As Publish What You Funds DFI Transparency Initiative reaches the end of Work Stream 2 (Impact Management – Objectives, Theories of Change and Impacts) we catch up with Alex MacGillivray, Evaluations Director at CDC Group, the UK’s development finance institution (DFI). Alex sat down with our CEO, Gary Forster, to share his thoughts on the opportunities for more and better disclosure of impact data. Here is their discussion of our research findings, where the DFI sector is on impact transparency and the change that’s needed:

GF: Alex, please can you introduce yourself for our readers and tell us a little about your role at CDC?

AM: Of course. So I have been working in the sustainable development field for – yikes – 30 years now, largely in research roles, and now in private sector development. At CDC, I’m in charge of evaluation, which range from in-depth multi-year studies to annual impact results.

“DFIs have to test the boundaries on what can be disclosed while respecting commercial confidentiality, rather than use it as a barricade.”

Alex MacGillivray, CDC Group

GF: You’ve seen the outcomes of our research on the transparency of Impact Management of DFIs. It highlights a number of areas where it appears there is room for improvement regarding how DFIs disclose their impact management practises, including the ex-ante and ex-post data that results. What do you think of the current state of impact process and data transparency relating to DFI investments?

AM: First off, a big thanks to your team for the granular and insightful analysis they have produced so far. We DFIs obviously compare notes in a collaboratively competitive way, but it’s really useful to have thorough, independent research to help us understand the myriad impact management and disclosure practises across the DFI space, enabling us to learn and improve our own approaches.

To answer your question, my sense is that your findings look uncomfortable but probably do reflect reality. Despite years of harmonisation efforts, the practises of DFIs vary considerably, not only regarding the disclosure of the impact data that we’re all keen to see, but indeed the disclosure of how they actually define, measure and report on impact. Signatories to the Operating Principles on Impact Investment have recently had their systems independently verified: I know that verifiers had to sift through dozens or hundreds of policy and process documents, most of which internal. Your research calls out PIDG, who disclose their impact management approach in their results monitoring handbook – that’s a positive example for the rest of us to consider.

When it comes to impact data, collectively, how would Mike Bloomberg – or Ronnie Cohen – rate us? We are steadily seeing more ‘ex-ante’ data, but it’s still an exciting day when I see some insightful ex-post data published by a DFI. Some DFIs are budget-constrained in commissioning studies; others sit on the data they gather because they are unsure of the quality or don’t have a mandate to communicate it. At CDC the recent disclosure of impact dashboards for every investment has been a big positive shift – check them and you will see they are not generic boilerplate text but detailed statements aligned to the Impact Management Project impact dimensions, making clear what we’ll be tracking. I’d also call out our public commitment to publish 20 impact deep-dives by the end of 2021; and the ambitious FCDO-CDC evaluation and learning programme that will help fill the ex-post void. But we are lucky to have a solid impact team and resources from our shareholder.

GF: Our research illustrates the extent to which commercial confidentiality can be a barrier to disclosure of impact data, what are your thoughts on this?

AM: There are genuine disclosure constraints with private sector investing that aren’t so significant for, say, the sovereign investment arms of the multilateral development banks – your research flags this. But DFIs have to test the boundaries on what can be disclosed while respecting commercial confidentiality, rather than use it as a barricade. There is definitely some impact data that the investee won’t share with us – or won’t let us on-share, because it’s price sensitive, or because it reveals operational data that competitors could use. And some asks are pretty tricky to collect. But there are also metrics that frankly are not commercially confidential and these can and should be agreed in the legals upfront for sharing. Beyond this, some investees are already issuing pretty decent impact reports of their own; some DFIs like Swedfund are providing user-friendly data portals to make reporting easier; and others like DEG plan to provide benchmark reports back to investees to give them some incentive to disclose to us. Beyond the voluntary, data science – e.g. geospatial analysis – is available to anyone these days. And data platforms are now scraping public sources (eg job adverts) for leading indicators of firm growth. It’s beginning to feel like an impact data revolution.

GF: So if it’s possible to collect and share impact data, but that’s not currently happening, what change do you think is needed for improved impact transparency.

AM: The first thing you need is for development impact to be at the core of your mission and championed by your leadership. CDC is now clearly impact-led. Then you need good systems and processes, both in the back and middle office and with the investment teams. You need to ensure that disclosure is legally agreed. Even then, investees must build the capacity to actually collate the data they have agreed to share: should they get TA to help? Some DFIs – CDC, FMO, Bio, Proparco, FinDev Canada, AfDB and others – are building a joint impact model that could make reporting and disclosure less painful. And then the DFIs themselves need to get much better at quality-control, analysis, learning and reporting, and not just to go in the back of an annual review to our shareholders – in CDC’s case, the FCDO. There are a lot of moving parts to get right before impact data really sings.

GF: Thank you Alex. To end on a lighter note I wanted to ask you a more personal question. You’ve worked in the social and development finance space for some time, most recently in evaluation and impact roles. When you look back over your career, which investment stands out to you for the impact it made?

AM: If you don’t mind I’ll duck picking out any one of the dozens of investments I see as having been really impactful at CDC since 2013 – in case my very competitive investment colleagues are reading this. Instead I’ll call out an investment that proved too complex and risky for DFIs: the Tropical Landscape Finance Facility, devised by Royal Lestari, Michelin and ADM Capital Foundation in Hong Kong, among other partners.  I was lucky to intern with that team last Spring on a sabbatical – a lot of tough stuff has happened in HK and globally since then – but it’s clear that large-scale nature-based solutions like TLFF are gaining momentum.