Impact investing ­­­- a focus on SDGs

­Our investments are designed to enable effective development and creation of added value on the ground. That is why DEG finances enterprises that focus on lasting success rather than short-term profit – just as we do. Businesses that take a long-term approach create skilled jobs and generate income, which helps many people in developing countries to harness opportunities and improve their prospects.

Private-sector enterprises do not just create jobs. They are also actively committed to education and training for their staff and support the transfer of technology and know-how. With their investments, they expand local value chains and improve the supply of goods and services in a given country. They generate billions in local income - this benefits people, institutions and society in developing countries.

DEG measures the effectiveness of its commitments and its contribution to the global Sustainable Development Goals (SDG) using the Development Effectiveness Rating (DERa). In this way we regularly record and measure individual customers’ contributions to development and follow up on changes since DEG’s investment. This also allows us to identify possible areas for further improvement.

The DERa is based on the “Harmonized Indicators for private sector operations” and was developed in consultation with a number of experts. It embraces international best-practice approaches and uses internationally harmonised, predominantly quantitative indicators to increase verification. The DERa has been applied to the entire portfolio and all new commitments since 2017. The development contributions of each customer are rated according to five outcome categories based on the SDGs: decent jobs, local income, market and sector development, environmental stewardship and community benefits.

­The DERa evaluations show that the companies co-financed by DEG have a measurable impact and make a significant contribution to the 17 SDGs. With its commitment, DEG particularly contributes to SDG 1 “No poverty”, SDG 4 “Quality education”, SDG 8 “Decent work and economic growth” and SDG 9 “Industry, innovation and infrastructure”.

In addition, many of our customers take on wide-ranging corporate social responsibility on the ground – and make further important contributions as a result. They pay above-average wages, provide insurance coverage and set up nurseries and health centres. Their involvement benefits not only their own employees and families, but also many people in the surrounding communities.

Annual DERa analyses of the DEG portfolio calculate the impact that our investment has. The analysis of the current portfolio showed that the expected effects of coronavirus on jobs and local incomes have not yet materialised.