Selecting projects for their impacts

As a development financial institution and for the purpose of accountability, Proparco evaluates and accounts for the impact of its actions by measuring and reporting the results and impacts of its financings.

This approach is integrated into the project cycle, and, first of all, aims to inform the financing decision by characterising expected impacts of financings, notably, with regard to Proparco’s three main strategic goals: to amplify the direct impacts it has in supporting jobs and improving access to essential goods and services, to strengthen the mobilization of private financings towards SDIs, and to accelerate Proparco’s contribution to the emergence of tomorrow’s actors and sectors.

Measuring impacts within the project cycle from identification to ex-post evaluation

1 2 3 4 5

Identification

Pre-identification of impacts

Appraisal

Analysis of the contribution to the impact objectives and sustainable development

Decision Monitoring Evaluation

Presentation of the results of the analysis to the Project Committee and Investment Advisory Committee

Annual reporting on the main results indicators

Ex post study on the results and impacts of projects

A new step in implementing the ‘100% Paris Agreement’ commitment in 2021

Since 2018 and in addition to estimating expected results for projects in relation to impact indicators, an analysis of potential inconsistencies in Proparco’s financings and direct investments vis-à-vis the Paris Agreement is systematically carried out to ensure a better integration of climate issues and sustainability within supported projects. To achieve this, Proparco analyses the risk of its operations being misaligned with the Paris Agreement; this risk can lie in a project’s high level of emissions, in potential structural effects on a country and/or the industry in question which do not tie up with low-carbon trajectories, or in inconsistencies with national or sectorial climate commitments, or in crowding-out effects for less emissive alternative options. 2021 has been marked by the new step taken by Proparco in implementing its ‘100% Paris Agreement’ commitment, with risk analysis on misalignments of its financings with the Paris Agreement being extended to intermediated operations, notably those in favour of banks. Proparco has analysed this risk since end 2021 and helps partner banks and funds that are particularly exposed to the main emissive sectors to improve their awareness of climate challenges. To do so, Proparco has developed its Pro Climate technical assistance facility to support developing climate financings by partner banks as well as integrating climate challenges into their strategies and their operations.

Evaluating expected impacts of each project

Expected effects of each project are assessed in relation to indicator data collection which is informed through project studies and discussions with clients. The analysis of ex-ante impacts is presented through the more global angle of a project’s contribution to SDGs.

Our key impact indicators

2021: Ongoing strengthening of project result monitoring

Number of jobs created and/or maintained Number of tons of CO2 eq avoided

Theoretical number of people who will have new or improved access to an essential good or service Gender equality: Percentage of signed amounts qualified for the 2X Challenge Amounts mobilized from the private sector for SDIs

To measure effective impacts of financed projects, to identify the most efficient means to support impact goals and to respond to growing accountability demands vis-à-vis its partners and its Board of Directors, Proparco also collects key indicators during the impact monitoring stage and contributes to ex-post project or regrouped project evaluation studies for capitalization purposes. Following an initial exercise in 2019 to monitor impacts achieved by 96 projects then a second in 2020 covering 214 signed projects, Proparco monitored results achieved by 273 projects signed between 2015 and 2019 (see chapter “Monitoring impacts of our interventions“).

A constantly improving impact measurement system

In 2021, to improve the prospective knowledge of impacts by sector and by type of operation, the impact measurement unit moved forward in developing sectorial analysis frameworks, in close collaboration with the operational divisions. These guidelines are designed for investment officers and offices and aim to support operational staff during project identification and appraisal, by apprehending potential impacts of projects more rapidly and more relevantly as well as identifying additional impacts that can be sought in the case of access to blended resources and/or technical assistance. After cement, building materials, offgrid and textile sectors in 2020, 12 additional frameworks were developed in 2021.

Proparco, very active alongside its partners in 2021

This year again, Proparco has been very active working alongside EDFIs and other key partners to contribute to harmonizing approaches in terms of valuating the effects of projects on climate and reducing gender inequalities (see insert below). More broadly, Proparco has intensified its presence on the impact-driven investment scene to participate in establishing standards and good practices in terms of impact as part of an unprecedented international momentum within the private sector. As such, Proparco sits on the Impact Principles Advisory Board (see insert below) as well as the Investors’ Council for the GIIN (Global Impact Investing Network), that provides a tribune for seasoned impact investors to strengthen market practices of impact finance actors. In 2021, Proparco, together with AFD, also participated in the ”Impact Finance” TaskForce launched by Finance for Tomorrow, to draw up an ambitious definition of impact finance and a methodology to measure impact to accelerate the fair and sustainable transformation of the real economy.16

Initiative

The launch of the new 2X Challenge phase in 2021 provided the opportunity to make adjustments to the 2X Challenge criteria and their interpretation by 2X Challenge members. These adjustments, to which Proparco contributed, focused on finding a fair balance between the necessity to fix ambitious thresholds to reward good performances and to encourage long-term progress at client level, and the necessity to maintain realistic criteria for investors. A new reference guide with 2X Challenge criteria was published in June 2021. Furthermore, ongoing work to align the 2X Challenge criteria with international standards has progressed in 2021 thanks to an alignment with the OECD’s gender equality markers, for which Proparco was a driving force, and with the United Nation’s Women Empowerment Principles.

16 https://financefortomorrow.com/finance-a-impact/

Standards Proparco has joined the Impact Principles Advisory Board

In June 2021, Pierre Forestier, Director of Proparco’s Sustainable Development Department, was elected member of the Advisory Board of Operating Principles for Impact Management (“Impact Principles”) for the 2021-2023 period, alongside 10 other signatories amongst 152. The Advisory Board advises the Impact Principles Secretariat on matters relating to the implementation and evolution of the Principles. Impact Principles comprise nine principles, the formulation of which has been driven by the International Finance Corporation (IFC, World Bank Group), to establish a new market standard for impact investment, providing greater transparency, credibility and discipline in practices. With this is mind, Proparco published its third Disclosure statement in June 2022, a memorandum to report on the alignment of its processes and procedures for each principle.