can and should assess their investment contribution.

Indeed, for all sustainability-focused organisations, assessing their contribution to positive impacts is central to understanding whether they are delivering on their purpose and theory of change.

Example: A social enterprise focused on supporting and increasing the well-being of the elderly may consider its additionality by comparing the level of service provided to the targeted population to the likely level of availability in its absence.

An impact investor supporting the company, by contrast, would need to consider what portion of the increase in the well-being of elderly population is attributable to its investment (in other words, its contribution). This contribution can be put into context using the percentage of ownership by the investor. Further factors, such as investor engagement with company management (for instance, with a view to focusing on specific under-served areas or population sub-groups) also form a part of an investor’s contribution and should be considered in the assessment. See Figure 3 for an illustration.

Figure 3: The likely degree of change caused by organisation

Overall, evaluating impacts is more challenging for investors and financial institutions than for other enterprises, because of their distance to impact. As a result, these organisations often need to rely solely on tracking practice indicators (i.e. indicators that are linked to their activities and outputs).

Example: A bank that has identified pollution reduction as an impact objective (and is seeking to evaluate its performance) may find it difficult to measure financed pollution. However, it can monitor the evolution of its corporate portfolio; in particular, the portion of its portfolio composed of companies in “key negative” sectors (which it should aspire to phase out) and the portion composed of companies with a clear transition plan and/or in “key positive” sectors (which it should aspire to growing and making the norm).

Adapting practice

Having monitored and evaluated the implementation of their activities and their resulting impact performance, organisations should adapt their practice where necessary, and continue to develop and build on activities that are effective for reaching impact targets.


Resources

Guidance on impact measurement and assessment

Please see the Measure, assess and value action for resources on assessment.

Guidance on measuring and assessing contribution and additionality

Principles of Social Value

Last updated: 2015

The Principles provide the basic building blocks for organisations that want to make decisions whilst taking social value into account. They are intended to help organisations optimise value for all stakeholders materially affected by an organisations activities. Practice Standards are available to help organisations implement each principle to a point where they are accountable for their activities and are making decisions to optimise value.

Use this resource to:

  • Set up processes to include social value data in management decision-making.

COMPASS: The Methodology for Comparing and Assessing Impact

Last updated: 2021

Guidance that provides an analytical framework to compare impact performance, with a specific focus on variance and the extent of the change required to enable meaningful contribution toward impact.

Use this resource to:

  • Measure, assess and value: Normalise measures of impact so that impact performance can be compared.
  • Set targets and plan: Understand how an investor might contribute in analytic terms, in addition to other aspects of investor contribution.
  • Monitor, learn and adapt: Determine how meaningful the contribution of the investor is.

Sustainability Performance Classification (ABC of Enterprise Impact)

Last updated: 2023

The ‘ABC’ of impact provides a way to connect these high-level intentions – which are what most enterprises and investors start with – to the more granular dimensions of impact and data categories, which help to measure and manage impact.

Use this resource to:

  • Connect high-level intentions – which are what most enterprises and investors start with – to the more granular dimensions of impact and data categories, which help to measure and manage impact.

Multilateral Development Banks’ Harmonized Framework For Additionality In Private Sector Operations

Last updated: 2018

Guidance summarises Multilateral Development Banks’ approach to the topic of investor contribution (which they term “additionality”).

Use this resource to:

  • Understand the common approaches to additionality, which allows for multilateral development banks to substantiate additionality in projects.

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