Publish What You Fund’s DFI Transparency Initiative has completed its second research Work Stream (Impact Management – Objectives, Theories of Change and Impacts). The research identified commercial confidentiality as an oft-cited but nuanced barrier to the sharing of impact data. As part of our DFI Spotlight series our CEO, Gary Forster, caught up with Ginny Reyes Llamzon, Associate General Counsel at the Global Innovation Fund (GIF), to discuss how they have addressed commercial confidentiality to enable them to share impact data from their investees while not undermining their investee’s competitive position.

GF: For our readers who may not be so familiar with GIF can you please tell us a little about the history of the organisation, it’s mission and your background?

GRL: GIF was founded in 2015, specifically with a purpose to help the lives of people in developing countries who are earning less than 5 US dollars each day. We exist to help entrepreneurs build out their business and scale. We do this with a range of financial powers including grants, equity, debt, hybrids and combinations of these. Since then we have deployed approximately US$93m across around 45 innovations and the portfolio is on track to improve the lives and livelihoods of more than 90 million people by the year 2030. To introduce myself, I am a finance attorney by training. I started out doing transaction finance for US, UK and Asian law firms. I then joined FMO (the Dutch DFI) in the Netherlands and was in charge of the legal aspects of their renewable energy and infrastructure portfolio. That was my first experience of seeing how big finance and global development can work together. I then joined GIF and I’ve been here for four years. My work involves overseeing the legal aspects of all of GIF’s investments.

“We’ve learned a lot about what it takes to ensure investments are not only impactful but also measurable, and what is then required to make that information public.”

Ginny Reyes Llamzon, Global Innovation Fund

GF: How have GIFs processes and systems evolved as you’ve sought to increasingly focus on the impact of your work?

GRL: There are two specific ways we’re trying to maintain our focus on impact – the first is our “open window” – this is a process whereby we try to elicit as many applications from developing countries as possible – it’s open to anyone to apply. In this way we can cast a wide net so that we don’t miss any great investment opportunities. The second is the capacity building we undertake to determine upfront what projects are the most impactful, the data we need to measure that impact and ensuring that our investees have the capability to work with us and their willingness to allow us to publish that data. And that’s important because in many cases we’re the first investors that investees will have dealt with, so while they may be expecting to report on financial information they may not have the systems and processes to produce the required impact information.

GF: GIF publicly reports some impact data, which we appreciate. How have you dealt with issues of client confidentiality regarding what can often be seen as sensitive data?

GRL: We’ve learned a lot about what it takes to ensure investments are not only impactful but also measurable, and what is then required to make that information public. For us it starts at the very first step of the investment – we need to be clear from the outset that we’re an impact focussed agency and that we’ll be looking to collect and publish data associated with the change that results from the investment. At a later stage we then ensure that the terms of our contractual agreement clearly stipulates the ways in which we aim to collect and share impact data. We’ll always include a specific “schedule” within the contract to specify the definitions and metrics that we’ll be focussing on…. Some of those agreements will be negotiated by the investees, as they may wish to keep some specific information confidential. However, we’ve never failed to come to an agreement with the investee to collect and share enough information to satisfy our analysts that the investments we’re making will lead to positive change. And we recognise that we need to strike a balance with our investees to ensure we’re not too demanding, especially for those early stage investments where capacity may be a limiting factor – but again I think we always find a good balance.

GF: From your time working with more traditional DFIs, do you think if they are struggling to obtain impact information they could use the same kind of approach as GIF?

GRL: GIF is certainly quite a unique organisation and some of the aspects of our work, such as how early we invest and how impact focussed we are play a role in how we do what we do. That being said, traditional DFIs have been around for a long time and they have been set up from the beginning to make a positive developmental impact and have successfully funded projects that created clear benefits for developing country populations. They have also evolved in their definitions of impact. One main difference with GIF is that we have ingrained impact throughout our investment decision making processes, our strategies and our incentives. GIF has a specific mandate to ensure that we are maximizing the social value of every dollar we spend and to measure that impact. If DFIs were to do what we do, they may need to revise their contracting approach, embed rigorous upfront impact analysis within their deal teams and seek consensus with their investee companies to publish such impact data. While I appreciate that there will be an associated cost to this, I think there are two important points – first, DFIs should be able to demonstrate their value, and second, in many of these markets there is limited commercial funding for the type of scale needed and the traditional DFIs are only competing amongst themselves. So while gathering the necessary information is burdensome at the moment, if all leading DFIs committed to do this, they could achieve transaction cost synergies and there would be no loss of competitiveness.

GF: So in detail, can you talk us through how you ensure that your contracts allow you to stipulate and agree what impact information can be shared?

GRL: Sure, so we’ll typically have a standard clause in the contract that looks something like this:

“The investee agrees that GIF shall be permitted to publish information about the investee and its activities and all impact data collected from the investee including GIF’s assessment of the investee’s social impact.”

We then make sure that the investee agrees to deliver to GIF such impact data in the form and at such reporting frequency provided in an attached schedule, and to highlight how important we feel this is we provide consequences for non-compliance. Of course then we have to attach the schedule so it’s clear which indicators and metrics we have agreed with the investee. The schedule is fundamentally an excel table with columns with the following headings: Performance Indicator, Detailed Description, which strategic objective the indicator aligns with, the units of measurement, the reporting frequency, and the source of data. An example would look like this:

GF: We understand that GIF is on a journey to improve its impact reporting, what do you feel is left to do in this regard? Do you have an organizational goal?

GRL: We’ve come quite a long way. We currently report impact on every single one of our projects. Where we can improve is on the metrics we use and the narrative that goes with that. As we’re sector agnostic and use different financial instruments we can end up with a broad portfolio of work, so increasing the efficiency with which we can define and measure impact is a priority.