As an investor for impact we understand finance to be transformational, and define it as directing money so that it benefits people and the environment over the long-term. The impact we are interested in – for each of our investment strategies - is the effect of our activities on society and the environment.
For our financial inclusion investment strategy this impact is about providing access to finance to those traditionally excluded, building robust, sustainable and professional financial institutions that are key actors in developing an accessible, well-functioning and inclusive financial sector that fuels social and economic development, and promoting access to basic needs.
In a context of stories and numbers
We realise that our role and efforts in this complex web of change can only to a limited extend be captured in quantitative metrics and indicators. We also believe that investing for impact moves beyond providing capital and requires a strong intention and a holistic and long-term approach, as opposed to one-dimensional solutions. With this approach Triodos differentiates itself from others in the capital-providing space.
To understand our vision and the extent to which we’re delivering on it, means sharing stories that illustrate the whole picture. These stories provide the essential context and background for our activities. They illustrate our ‘theory of change’.
The information and data for the impact report are derived from our online investee portal. In this portal the financial institutions in our portfolio provide extensive data on social and environmental topics, ranging from the number of clients and savers they serve, female loan clients, and rural outreach to the sectors they are active in and the loans they offer to promote access to basic needs, such as education loans and affordable housing loans. The indicators that we publish are, when possible, aligned with the IRIS Metrics of the Global Impact Investing Network that are designed to measure the social, environmental and financial performance of an investment, or the calculations are based on existing IRIS metrics.
Furthermore, the Triodos Sustainability Banking Assessment Scorecard helps to analyse, monitor and report on the non-financial performance of our portfolio companies in an effective and transparent way. The Triodos SBA Scorecard consists of 25 indicators grouped in five dimensions: Environment, Management & Staff, Product Range, Responsible Finance, and governance. The scorecard takes into account relevant industry initiatives, including the UNPRI Principles for Investors in Inclusive Finance, the Universal Standards for Social performance Management and the SMART Campaign’s Client Protection Principles, which address some of the most debated topics in the industry, such as fair pricing.
Part of the whole story
The quantitative indicators are a part of the whole story. That means indicators, such as ‘number of loan clients reached’, ‘percentage female clients’ and ‘percentage rural clients’, are not a goal in itself; they are pieces of information that are part of the broader picture. For that reason, we neither set specific goals for indicators nor do we compare them to last year figures, simply because a higher number doesn’t necessarily mean more impact. For instance, financing a small and innovative financial institution which will drive financial inclusion in rural areas could mean more impact than financing an established financial institution in a mature market.
This publication aims to assess and communicate the impact of our Financial Inclusion investments in a transparent and meaningful way. For the reader’s convenience we avoid academic terminology, such as impact outcomes, outputs, and so on.