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Maximizing impact: approaches for delivering and measuring results at country-level  

Luciana Aguiar, Emily Davis , Miguel Garcia-Bermejo & Belissa Rojas

This essay signed by Luciana Aguiar, Emily Davis , Miguel Garcia-Bermejo & Belissa Rojas from UNDP Sustainable Finance Hub is part of a collection of essays that build on key themes related to impact and DFIs. These essays are intended to supplement, and to engage in dialogue with, the discussions at EDFI’s annual Impact Conference 2022, and to address the same overarching topics.

This essay explores key considerations, challenges and opportunities of how Development Finance Institutions (DFIs) can maximize impact and create better investment conditions for a sustainable private sector to thrive at national levels.

The international community is grappling with the implications of the COVID-19 pandemic, geopolitical instability and global uncertainty on public budgets and widening financing gaps for achieving the Sustainable Development Goals (SDGs) and the Paris Agreement. If we aim to support countries to reorient progress towards delivering the 2030 Agenda, we need more sustainable investments with evidence of impact on SDGs.

Development Finance Institutions (DFIs) face diversified risks related to back-to-back crises, including potentially higher losses, lower returns, increased macroeconomic instability, and higher political and currency risks. DFIs play a particular role in Least Developed Countries (LDCs) and fragile states, which face the most binding financial constraints. Yet this is also where the deal flow can be the most relevant, and DFIs make efforts to find and nurture investment pipelines in these countries. Even in middle-income countries (MICs), credit ratings tend to drop, making the business environment even more challenging.

In this context, we see an urgent need for a financial system for driving investment toward sustainable development and more resilient futures. It is now widely recognized that environmental and social impacts generated by investments and economic activities are deeply interconnected. But still, a clear gap exists in the sustainable finance architecture for integrating impact management and measurement (IMM) systems into public and private investments. Investments with measured and intended impact represent only 2% of global assets under management at USD 2.28 billion. Although a significant market exists for assets with impact globally, only USD 639 billion worth of assets measure impact. When it comes to intended impact – with the public sector standing at USD 1.338 billion of assets and the private markets at USD 308 billion – there are no common or transparent systems in place to measure impact1. While industry-led initiatives demonstrate the possibility of effectively harmonizing IMM, the high-level principles and standards, targeted metrics, and indicators to inform decision-making are still missing.

DFIs play a meaningful role steering private capital to developing countries, especially those with high macroeconomic, political, governance and enabling environment risk factors. DFIs are increasingly impactful vehicles in their unique role of de-risking and addressing market failures by directing private investments to sectors hard to attract finance and promote growth in developing countries. As DFIs attempt to take on more risk across sectors and geographies in pursuit of development impact,2 they may consider re-evaluating the targets for financial rate of return and credit rating expectations. As such, there is increased pressure on DFIs to prove their worth by reporting transparently on impact.

Using technical assistance facilities to increase effectiveness of sustainable finance instruments

In a context of complex systemic risks, reduced fiscal space, and increased interconnectedness between economic, social, and environmental issues, DFIs need to reduce information asymmetries, enhance capacity development, and rely on structured frameworks to make well-informed decisions on capital allocation in activities that generate long-term value. A means to ensure impact and effectiveness of sustainable finance instruments, like guarantees, equity investments or similar tools, is through the utilization of technical assistance3 (TA) facilities. TA facilities are usually structured through a non-financial component sculpted around sustainable finance instruments to help set up the enabling environment for their successful implementation.

As a tool to enhance financing activities, maximize investees’ potential and comply with the DFIs’ social and environmental policies, a TA facility needs to be planned around a theory of change aligned with development needs and contribute to generating a positive impact through the work of intermediaries4. If properly structured, with components such as IMM frameworks, TA has the potential to mitigate implementing risks and be of great significance in reducing information asymmetries to both SMEs and partner financial institutions5. OECD/DAC includes TA as a form of value additionality when assessing the benefits of a project6 and many IFIs consider TA as a key factor in projects that contribute to the achievement of the SDGs7. TA can also support the bridging of the gap to mobilise capital at scale and facilitate a more dynamic interplay between DFI capital and private capital.8

This can be illustrated by a TA facility established to support a partial guarantee provided by Sweden’s Sida for MFIs to acquire funding for on-lending to micro and small enterprises in Uganda, for the purpose of increasing resilience for individuals with refugee status. The TA facility supported the guarantee instrument in several ways, including: i) supporting capacity building for establishing branch offices in rural areas; ii) supporting a study to adapt MFIs services; iii) supporting financial literacy courses to increase borrowers’ understanding; and iv) training and supporting borrowers in business development and financial performance. The TA facility was a key component in implementing the contribution and a main factor in mitigating risks, increasing the demand for the on-lending to refugees.

Aligning sustainable finance with approaches for measuring and managing impact
At the system-level, the demand for integrating sustainability in financial institutions and capital markets comes from multiple fronts. The global landscape in this space is rapidly evolving with new policies, standards and tools, from voluntary frameworks to more targeted and mandatory regulation. Initiatives led by public and private actors are promoting shifts in the financial system. For example, there has been a 264% increase in the number of policy and regulatory green finance measures since 2015.9 There is also movement towards integrating impact, the SDGs and ‘net-zero targets’ across the DFI community to make impacts visible and quantifiable10. This is observed through the demand for ways to create conditions for leveraging private investment, and contributing finance, increasing DFIs and MDBs ability to allocate investments where impact is most needed.

The oversight of businesses to integrate climate change and the SDGs into core activities is a market failure which will not be solved by the market alone. The absence of comparable data and granular climate-related disclosure of enterprises limits asset owners’ ability to incorporate climate-related issues into investment decision making and to implement effective portfolio design strategies. The development of a common framework for measuring SDG aligned investment enables both public and private accounting for SDG impact – ultimately enabling a shift from a focus on intent to a focus on measuring actual impact. One example is the Climate Exposure Draft11 from the International Sustainability Standards Board (ISSB) which facilitates a common set of climate related reporting requirements with the support of the UN-convened Net-Zero Asset Owner Alliance, a group of 74 leading institutional investors managing US$10.6 trillion in assets.

Enabling and promoting the impact integrity of actual and realized investments enhances disclosure and assurance, which optimises private sector contributions to achieving the SDGs and climate commitments. To respond to this need, the OECD-UNDP Impact Standards for Financing Sustainable Development and the SDG Impact Standards12 were launched to provide a practice framework for donors, DFIs and their private sector partners to make financial decisions and manage projects in ways that generate a positive impact on sustainable development and improve transparency.  The Standards pull together all existing high-level principles, metrics, taxonomies and reporting requirements under one overarching framework13.

Integrating an IMM framework has strategic and operational benefits. Strategically, it signals a commitment to sustainability, demonstrates accountability, and increases credibility with shareholders and key stakeholders. IMM helps to identify priorities and set targets in line with mandates, and strategic policy goals, including social and environmental safeguards, to avoid adverse impacts and promote positive ones. Operationally, IMM allows DFIs to optimize resource allocation, select transactions, and ensure that impact data informs decision-making. At the portfolio level, it builds resilience and supports diversification based on expected risk-adjusted financial and impact returns across financial instruments, such as guarantees, equity, and thematic bonds. In doing so, organizations can be more strategic to allocate resources aligned with impact, take corrective action, reduce transaction costs, facilitate aggregation of assets and mobilise higher volumes of capital.

Landing investments soundly in countries’ priorities, reforms and platforms

In the pursuit of impact, the alignment with national financing priorities and private financing reforms enables investment pipelines, supports existing platforms on policy de-risking, harmonises portfolio impact with development challenges and channels investments to strategic areas. It also fosters the enabling environment to stimulate the private sector to complement public investments and address local challenges.

Globally, multiple opportunities are being shaped to support DFIs, as well as public and private sectors, to access consistent information and make reasoned decisions on where and how to channel investments. 86 countries are developing integrated national financing frameworks (INFFs), as nationally led structures supported by a strategy to increase investments, align reforms and manage risks – all toward the achievement of national priorities and the SDGs. These platforms identify investment priorities that generate long term value and strengthen pipeline development that enables mobilisation of additional capital for high impact projects.

Through these processes, countries have prioritized more than 300 specific reforms and investment areas that can catalyse sustainable recovery and accelerate SDG progress, for example identifying women-led SME enablers, among others.  Additionally, 40 countries are systematically mapping investment opportunity areas through SDG Investor maps across sectors that are commercially viable with a strong impact thesis in collaboration with investors and development banks. As a trusted and neutral facilitator not directly involved in financial transactions, UNDP works as an established partner with in-country presence and long-term engagement with governments and the private sector to establish the enabling environment, engage in policy dialogue, advise governments on policy and instrument options, and forge partnerships to enhance the effectiveness of sustainable finance.

The way forward requires complementary action and ambition across public and private sectors.  DFIs play a vital role in bridging these actors and in supporting the financial system to drive investment towards sustainable development and more resilient futures. Together we can collaborate to enhance the effectiveness and credibility of impact claims at the national level and leverage the integrity of sustainable finance at scale.


About the authors:

Luciana Aguiar is SDG finance impact manager at UNDP with 15 years’ experience in developing impact driven solutions for the private sector in development.

Emily Davis is a partnerships specialist for financial institutions at UNDP focused on sustainable financing, with 10+ years’ experience supporting countries on national financing strategies and policy reforms.

Miguel Garcia-Bermejo is a SDG finance specialist at UNDP who has spent more than 16 years within the financial markets and sustainable finance in different roles. His area of expertise encompasses among other areas the origination of guarantees for the purpose of mobilizing additional capital to the SDGs.

Belissa Rojas is UNDP’s SDG Impact Measurement and Management Advisor with 15 years of experience in the international development sector, advising private sector organizations, impact investors, development banks, and foundations on how to professionalize their IMM practices.



IFC. Growing Impact: New Insights into the Practice of Impact Investing, 2021.
IFC. Investing for Impact: The Global Impact Investing Market, 2020.
GSG. Impact Measurement & Management (IMM): Impact Investing’s Evolving Ecosystem, October 2021.
“Guidelines for integrating Climate change mitigation and adaptation in PCGS for SMEs”, Nov, 2022.
GIIN. The State of Impact Measurement and Management Practice, 2020.
OECD. Unleashing Impact Development Finance, 2022.
SIDA. Evaluation report “Evaluation of Sida’s use of guarantees for market development and poverty reduction”, 2017.
Devex. The Growth of Development Finance, 2022.

The published essay represent the views of the authors alone, and do not reflect the opinions of either the EDFI Association or its member institutions.