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Evaluative tools in impact investing: Three case studies on the use of theories of change
by Noel B. Verrinder, Kagiso Zwane, Debby Nixon, Sara Vaca
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Impact investing is becoming one of the largest forces in driving social and environmental change globally. However, how one defines, measures and communicates this impact is not well defined or consistently implemented. This can prevent investors from making well-informed decisions and allows for ‘impact washing’. The evaluation community has many tools that could be adapted and used in the world of impact investing. Theories of change allow for the better communication of impact, identification of indicators to be measured and critical interrogation of logic. The attributes of theories of change could assist in steering the growing force of impact investing towards gathering more investment and achieving greater impact. This paper is exploratory and examines the development and use of theories of change as a tool for impact investing and seeks to identify the benefits of the tool. We qualitatively review three case studies of organisations that have implemented theories of change and identify common key themes. We find that theories of change are a useful tool for the communication of impact, identification of indicators to be measured and for the critical interrogation of logic. However, theories of change do not provide a panacea to the impact challenge; the need to rigorously measure impact is not fulfilled by merely identifying what needs to be measured. Regardless, the use of theories of change adds an advantage in a space where others have not gone to the same length to show their commitment to driving change.

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English