Week 2

Question 1

Name 3 possible impact goals for Impact Investors

Answer 1

• engaged ownership: aims to align all of your assets for social and environmental impact.
• shifting a discrete system: aims to influence the interconnected set of elements that govern a topic or sector. An asset owner with this goal is not satisfied with incremental change and seeks to address the root causes of social and environmental problems.
• whole system approach: aims to use impact investing to reconfigure and reinvent our current economic system. Impact investing offers an opportunity to realign investment broadly, so it delivers a healthy future for people and the planet- a vision that is expressed in shared global frameworks like the UN Sustainable Development Goals (SDGs).

Question 2

What are the 4 steps of impact goal formulation?

Answer 2

• impact intensity: how influential you want your impact goals to be in shaping your investment decisions.
• impact risk: describes how comfortable you are with the possibility that your investment will fail to create the targeted impact.
• impact theme: can be a specific industry sector, such as energy or health, or can focus on a specific issue, such as community development or social justice.
• impact lens: is a specific view or perspective applied across all of an impact investor’s assets. For example, a foundation may apply a racial-equity lens to all its investments. This means that the foundation will consider how the investments affect the underlying conditions of racial equity.

Question 3

Name the 5 parts of the Theory of Change + Explanation

Answer 3

• inputs: the financial and non-financial resources you bring.
• outputs: the immediate, direct results from these investments.
• outcomes: the short-term and medium-term results attained or effects for individuals, groups, or issues. They can be both directly and indirectly related to the investments.
• impact: the long-term changes achieved for populations, issues, or systems. Impacts usually also specify the nature of contribution from investments relative to other inputs and influential factors.
• assumptions: description of what you believe to be true in the context of the intended changes. They describe the basis of evidence or experience you are using, and should identify possible influential factors across the various levels from inputs to impacts.

Question 4

Name 4 reasons why a Theory of Change can be useful

Answer 4

1. it can help describe and interpret what you are seeking to achieve and why. In this way, a theory of change can serve as a communications tool to align and manage expectations.
2. it can inform portfolio construction in terms of themes, instruments, and partnerships.
3. It can identify gaps and issues that require further validation, as you prioritise how you seek additional research and evidence.
4. it should also inform the selection of methods, indicators, and standards that you can use to measure and evaluate success, while aligning short- and long-term measurement efforts.

Question 5

What is a takeaway of the article Huisman & Lurvink (2023) about the theory of change?

Answer 5

“A theory of change helps the impact investor to understand how its inputs generate outputs and outcomes to achieve impact”, when the case is more formulated as such, the higher chance an impact investors classifies the case as an ‘impact investment’