Interrogating the theory of change: evaluating impact investing where it matters most

Abstract

How is impact investing evaluated? How can and should it be evaluated? Over the past 5 years, there has been solid progress in developing social impact metrics at the industry-wide, firm and investment levels and the industry is becoming increasingly data-rich. Nevertheless, evaluation practices still tend to focus on counting inputs and outputs, and telling stories. Moreover, an important element is too often underdeveloped, invisible, not explicit or missing altogether. That element is theory of change, an approach and tool drawn from the field of program evaluation. This article reviews cases where theory of change has, in fact, been used to good effect at various levels of the impact investing industry. It also discusses a range of qualitative and quantitative methods which could be usefully blended with the theory of change approach, and affirms the equally important imperatives of accountability and learning across all combinations of methods. The article concludes that a more comprehensive application of theory of change to all levels of the field is required -and especially to the micro-level of individuals, households and communities, where the results of impact investments matter most. Such an approach can help build an impact investing industry that is adaptive, transparent and self-sustaining. To this end, creating an ongoing dialogue between the development evaluation field and the impact investing industry, and designing and launching new education and training initiatives, are key tasks in the years ahead.

Social Impact Investing in Germany: Current Impediments from Investors’ and Social Entrepreneurs’ Perspectives

“…What is more, it is often criticized that financial remuneration of such returns is to date still inadequate (Social Impact Investment Taskforce 2014a). All this worsens financial return prospects which highlights the interdependent nature of the impediments at hand (Clark et al 2012;Jackson 2013;Meehan et al 2004;Repp 2013;Hehenberger and Harling 2013).…”

“…The scholarly literature specifically on social impact investing to date is limited (Brown 2006;Evans 2013;Hebb 2013;Jackson 2013;Mendell and Barbosa 2013;Moore et al 2012b;Nicholls 2010;Silby 1997). It is grouped under the larger umbrella of social finance (Moore et al 2012b;Nicholls 2010), a concept that has been developed to describe all kinds of practices to pursue social and ecological goals with financial capital, including microfinance and traditional charitable grants and donations.…”

Understanding mechanisms in the social investment market: what are venture philanthropy funds financing and how?

“…The development of social investment markets is also supported by political initiatives of the European Commission and various national governments (Cohen 2011;European Commission 2011;KfW Entwicklungsbank 2011). However, the social investment market is still a little understood market with a range of actors (SpiessKnafl 2012;Jackson 2013).…”

Capturing Collaborative Challenges: Designing Complexity-Sensitive Theories of Change for Cross-Sector Partnerships

“…A Complexity-Sensitive ToC supports systemic change by shifting strategy from a planning approach characterised by single-loop thinking towards a theorising and learning approach characterised by double-or triple-loop questions of effectiveness (Jackson 2013;Stacey and Mowles 2015). The appropriate use of a ToC should therefore be contingent on the partnership configuration for which the ToC is developed and for the kind of learning and reflection it aims at, which is ultimately related to the degree of complexity for which it is designed.…”

“…The ToC approach potentially differs from other planning tools of social programmes such as the Logical Framework and Result Chains in that ToC reflects a Programme Theory-the rationale why outcomes can be expected and what might undermine causal relations (Clark and Anderson 2004). 2 The ToC concept surfaced in the 1990s in the rapidly developing field of impact evaluation for sustainable development (Jackson 2013;Weiss 1995). It came from a dissatisfaction with the evaluation practices of the time, the limited understanding of complexity and a call for better informed project planning (Vogel 2012).…”