DFC is committed to supporting projects in developing countries that deliver impactful benefits to people and the planet. To better assess and manage the development impact of projects over their lifecycle, the Corporation designed the Impact Quotient (IQ), a best-in-class tool that measures impact through the lens of economic growth, inclusion, and innovation.
How was IQ developed?
IQ supports DFC in its mission to finance solutions to the most critical challenges facing the developing world today. During the development of IQ in 2019, DFC solicited broad input from the public and consulted with more than 50 stakeholders, including impact investors, academia, development finance institutions, and partners in the U.S. Government. As a founding Signatory to the Operating Principles of Impact Management (“OPIM”), DFC ensured the IQ aligned with industry best practices in impact management and DFC received an independent verification of its alignment to the Operating Principles in 2021.
- DFC’s Disclosure Statement on the Operating Principles for Impact Management
- 2021 Independent Verification Report Statement
What is the purpose of the IQ framework?
The IQ is a standardized, objective, transparent framework used to measure and manage the developmental impacts of projects over their lifecycle. The IQ:
- Systematically measures DFC’s development impact at both the project and portfolio-level, spanning a wide range of sectors and geographies.
- Helps inform decision-making during project approval.
- Establishes key metrics to measure each project’s development impact over time.
- Provides a balanced assessment that reflects both the positive and negative impacts of a project, within the context of the host country.
- Encourages initiatives to enhance a project’s positive impacts on its workforce, the environment, and/or the local community.
- Classifies projects into scoring tiers.
How are projects assessed?
IQ enables DFC to classify projects into scoring tiers based on its impact across three pillars:
- Growth: contributes to economic growth through infrastructure improvements, contribution to local income, trade benefits to the local economy, and job creation
- Inclusion: advances inclusion by providing products or services, diversified workforces, and inclusive supply chains that benefit underrepresented groups including low-income populations, smallholder farmers, young adults, women and women-owned enterprises, people with disabilities, indigenous peoples, refugees, and ethnic or religious minorities
- Innovation: supports innovation through the advancement of new products or services, the use of innovative financial structures to mobilize private capital, knowledge or technology transfer, and benefits to the planet
Final assessment ratings are adjusted to account for potential negative environmental, social, and/or impact risks. For more detailed information on DFC’s IQ framework and Impact Theses, please see below:
The Impact Thesis provides an overview of DFC’s approach to impact management for key development sectors and strategic initiatives. This document includes an evidence-backed articulation of DFC’s impact objectives and targets, expected outcomes, and corresponding metrics for managing investments in priority sectors and strategic initiatives, in alignment with the UN Sustainable Development Goals, Five Dimensions of Impact, IRIS+, and HIPSO.
Each pillar contains standardized indicators and metrics that are aligned with the Harmonized Indicators for Private Sector Operations (HIPSO) and the Global Impact Investing Network’s IRIS+ Catalogue. Key indicators and metrics for each project are identified during the project approval stage and tracked over time. For a list of all IQ indicators and metrics, please see below:
DFC obtains a deeper understanding of its effectiveness in achieving positive developmental outcomes by conducting selective deep-dives into projects or a portfolio of projects with a sectoral, thematic, or country-level focus. The learnings gleaned from performance evaluations help inform changes to DFC policies, procedures, project structuring, and/or strategy. And they intend to contribute to the learnings of the wider impact investing community.