International Development Committee Enquiry on BII
Submission of Evidence from 60 Decibels
11th Jan 2022
Dear Madam/Sir
I am pleased to provide written evidence to the following questions concerning your enquiry.
Background and Relationship
60 Decibels provides simple, scalable, and high-value impact performance measurement. We do this by enabling our clients to listen to the people who matter most: their beneficiaries - be they customers, suppliers, workers, or users - anywhere in the world. We turn this listening into quality, benchmarked social performance data (both quantitative and qualitative) and accompanying insights to help our clients demonstrate as well as manage their social performance.
BII has been a client of 60 Decibels’ for several years. During this time we have helped BII to work with its’ existing and potential investee companies to understand the impact of the products and services they provide, as well as to provide accurate data on customer demographics (including socio-economic status in comparison to International Poverty lines).
To date 60 Decibels has provided social performance measurement services to assess the developmental impact of nearly 50 BII investments.
Q. How does BII’s strategic outlook compare with that of other comparable overseas institutions?
By comparison with peer Development Finance Institutions (DFIs), BII places a noteworthy emphasis on understanding the income profile of the customers/employees/supply chain workers it impacts through its investments.
Specifically, and in line with its development agenda, BII has made a commitment to reach as many low income customers through it’s investments as possible. We have been able to support this ambition by independently measuring the proportion of customers purchasing goods and services provided by BII portfolio companies that live on, or less than, $5.5 (PPP, 2017) per day. What is commonly referred to as ‘low income’.
To our understanding no other DFI has made such an unambiguous commitment to measuring and maximising the number of low income individuals their investments reach. Such a commitment will help to ensure that the investments BII makes are increasingly focussed on directly supporting ‘low income’ households and communities.
What due diligence does BII undertake prior to making investment decisions and how does this compare with best practice?
Given what I understand to be budgetary constraints, accompanied by a desire to invest as much as possible of the public funds it receives into its portfolio companies, BII appears to conduct much of its impact due-diligence using established third-party research. This research is used to give provide sufficient confidence of the impact-case of potential investees.
However, where evidence does not exist or there is credible reason to question the validity of existing research to the context into which BII is investing, BII will on occasion commission 60 Decibels to conduct pre-investment social research into the impact of a perspective investee.
In these instances, 60 Decibels will sometimes be requested to survey a statistically significant, representative group of potential investee beneficiaries to better understand the following: the profile of who is being served, what changes are occurring in their lives, which of these changes of most material to their well-being, and how much change occurs to those areas deemed most material.
This data is then used, alongside existing business performance metrics, and wider impact data to make a judgement on whether to invest or not.
How does BII evaluate the impact of its investments?
Compared to due-diligence, 60 Decibels is more frequently commissioned to conduct impact assessments following BIIs decision to invest. During post investment management 60 Decibels’ impact performance measurement services are used by BII to (a) validate the original impact thesis of specific investments (b) compare the performance of BII investments to 60 Decibels’ wider industry impact benchmarks and (c) provide a post investment value-add service to its investees (many of whom struggle to find the resources to effectively measure their impact themselves).
Just as in due-diligence, 60 Decibels seeks to survey a statistically significant, representative group of portfolio company customers to better understand the following: the profile of who is being served, what changes are occurring in their lives, which of these changes of most material to their well-being, and how much change occurs to those areas deemed most material.
BII has on occasion also commissioned 60 Decibels to produce wider reports (using our database of thousands of social research studies) that investigate the impact trends of particular sectors. The goal of these reports is to deepen BIIs understanding of the potential impact of sectors and inform strategic priorities, as well as to provide a wider public good to the impact investing sector. See for example https://60decibels.com/insights/why-off-grid-energy-matters/