Impact investments are becoming increasingly important, with growing pressure on the financial industry to showcase the positive, real-world benefits of their portfolios, especially when it comes to aligning with the Sustainable Development Goals (SDGs). But impact is hard to quantify, and it’s not always possible to set concrete targets based on numbers and statistics.
In this third episode of the CD Insights podcast we find out how to get around the limitations of impact frameworks, we look at the short and medium-term opportunities for financial markets, and we offer actionable advice on how to ensure the SDGs remain front of mind. Our two guests, Alice Chapple, Director at Impact Value, and Karin Pasha, Head of Sustainability at Cardano address the below topics throughout the conversation:
- Measuring impact for positive climate and gender outcomes
- How financial institutions are addressing the increasing need for impact measurement
- New methodologies being explored to measure impact and changes financial markets
What is impact investing?
Impact investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets. They can target a range of returns from below market to market rate, depending on investors’ strategic goals.
How does Cardano Development measure its impact in financial markets?
For CD, there are challenges in articulating the impact objectives of our start-ups in terms of outcomes for the real economy, due to the financial market focus and the systems change approach we take. The traditional impact frameworks used by our key funders, donor agencies and DFIs, desire to see impact formulated in e.g. jobs created or CO2 emissions avoided. In the case of financial market innovation, however, such indicators fall short of our target and do not represent the value of a system change in financial markets.
To address these impact measurement issues, CD has developed a Theory of Change (ToC) and is currently testing our impact measurement through our more tailored impact matrix created to fit our mission and strategy. We formulate our impact through our ToC where we have defined five pillars of CD’s business characteristics including risk management, risk capital, systems support, networks and people, and technical assistance. We explain the primary and secondary effects these characteristics have on financial markets. Our ultimate goal is to accelerate financial market development and to boost inclusive, sustainable, and resilient economic growth.
About the CD Insights Podcast
The CD Insights podcast is dedicated to sparking ideas and collaborative conversations with industry-leading experts in finance for development. Through our podcast, we also explore Cardano Development’s role as a local currency financing house. And how it supports its companies with fund management and incubation to transform the financial markets of frontier economies. New episodes of the podcast will be available bi-monthly, you can subscribe to our podcast channel here.
