Measuring and analyzing project impacts

8

PROPARCO - SUSTAINABLE DEVELOPMENT REPORT

Our operating methods

To provide greater support to private stakeholders toward more sustainable and inclusive development, Proparco is strengthening its own evaluation and impact measurement practices and is developing ever more effective support tools.

Measuring and analyzing project impacts

As a development financial institution and for the purpose of accountability, Proparco evaluates and reports on the impact of its action through an approach which measures the results and impacts of its action. For this, Proparco has been constantly developing, adapting and strengthening its tools and procedures since 2006, in line with international practices and its strategy.

The measuring of results and impacts aims to:  assist financing decisions by assessing, during project examination, the expected impacts on sustainable development;  strengthen the impact of projects by identifying the drivers making it possible;  act in helping to develop Proparco’s strategies;  improve knowledge and capitalize on know-how.

An impact measurement integrated into the project cycle

Proparco’s framework for measuring results and impacts is integrated into the different stages of the project cycle in order to help determine the results and impacts of Proparco’s financing, notably with regard to the three main strategic objectives (see page 7).

The expected impacts of each project are assessed with regard to quantitative and qualitative indicators obtained via project studies and discussions with clients. The indicators, gathered in a data base, produce an aggregated score which in theory allows the impacts of projects to be compared with each other. The ex ante analysis of impacts, carried out by the Impact

OUR KEY IMPACT INDICATORS

PROPARCO - SUSTAINABLE DEVELOPMENT REPORT 9

Number of direct and indirect jobs created/ maintained Number of tons of CO2 equivalent avoided Number of people who in theory will have improved access to an essential good or service

Amounts mobilized from the private sector for SDIs

Measurement unit in conjunction with the project team, is presented from the broader perspective of project’s contribution to the SDGs.

In 2019, the methods associated with the calculation of the indicators related to the number of direct and indirect jobs created/maintained and to the improved access to essential goods or services were refined, with a view to harmonizing practices across financial institutions.

Regarding climate issues, the “100% Paris Agreement” dimension was fully integrated into the project examination phase to ensure that climate and sustainability issues are better accounted for in projects supported. Analysis is carried out systematically to identify potential inconsistencies between direct financing and investment by Proparco (excluding intermediation) and the Paris Agreement.

To measure the real impact of funded projects, identify the most effective ways to support impact objectives and respond to the growing challenges of accountability, Proparco also collects key indicators at the impact measurement monitoring stage. Furthermore, it carries out ex post evaluation studies of projects or cluster projects for capitalization purposes.

10

PROPARCO - SUSTAINABLE DEVELOPMENT REPORT

In 2019, Proparco carried out an impact evaluation of projects signed in 2015 and 2016, which had been in our portfolio for two or three years (see pages 48 to 52).

Our good practices in impact management recognized

In April 2019, Proparco signed the Operating Principles for Impact Management (OPIM), a series of good practices whose development was overseen by the International Finance Corporation (IFC) with the aim of granting the investment impact sector the transparency and the credibility which it needs. The nine principles encourage investors to put impact management at the center of their activity, from the investment strategy design stage to the management of the project’s exit. The consulting firm EY verified that Proparco’s impact management framework was in line with the OPIMs in 2020.

2020: strengthened international coordination for impact measurement

Proparco, which was very active in 2019 among EDFIs on the subject of the accounting of direct and indirect jobs as well as on climate, will pursue this work in 2020 in collaboration with the IFC, the African Development Bank (AfDB) and other special partners.

Since May 2019, the EDFI secretariat has started working groups in order to harmonize member approaches to assessing the value of clients’ effects on employment, climate, the reduction of gender inequality and the mobilization of private finance. The Joint Impact Model (JIM) is the result of efforts by FMO, CDC, BIO and Proparco, in collaboration with the AfDB and FinDev Canada, to model the impact effects of projects financed in our operation areas, in terms of indirect jobs and added value. Among other things, this modeling takes into account the trickle-down effect in economies.

IMPACT MEASUREMENT IN PROPARCO’S PROJECT CYCLE from identification to ex post evaluation

1 IDENTIFICATION

Pre-identification of impacts

2 EXAMINATION

Analysis of the contribution to impact objectives and to sustainable development

3 DECISION

Presentation of the analysis of results to the project committee and the investment advisory committee

4 MONITORING

Annual reporting on the main results indicators

5 EVALUATION

Ex post study of project results and impacts

PROPARCO - SUSTAINABLE DEVELOPMENT REPORT 11

OPERATING PRINCIPLES FOR IMPACT MANAGEMENT©

Strategic Intent

Origination & Structuring

Portfolio Management

Impact at Exit

A constantly improving impact measuring tool

In 2020, Proparco will work on strengthening the implementation of certain principles following the 2019 signing of the Operating Principles for Impact Management, for example in terms of impact monitoring, in a spirit of transparency and dialogue. This requires to improve data collection from clients over the life of projects in order to track their contributions to the SDGs as well as their financial performance more closely. Beyond the strengthening of monitoring of impacts achieved in projects, Proparco is pursuing the improvement of its tool measuring results and impacts in line with two objectives: 1 Define strategic impact objectives consistent with the investment strategy. 2 Manage strategic impact and financial returns at portfolio level.

3 Establish the investor’s contribution to the achievement of impact. 4 Assess the expected impact of each investment, based on a systematic approach.

5 Assess, address, monitor and manage the potential risks of negative effects of each investment. 6 Monitor the progress of each investment in achieving impact against expectations and respond appropriately.

7 Consider sustainability of impact when finalizing project exit. 8 Review, document and improve decisions and processes based on the achievement of impact and lessons learned. 9 Independent verification

Strengthen support prior to project examination

To improve the prospective knowledge of impacts by sector and by type of operation, notably in bordering countries and in fragile areas where it wishes to take action proactively, Proparco wants to draft sectoral analysis frameworks and tools for project teams.

Improve the tools and process of evaluation and analysis

A certain number of rating tools have been developed by AFD and its counterpart DFIs to support their strategies. Proparco is examining them in order to align its own tools with them, with the goal of harmonization.