Publish What You Fund’s DFI Transparency Initiative has completed its second research Work Stream (Impact Management – Objectives, Theories of Change and Impacts). In the research report you’ll find a case study about the Private Infrastructure Development Group (PIDG), focussing primarily on its Results Monitoring Handbook. As part of our DFI Spotlight series, Marco Serena, Head of Development Impact at PIDG and our DFI Transparency Initiative Project Manager, Farzana Ahmed, sat down to discuss PIDG’s impact journey.

FA: Marco, please can you introduce yourself for our readers and tell us a little about your role at PIDG?

MS: I am the group Head of Development Impact at PIDG and I sit on the Executive Committee, which is testimony to how seriously impact is taken at PIDG. The companies in the PIDG group provide solutions along the entire infrastructure financing spectrum. I lead a fantastic small team working across all PIDG solutions, from our early stage project developers InfraCo Africa and InfraCo Asia to our credit solutions Emerging Africa Infrastructure Fund (long term debt) and GuarantCo (guarantees and local currency financing). I describe the role of my team as “driving and demonstrating” positive development impact across all PIDG investments. I am responsible for our end to end development impact management system, from ex-ante impact assessment to deciding if an investment meets our development impact appetite, to monitoring, reporting and learning to do better. Thematically, my team leads PIDG approach on climate change and gender lens investing. PIDG mandate, to deliver vital infrastructure in frontier markets and transform infrastructure capital markets is more relevant than ever in the current COVID crisis. I feel very lucky that my role is to contribute to originating the most impactful infrastructure projects and ensuring that each investment is the most impactful possible version of itself.      

“At PIDG we made a choice a few years back to publish data on all our investments and not to use commercial confidentiality as a blanket barrier to disclosure. We are finding that taking a pragmatic approach and working with our sponsors and co-investors to bring them along in the journey to transparency, while supporting the performance of our investees is possible.”

Marco Serena, PIDG

FA: Marco, you’ll have seen from our research that we highlight PIDG’s approach to impact transparency as being one of the better examples we’ve seen. Can you tell us about PIDG’s approach to impact, where it stems from, and how you use impact data within your operations?

MS: Impact, defined as tangible positive changes to people’s lives is one of PIDG core values and our overall purpose is to combat poverty in the poorest and most fragile countries through pioneering infrastructure. Most of our investments are in Least Developed Countries and in Fragile and Conflict Affected States. Since 2002 PIDG investments have played a pathfinder and pioneering role, from the development of mobile telecommunication in Africa to the first Independent Power Producers in several countries, to the first privately financed large wind or hydro projects in other markets. Over the past few years, it became apparent that PIDG could go much further in fulfilling its mandate by pushing the boundaries of transparency in its operations and results. An important part of our pathfinding role is to generate track record where it does not yet exist, so this is inspiring our impact management work as well. This is why we publish as much information as possible online on all our investments and expected impacts, all the relevant methodologies that we use to calculate our impacts and all our evaluations. It is not just about public accountability, but also about ensuring that we generate precious impact data that we and others can learn from.

FA: We know from our discussions with you that you are working on version 2.0 of the Results Monitoring Handbook which we referenced in our research. Can you explain why you’re upgrading the handbook and what we might expect to see that’s new?

MS: Our approach also means that we never stand still and we look to continuously go one step further. Over the past 12 months we have upgraded all our impact management systems in a significant way to equip ourselves for the future. In May, we became the first organisation of our kind to publish the estimated greenhouse gas emissions (GHG) of our investments as part of a new ambitious programme of action on climate change. This year we also adopted a new Gender Action plan across our group, mainstreaming protection from gender-based violence and promotion of women empowerment across our investments and operations. We developed a new Development Impact assessment and monitoring system that will enable us to optimise capital allocation and portfolio management, balancing a live “valuation” of expected development impact with expected risk adjusted financial returns of our portfolio. This year we also started investing to gather more systematically the views and experiences of the end users of the infrastructure that we finance. Last but not least, we have evolved all our monitoring and evaluation work even more decisively towards learning and continuous improvements.

The Results Monitoring Handbook 2.0 will reflect these additions and be the interface through which we will make all our assumptions and methodologies accessible and transparent. The challenges of achieving the SDGs over the next decade are huge and we believe that transparency will help everyone to make faster progress.

FA: As our research illustrates, the majority of DFIs don’t adequately explain their impact management processes. Why do you think this is and how do you think we could encourage change?

MS: I am very excited to see how impact investing is moving beyond niche and that mainstream investors start moving from compliance on ESG towards demonstrating net positive impact. I see the impact management sector making great strides towards common approaches and professionalisation, which is vital. Initiatives like the Impact Management Project and the IFC Principles on Impact Management are quickly becoming very important reference points, which I believe will help bring about positive change, more transparency and increased credibility of impact claims. In the absence of standards and common reference points, it becomes impossible to benchmark performance and there are not many incentives to adequately explain impact management processes.

PIDG is not a bilateral DFI, we are not owned by a single Government, and we are not an International Finance Institution or Multilateral Development Bank, so we don’t carry the scale and complexity that those structures involve. As a result, we can operate more nimbly and innovate more freely and therefore add value to the work of the DFIs, many of whom we work very closely with. We are also focussed exclusively on infrastructure in emerging markets which helps our specialisation.

Two key challenges and future developments that could be game changers in my view are (i) how we – as investors – set our targets toward achieving the goals of the Paris Agreement on climate change in a transparent and coherent way and (ii) how we systematically factor in the impact on people and planet when accounting for the value of the products and services that our investments contribute to. We see PIDG’s role as attracting private capital where investors would not otherwise go, so we are really looking at transparency and disclosures with a view to what is feasible and desirable for private investors.

FA: Another finding of our research is the dearth of data relating to impact and results for DFI investments. What do you think the main barriers to this are and how can they be overcome?

MS: Gathering data on impact and results is difficult because a lack of reliable publicly available data is a key characteristic of the markets in which we operate; again, part of our role is to generate track record in those markets. And gathering data, investment by investment, is both expensive and difficult, because of the varying level of influence and access to data exercised as investor, so it is a real challenge. Being very selective in what to monitor, by focusing on the most important routes to impact helps. We are also increasingly trying to make much better use of data collected for commercial purposes – including through better use of technology – that we can also re-package for reporting purposes. We often invest at the very early stage of infrastructure project development and both Environmental and Social Impact Assessments and market studies contain a wealth of data that can be used to establish baselines and improve the interpretation of future impact reporting.

At PIDG we made a choice a few years back to publish data on all our investments and not to use commercial confidentiality as a blanket barrier to disclosure. We are finding that taking a pragmatic approach and working with our sponsors and co-investors to bring them along in the journey to transparency, while supporting the performance of our investees is possible. One of the latest challenges that we embarked on this year is to try and ensure that the appropriate monitoring and reporting on Health and Safety and Environmental Standards as well as Development Impact indicators is included by regulators in bond issuances in emerging markets. Overall, I believe that while some data is commercially sensitive at specific times, it is nearly always possible to reconcile impact data reporting and commercial confidentiality.

Note: The PIDG Results Monitoring Database can be accessed here and its Annual Review is available here.