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2019 IMPACT REPORT 1 CONTENTS 1

ABOUT DEVELOPING PORTFOLIO COMPANY 1 WORLD MARKETS 2 5 SDG INSIGHTS 18

Client Story – Saija 22 MANAGEMENT NOTE 4 2 RENEWABLE ENERGY & CLIMATE ACTION: 6 IDENTIFYING THE NEED 24 PORTFOLIO HIGHLIGHTS 6 3 DWM’s Contributions to the SDGs through 25 Renewable Energy FINANCIAL INCLUSION 10 Renewable Energy’s 27 4 Contributions to the SDGs

Financial Inclusion’s Primary Contributions to 12 PARTNERSHIP the SDGs 7 RECOGNITION 28 Financial Inclusion’s Secondary Contribution 15 to the SDGs IMPACT MEASUREMENT METHODOLOGY 30 DWM’s Primary 8 Contributions to the SDGs 16 through Financial Inclusion DWM’s Secondary Contributions to the SDGs through Financial Inclusion 17 2

About Developing 1 World Markets ABOUT DEVELOPING WORLD MARKETS 3

New Multisector Impact Strategies In 2018, DWM launched the first of two multisector strategies that invest in a broad range of impact sec- tors including financial inclusion, renewable energy, sustainable agriculture, water and sanitation and healthcare. In addition, in 2018, DWM received a Our Mission grant from Convergence to support catalytic invest- ments in the water and sanitation sectors. DWM seeks to provide investors access to return-first impact investments in the emerging and frontier markets. Global Presence Headquartered in Stamford, CT, with offices in New York City, Delhi, Nairobi, and Singapore, DWM has a presence in 11 global locations, in- Exclusive Focus on Emerging cluding Costa Rica, Ecuador, Nicaragua, India, and Frontier Markets Japan, Germany, the Netherlands, France, Hong For twenty five years, Developing World Markets Kong, Kenya, and Singapore. (DWM) has exclusively focused on investing in emerging and frontier markets. To date, DWM has made investments in over 60 emerging and Africa Expansion frontier markets. Beginning with the opening of a Nairobi office in 2017, DWM increased its investments in the Afri- Return-First Impact Investment can continent from USD 15 million at of the end of 2016 to USD 47MM at the end of 2018. At year- Approach end 2018, DWM had invested in Egypt, Zambia, DWM is an emerging and frontier markets invest- South Africa, Kenya, and Rwanda. ment manager, dedicated to making return-first impact investments that seek risk-appropriate re- turns for our investors and measurable environ- Sustainability mental or social benefits for the developing world. DWM believes that impact investing should be con- ducted in a sustainable manner. To this end, DWM adopted a plan to purchase certified carbon cre- A History of Catalyzing Impact dits annually to offset employee’s air travel. DWM DWM began impact investing in 1999 and shifted made good on that plan by purchasing 471mt- its focus exclusively to impact in 2007. By partne- CO2e of credits from Native Energy to fund Project ring with some of the world’s largest institutional Sky Wind in Maharashtra, India. DWM also seeks investors, DWM has invested or arranged $1.5 to promote sustainable office practices and hire lo- billion in financing for more than 200 socially or cally in Latin America, Asia and Africa, reducing the environmentally positive companies. need for trans-Atlantic and trans-Pacific flights. 4

Management 2 Note

“Developing World Markets seeks to provide investors access to return-first impact investment in emerging and frontier markets.” MANAGEMENT NOTE 5

towards some of the world’s most intractable issues such as economic exclusion, energy poverty, water and sanitation access – often doing so by helping marginalized segments including women, youth and forcibly displaced communities.

DWM has invested in over 60 countries, many of which are facing the effects of economic and social exclusion that is at times deeply rooted in complex underlying systems. These structures have further exacerbated marginalization, conflict, unpreceden- ted depletion of natural resources and damage to Peter Johnson Edward Marshall natural safety nets. At DWM, our people and part- ners are brought together by our shared purpose and commitment to building inclusive, resilient, Dear Readers, economically-strong, and environmentally-sound communities. As a global community, we are four We are honored to be celebrating our 25th anni- years into the 2030 development agenda and as versary working in the emerging and frontier mar- we face a growing number of issues, from clima- kets, of which we’ve spent the last two decades in te change and poverty to forced displacement, the impact investing. SDGs’ emphasis on inclusion and interdependence underscores the need for a sustained commitment With your help and through DWM’s impact inves- to achieve goals across the five dimensions of peo- ting activities, we have championed innovators and ple, planet, prosperity, peace and partnership. At businesses that have built and scaled market cate- DWM, we stand ready to partner to strengthen our gories which were previously underserved or over- collective response to global challenges. looked by conventional thinking. Collectively, as an organization, we have been reflecting on what it In reviewing this report, we hope you consider the takes going forward to continue to build a sustai- commitment and contribution not only of our or- nable and resilient brand with impact that endures ganization but of each of our employees, clients, across market cycles. DWM’s longevity of expe- investors and partners towards achieving the rience in the field of impact investing has given us shared ambition of a more inclusive and resilient insights into scaling an investment platform in an society that provides opportunity for all segments evolving landscape. We recognize that this objecti- and demonstrates mutual respect for each other ve is inextricably linked to DWM’s people, partners and our planet. and clarity of purpose.

We are proud to be working alongside a committed team spread across 11 countries with diverse views and approaches that nevertheless shares a common purpose around what we can achieve together. We are honored to have the support of our clients (over 200 investee companies), investors (who themsel- Peter Johnson - Founder, Co-Managing Partner ves represent millions of pensioners, tax-payers, savings and insurance clients), and technical and service partners. This ecosystem of like-minded partners, which includes both impact veterans and first-time allocators, has contributed capital at scale Edward Marshall - Co-Managing Partner 6

Portfolio 3 Highlights PORTFOLIO HIGHLIGHTS 7 As of December, 31 2018

Financial Inclusion 75 Inclusive Financial Institutions

Including 9 IFINs with Renewable Renewable Energy Energy Mandate 78 Companies & Climate Action In Current Portfolio 3 Solar Operating Companies

Regional Investment South, East, and Southeast Asia 25% Central American Common Market 19% South America 17% 31 Developing / Emerging Caucasus and Central Asia 15% Countries in Current Portfolio Africa and Middle East 11% Eastern Europe 9% Diversified 4%

Investment by 2.88% Currency Denomination 11.7% Asset Type of Debt Investments USD 70.0% Senior Debt Equity EUR 20.9% Subordinated Debt 85.35% Local Currencies 9.1%

Where we invest

LATIN Kosovo Rwanda AMERICA Latvia Senegal Macedonia South Africa Bolivia Montenegro Tanzania Brazil Poland Tunisia Colombia Romania Zambia Costa Rica Russia El Salvador Serbia ASIA Ecuador Moldova Armenia Guatemala Ukraine Honduras Azerbaijan Mexico Cambodia AFRICA & China Nicaragua MIDDLE EAST Panama Georgia Paraguay Côte d’Ivoire India Peru D.R. Congo Indonesia Uruguay Egypt Kazakhstan Ghana Malaysia EASTERN Jordan Mongolia EUROPE Kenya Myanmar Liberia Pakistan Albania Madagascar Sri Lanka Offices in New York, Connecticut, Bosnia Mali Philippines Nairobi, New Delhi and Singapore DWM has invested in 200+ Bulgaria Morocco Tajikistan Additional staff in Costa Rica, Peru, Cyprus impact companies across Mozambique Taiwan Ecuador, Nicaragua, India, Japan, Estonia Nigeria Turkey Germany, Netherlands, Hong Kong developing countries. Hungary Pakistan Thailand 60+ 88 PORTFOLIO HIGHLIGHTS

* 53,766 SMEs were financed by the eight SME lenders, and 265,304 SMEs Financial Inclusion were financed by our MFIs.

Microfinance Small and Medium Institutions Enterprise Lenders 67 (MFIs) 8 (SME Lenders)

≈ 11.2 M ≈ 319K* Active Borrowers Reached SMEs Reached

24% 69% 75% 77% 78% 94%

MFIs Serve Rural MFIs Provide Low-Income Female MFIs a client base Clients Financial or Below Clients Implemented >70% female Literacy Training Clients CPP to Clients

Underserved Gender Residence Income Level Population1 Distribution Distribution Distribution 23% 31% Lack of 22% 31% Account Access Men Urban 2% World Avg 25% 50%

% of Low Income Lack of 46% 78% 69% % of Poor Account Access Women Rural % of Very Poor DWM Avg % of Other PORTFOLIO HIGHLIGHTS 9

Financial Products Offering Non-Financial Services Offering

24% 25% 10% 21% Remittance Debit/Credit Basic Health Basic Medical Services Cards Nutrition Education Care

27% 30% 75% 38% 46% 48% Enterprise Business Financial Saving Loan Life Skills Development Literacy Products Insurance Insurance Development Assistance Training

Financial Inclusion Portion of DWM Off-Grid and Renewable Climate Action Note

200K+ 9 Inclusive $96M+ People Financed Financial ORCA Loans Institutions Extended 1K+ MSME Business Financed

Renewable Energy & Climate Action 350K+ 3 Solar Home Systems Installed Solar Operating ≈2.2M Companies Solar Lanterns Sold

350K+ 360K+ 1.1m ≈3M $27M+ New Homes Metric Tons Homes People Energy Served of CO2e Served Impacted Expenditures Avoided Saved 10

Financial 4 Inclusion FINANCIAL INCLUSION 11

Financial Inclusion: Identifying the Need and the Solution

Credit Gap Financial Inclusion as a solution

While global poverty rates have been cut by more Financial inclusion offers a solution to the credit than half since 2000, one in ten people in developing gap by providing lower-income populations access regions are still living below the international poverty to financial services, such as microfinance, SME line of US$1.90 a dayi. According to the 2017 Glo- finance, and other specialized financial services. bal Findex Report, about 1.7 billion adults globally To varying degrees, financial inclusion enables do not have an account at a financial institution or access to credit, support for entrepreneurs, and a mobile money provider. In developed countries, income smoothing to create opportunities. Finan- 94% of adults have accounts at financial institu- cial access alone is not sufficient, however, and tions or mobile money providers. In developing for financial inclusion to be an effective solution it countries, that number drops to 63% of adults. must be conducted in a responsible manner, with While in certain countries account ownership has an emphasis on lending for productive purposes. surged, progress has been much slower in the developing world, especially among marginalized populations. Indeed, women and rural commu- DWM’s Impact nities are over-represented among the world’s unbanked and poor.ii DWM supports financial inclusion though private debt and private equity investments in microfinance In addition, recent studies show that small and institutions (MFIs) and small and medium enterpri- medium enterprises (SMEs) account for a majority se (SME) lenders, which provide financial access of private sector business and economic activity to underserved individuals, micro entrepreneurs, in both developed and developing countries.iii For- and small business segments. As of 2018, DWM mal SMEs contribute 45% of total employment iv and had investments totaling over $450 million inclu- 33% of Gross Domestic Product (GDP)v in many ding investments in 67 MFIs and 8 SME lenders developing economies, and some estimates indi- in 31 emerging markets. DWM upholds financial cate that 90% of total employment is from SMEs inclusion conducted in a responsible manner. As a when considering the underserved informal sec- result, 94% of DWM’s portfolio companies have im- tor. According to a 2017 World Bank report, there plemented the Client Protection Principles. are 21 million SMEs in developing countries and 44% of them are financially constrained. An esti- mated $4.5 trillion in additional investment is nee- ded if we are to close the SME finance gap and provide better economic opportunities for people all over the world.vi 12 FINANCIAL INCLUSION

Financial Inclusion’s Primary Contributions to the SDGs

DWM bases its SDG taxonomy for financial SDG 1: No Poverty inclusion on the research of the Consultative Financial Inclusion’s Contribution Group to Assist the Poor (CGAP), which con- cluded that financial inclusion primarily makes Extensive research has confirmed that financial direct contributions to: inclusion is beneficial for economic and social de- velopment. For example, a randomized evaluation study conducted by CGAP shows that microfi- nance helps households reprioritize their expen- ditures and smooth consumption, which can be extremely useful to poor households in managing unexpected expenditures and recovering from shocks. In addition to household consumption, microfinance helps improve other microeconomic indicators, including self-employment business activities and well-being.vii Furthermore, an em- pirical study from the World Bank found impro- vements in economic growth indicators due to fi- nancial inclusion – namely, improvements in per capita income and rural poverty rates.viii

SDG 2: Zero Hunger Financial Inclusion’s Contribution

Studies show that access to credit, savings pro- ducts, and micro-insurance can all improve rural livelihoods. Enabling farmers to access credit be- tween harvests leads to more efficient labor allo- cation and to greater agriculture productivityix, while savings products allow them to make lar- ger investments resulting in significant positive effects on agricultural yields and household ex- penditures.x Insurance products similarly impro- ve productivity by protecting against catastrophic risks, enabling farmers to make more meaningful technological investments.xi FINANCIAL INCLUSION 13

SDG 3: Good Health and Well-Being SDG 4: Quality Education Financial Inclusion’s Contribution Financial Inclusion’s Contribution

Research shows individuals with access to sa- CGAP highlights that savings products enable vings products are less vulnerable to unexpected increased spending on education and that rai- health emergencies and tend to invest more in sing awareness of the importance of savings preventative health products.xii Women-headed (i.e. financial literacy training) can lead to greater households spend more on nutritious foods and savings. Short-term extension of credit and re- education after receiving saving accounts.xiii mittance services also positively affected invest- ment into the further education.xiv 14 FINANCIAL INCLUSION

SDG 5: Gender Equality Financial Inclusion’s Contribution

Studies have shown that greater gender equality women in householdsxv. Broader economic data can improve household financial health, boost shows that closing the credit gap for women-ow- businesses’ performance, and drive social deve- ned SMEs in developing economies can boost lopment. Financial inclusion contributes to equa- real income per capita growth rates by around lity as providing women with access to financial 85bp on averagexvi. Additionally, women in develo- services enables them to gain more control over ping countries are more likely to be self-employed household consumption decisions on durable and thereby in need of financial services such as goods, as well as increasing bargaining power for those offered through microfinance banks.xvii FINANCIAL INCLUSION 15

Financial Inclusion’s Secondary Contribution to the SDGs

SDG 6: Clean Water and Sanitation SDG 7: Affordable and Clean Energy SDG 8: Decent Work and Economic Growth SDG 9: Industry, Innovation, and Infrastructure SDG 10: Reduced Inequalities SDG 16: Peace, Justice, and Strong Institutions

Financial Inclusion’s Contribution

Microfinance, SME lending, and micro leasing can act as sources of credit to fi- nance the purchase of water and sanita- tion products as well as affordable, clean energy products, contributing to SDGs 6 and 7. To varying degrees, financial in- clusion and the activities of microfinance institutions and SMEs also promote em- ployment, vocational skill development, entrepreneurship, innovation, and the development of small-scale industry and economic growth, contributing to SDGs 8 and 9. Empowering individuals and com- panies from typically poorer backgrounds through financial services in a responsi- ble manner can lead to increases in li- ving standards and, over more extensive time horizons, reduced inequality. CGAP also contends that promoting economic opportunity fosters peace by reducing unrest and greater political stability. 16 FINANCIAL INCLUSION

DWM’s Primary Contributions to the SDGs through Financial Inclusion

SDG DMW’s Contribution

50% of end clients are low income 27% of end clients are poor SDG 1: of end clients are micro-enterprises No Poverty 72% of DWM IFIN portfolio companies provide business, 59% agricultural, or life insurance $2,057 is the median loan size of DWM IFIN portfolio companies

of lending by DWM IFIN portfolio companies is to the SDG 2: 20% agriculture sector Zero Hunger DWM IFIN portfolio companies have a majority allocation to 5 the agriculture sector

SDG 3: of DWM IFIN portfolio companies provide a basic medical 21% service to clients Good Health & Well-Being of DWM IFIN portfolio companies provide basic health or 10% nutrition education to clients

SDG 4: of DWM IFIN portfolio companies provide financial literacy 75% training to clients Quality of DWM IFIN portfolio companies provide business Education 30% development assistance to clients

SDG 3 & 4 of DWM IFIN portfolio companies offer voluntary deposit 41% savings products to clients

DWM IFIN portfolio companies have a client base that is 40 majority female (by # of clients) SDG 5: DWM IFIN portfolio companies have a portfolio that is 25 majority female (by amount of credit extended) Gender Equality DWM IFIN portfolio companies have a client base that is 11 over 80% female (by # of clients) DWM IFIN portfolio companies have a portfolio that is over 8 80% female (by amount of credit extended) FINANCIAL INCLUSION 17

DWM’s Secondary Contributions to the SDGs through Financial Inclusion

SDG DWM’s Contribution to the SDGs

SDG 6: DWM IFIN portfolio companies provide credit products 9 in water and sanitation Clean Water and Sanitation toilets and sanitation facilities funded through DWM 35,000 WASH investments

SDG 7: DWM IFIN portfolio companies provide credit products in Affordable and 18% clean energy or energy efficiency Clean Energy

SDG 8: of loans of DWM IFIN portfolio companies are for Decent Work and 75% income-generating purposes Economic Growth

SDG 9: of DWM IFIN portfolio companies utilize some Industry, 34% tech-driven product in the field Innovation, and of additional DWM IFIN portfolio companies have a tech-dri- Infrastructure 18% ven product in development

SDG 8 & 9 DWM IFIN portfolio companies specialize in lending 8 towards small and medium-sized enterprises

78% of clients of DWM IFIN portfolio companies are female

SDG 10: 69% of clients of DWM IFIN portfolio companies live in rural areas Reduced of DWM IFIN portfolio companies operate as non-banks and Inequalities 80% serve a smaller sized target market of DWM IFIN portfolio company micro clients are low 50% income (Repeated from SDG 1) of DWM IFIN portfolio company micro clients are poor (Repea- 27% ted from SDG 1)

SDG 16: is the number of inclusive finance investments that DWM Peace, Justice, and 75 holds to promote inclusive economic prosperity in a range Strong Institutions of country and political environments 18

Portfolio Company 5 SDG Insights PORTFOLIO COMPANY SDG INSIGHTS 19

In 2018, DWM’s Proprietary Impact Question- This monitoring, and the results which follow, naire was enhanced to understand if DWM IFIN serve as an empirical complement to the ar- (Inclusive Finance Institution) portfolio compa- guments provided above based on industry nies aligned their mission to the SDGs. As part research studies on the topic. We believe this of their impact monitoring, DWM IFIN portfolio additional, empirical data will help drive con- companies were asked to provide examples of tinued alignment between the data collection products and services that support each goal process and impact. to support the case for mission identification.

% of DWM IFIN Ivestees who Identify their Mission Objectives with SDGs

72% 34% 28% 35% 56% 24%

34% 71% 44% 34% 38% 21%

21% 6% 16% 4% 22% 20 PORTFOLIO COMPANY SDG INSIGHTS

SDG 1: SDG 4: No Poverty Quality Education

DWM IFIN portfolio companies indicated their In limited instances DWM IFIN portfolio companies alignment with the goal through extending credit offered lending for educational purposes to direct- for income generation purposes to lower-income ly contribute towards the goal of quality education. populations. Companies pointed to administering In numerous instances, financial literacy trainings group loans, administering credit in rural areas, and technical assistance for business development and administering mobile-based credit as factors were seen as meeting SDG 4 by providing infor- enabling greater outreach to relatively poorer bo- mal education in the form of vocational training and rrowers. DWM IFIN portfolio companies also iden- numeracy skills. Various CSR initiatives including tified their role as an alternative to predatory “loan providing funding for various levels of schooling shark” lending whereby informal lenders charge for clients’ children and people in the surrounding high interest rates and carry out aggressive co- communities were also mentioned. llection practices. Remittance and insurance pro- ducts were also seen as mitigating poverty levels. SDG 5: Gender Equality SDG 2: Zero Hunger DWM IFIN Portfolio companies who serve women to larger degrees identified this targeted outreach DWM IFIN portfolio companies highlighted agri- towards women as contributing towards the goal. cultural lending and equipment leasing to farmers Contributions included extension of credit and as evidence of alignment. Various technical assis- other ancillary products or services to support fe- tance services specific to agriculture provided to male clients. For example, in 2018, FINCA Kosovo clients were also seen as direct contributions to launched a new product to help women in entre- SDG 2 and included training sessions on lives- preneurship. The product is called FINCA Women tock, various crops, and pasture decomposition. Entrepreneurship Loan, and carries 0% adminis- trative costs and attractive conditions for business SDG 3: development. As of year-end, 2,508 female clients are using this product for their business. FINCA Good Health and Well-Being also launched an education training program for women covering topics including marketing, com- DWM IFIN portfolio companies viewed loans exten- munication, finance and accounting. ded for purposes of purchasing water, sanitation, and other health-related products as factors con- tributing towards the goal. Emergency loans were also seen as offering a product to meet health emergencies. In addressing SDG 3, DWM IFIN portfolio companies also pointed to various Cor- porate Social Responsibility (CSR) projects cons- tructing hand-washing facilities at schools and running gratuitous medical assistance programs for clients and near-by communities. PORTFOLIO COMPANY SDG INSIGHTS 21

DWM IFIN Portfolio Companies also reported Portfolio companies cited contributions to SDG contributions to other SDGs, including SDG 6 through the provision of water and sanitation 6: Clean Water & Sanitation, SDG 7: Afforda- credit products and SDG 7 through the provision ble and Clean Energy, SDG 8: Decent Work of renewable energy and energy efficiency credit and Economic Growth, SDG 9: Industry, Inno- products. WiDWM IFIN portfolio companies also vation, and Infrastructure, SDG 10: Reduced highlighted contributions to SDGs 8 and 9 throu- Inequalities, and SDG 16: Peace, Justice and gh income-generating credit, especially SME Strong Institutions. lending, business/vocational trainings, lending to start-ups, and the use of innovative mobile te- chnologies to widen access to financial services. Offering a wide range of products and services was also seen as a factor that increases demand and economic growth. 22 PORTFOLIO COMPANY SDG INSIGHTS

Client Story Saija

While initially struggling to save the needed funds, discovering Saija through the recommendation of a friend gave Rojida access to the capital required to open her micro-business, a bangle store: Empowering through Microfinance “In 2015, Rojida enrolled herself as a Saija client in a nearby group and received a loan of Rs. 15,000 that day. Saija Finance Private Limited is a microfinance com- Rojida opened a shop right in front of her house wi- pany in India operating in Bihar and other states in thin the next few days. She even added a few more the northern and eastern regions of India. The com- products to sell, including earrings and bindis. The pany’s client base is comprised of 98% female bo- store did well and was open until dusk, helping Roji- rrowers, with 70% of clients residing in rural areas. da improve her livelihood.” Saija’s average loan size is $210, representing 10% of GDP per capita. In addition to microfinance loans, In the subsequent year, and following repayment of the company provides life insurance and financial her first loan, Rojida took on a second, larger loan literacy training. to improve her business and expand her existing inventory and products to also include garments. In 2016, DWM made a green loan to Saija as part of However, “Over time she began to realize that the ORCA Note program. The loan provided $3.5 mi- business slowed down for 1 to 2 hours every day llion in four-year financing with the proceeds used to during the daily power cuts.” Through a Saija field finance solar and renewable energy products. Half- officer, Rojida became aware of a new product the way through the notes program, Saija has disbursed company was offering: Solar Lamps. “After learning $4.5 million in clean energy-related loans. Below, we more about the product, Rojida decided to buy it to feature a report from Saija on the impact of a loan run her shop during power cuts.” made in 2015 for a solar lamp product which DWM’s 2015 ORCA Note program helped support. The interventions through Saija’s microfinance and energy loans provided timely support to implement “In a village located in the Dholi region of Bihar, Ro- Rojida’s plans for business setup and growth, while jida Khatun lives with her husband and two children. also enhancing the family’s quality of life through in- Her husband is a day laborer who supported his fa- creased productivity, earnings and access to clean mily while Rojida supplemented his income by se- energy sources. lling bangles. Along with raising her two children and doing daily household chores, Rojida worked every day – through scorching heat or pouring monsoon rains – with the goal of selling a few bangles every day. She dreamed of having her own bangle shop and began to save what was needed to pull together the initial investment required to open her shop.”

PORTFOLIO COMPANY SDG INSIGHTS 23 24

Renewable Energy 6 & Climate Action RENEWABLE ENERGY & CLIMATE ACTION 25

Renewable Energy & Climate Action: Identifying the Need

Clean Energy Gap

According to the International Energy Agency’s typically use carbon-based products to fuel primary 2017 Outlook Report xviii, 1.1 billion people (14% of lighting, which can be expensive, pollutive, and can the world’s population) did not have access to tradi- pose health risks. Therefore, off-grid renewable tional electricity sources, with the majority of these energy presents a practical alternative to address individuals living in rural areas. the challenge of energy poverty. However, as dis- cussed above, people in developing countries still Grid utilities are often too expensive for poor coun- face challenges to gaining financial access to impro- tries to expand and maintain. As a result, people ve their quality of life, including the purchase of off- living off the electric grid in developing countries grid energy products.

DWM’s Contributions to the SDGs through Renewable Energy

Renewable Energy & Climate Action 350K+ 3 Solar Home Systems Installed Solar Operating ≈2.2M Companies Solar Lanterns Sold

350K+ 360K+ 1.1m ≈3M $27M+ New Homes Metric Tons Homes People Energy Served of CO2E Served Impacted Expenditures Avoided Saved 2626 RENEWABLE ENERGY & CLIMATE ACTION

$27M 350K+ ≈2.2M 25M+ Energy Expenditure Solar Home Solar Lanterns kWh Renewable Saved Systems Installed Sold Energy Produced

3 ≈3M 350K+ 1.1m+ 350K+ Solar People New Homes Homes Metric Tons of Op Co Impacted Served Served Co2e Avoided

74K+ Passenger Vehicles = Driven for One Year 6

DWM has invested in three off-grid solar compa- nies that in 2018 provided more than 350,000 solar home system installations as well as sold approxi- mately 2.2 million solar lanterns. Purchases of the- se products are expected to lead to energy expen- diture savings of $27 million through servicing 350k households and effectively 3 million people during the last year. These companies service 1.1 million households, which include 350,000 new house- holds in 2018. This activity is expected to lead to 25M kWh of renewable energy produced and 350k metric tons of CO2 emissions avoided. RENEWABLE ENERGY & CLIMATE ACTION 27

Renewable Energy’s Contributions to the SDGs

Off-Grid, Renewable Energy, and Energy Efficiency’s Contribution to the SDGs

Research shows that replacing carbon-based pro- Off-grid renewable energy lighting products can ducts can help to reduce greenhouse gas emis- also reduce fire and health risks contributing to sions and help to create a sustainable environ- SDG 3. A study shows that households purchasing ment at the global level addressing SDGs seven, solar kits from DWM investee, d.Light, experienced nine, and thirteen. 88% fewer burns from lighting sources and 93% fewer fires than those who didn’t use d.light solar Based on data reported to DWM from the three products, who often use kerosene-based lighting. solar operating companies in which it has inves- ted, customers who purchase solar systems be- nefit from savings of $138 (on average) in ener- gy and mobile phone charging expenditures and electricity access, contributing to SDG 1. The fo- regoing calculation is based on DWM-collected metrics over an expected minimum unit lifetime of 5-years. 28

Partnership 7 Recognition PARTNERSHIP RECOGNITION 29

Investment Partnership1

This results reflected in this report would not be possible without the support of the fo- llowing institutions:

Industry Collaboration

The Smart Campaign advocates a The Global Im- common code of conduct in the mi- pact Investing crofinance industry, governing and Network (GIIN) establishing client protection safe- is a nonprofit or- guards. The Client Protection Prin- ganization dedicated to increasing the effectiveness ciples (CPP) are the Campaign's outlined minimum stan- of impact investing through collaboration, research dards that clients should expect to receive when doing and advocacy. GIIN has developed the Impact business with a microfinance institution. Reporting & Investment Standards (IRIS), an inde- pendent set of common metrics for impact reporting. The United Nations Principles for Responsible Investment (PRI), created in 2005, provides a ne- Global Impact Investing twork of international investors Rating System (GIIRS), a with a framework of six principles for incorporating en- project of the independent vironmental, social and governance issues into their non-profit B Lab, is a com- decision-making and ownership practices. In 2011, the prehensive and transparent system for assessing the Principles for Investors in Inclusive Finance (PIIF) were social and environmental impact of companies and created as a distinct subset within the PRI Initiative, funds with an approach to ratings analogous to Mor- providing investors with a framework for responsible ningstar’s and an analytic approach similar to Capital investment focused on access to finance for poor and IQ’s. Ratings are subject to the GIIRS verification pro- vulnerable populations. DWM is signatory to both the cess, which is executed with the support of a third-par- PRI and the PIIF and submits annual progress reports. ty documentation review. DWM was named a pioneer by GIIRS and has one of the first funds to receive a Microfinance Information Ex- GIIRS Impact Rating. change provides objective and qualified financial and social per- formance information on micro- finance institutions, covering some 2,000 institutions globally. DWM encourages microfinance clients to 1 It is not known whether the DWM listed submit annual Social Performance Standards Report above approve or disapprove of DWM to MIX and to acquire social ratings. Finance or the advisory services provided. 30

Impact Measurement 8 Methodology IMPACT MEASUREMENT METHODOLOGY 31

Impact Measurement

With a commitment to drive positive social and and quantitative manner. Over the years, DWM environmental impact and to contribute to the has adopted and adapted several impact me- SDGs, DWM measures and monitors the impact asurement tools and endorsed industry stan- of our portfolio companies in both a qualitative dards for different investment sectors.

Industry Collaboration

2004 2006 2008 2009 Begins providing annual Develops methodology for Endorses Smart Signs UN Principles of social performances data impact measurement Campaign’s Client Pro- Responsibles for investors tection Principles (CPP) Investment (UN PRI) and MFTransparency

2010 2011 2012 2013 1. Encourages portfo- 1. Enhances Social IQs Strengthens loan agree- Received Global Impact lio companies to submit with GIIN and ment requirement with Investment Rating System annual social performance IRIS standards specific attention to trans- (GIIRS) rating for standards report to the 2. Signs UN Principles parency and prevention of the DWM equity fund MIX Market for Investors in Inclusive over-indebtedness 2. Develops social Finance (UN PIIF) scorecard

2017 2018 2019 Develops Environmental Develops UN SDG Impact Selected as a and Social Management Framework leading impact System, in collaboration investment manager with OeEb 32 IMPACT MEASUREMENT METHODOLOGY

Evaluation Dimension Indicator Examples

Client Benefit & Welfare Borrower indebtedness prevention (40%) Non-financial products and services Outreach & Targeting Average loan size, (25%) Client socioeconomic levels, rural vs. urban Responsibility to Community & Staff Staff feedback, grievance mechanisms, (10%) Contributions to community Environment Internal environmental policies (5%) Environmental education and promotion Governance Mission and vision (20%) Salaries, remuneration, and incentives

80% Outreach And Targeting (25%)

60% Supplement 40% Client Benefit and Questions Welfare (40%) 20% 0%

Responsability to Community Governance (20%) & Staff (10%)

Environment (5%)

Impact Questionnaire & Scorecard Environmental & Social Management (DWM Impact IQs) System Integration

Impact Questionnaire & Scorecard (DWM Impact In 2016, DWM developed an environmental and so- IQs) is a proprietary, data-driven tool used during cial management system in collaboration with OeEB, the due diligence process and on an annual basis the Austrian development bank, and integrated it post-investment. The DWM Impact IQs use approxi- with our existing impact management framework. mately 60 indicators to evaluate impact across five As a result of the environmental and social mana- dimensions and is customized based on the portfolio gement system integration, additional due diligence company types, including microfinance institutions, related to social and environmental performance is SME lenders, and solar operating companies. Data conducted on companies, such as SME lenders, to are cross-checked for accuracy against DWM’s fi- determine if they are low, medium, or high risk. nancial database and the Smart Campaign website. IMPACT MEASUREMENT METHODOLOGY 33

Pre-Investment Process

DWM collects social and environmental data and evaluates the impact of potential investments during due diligence. The analysis is conducted through both desktop due diligence and an onsite visits.

Mission Aligned with Investment Theme Activities Not on Exclusion List

Investment Initial Screening Interview Committee Senior Approval Management

Onsite Additional Review Visit E&S Check Social IQ

(Medium/High Risk Eq Inv Only)

Post-Investment Process

On an annual basis, DWM performs an on-site visit. In addition, we collect social and environmental data to track trends and identify areas of strength and improvement for each portfolio company.

Publish Impact Ongoing Assistance & Advice Portfolio Companies Report Complete Annual Social IQ

Feedback to Additional DWM Analysis on Portfolio Companies E&S Check Impact Data

(Medium/High Risk Eq Inv Only) 34

i https://www.worldbank.org/en/topic/poverty/ xii https://www.poverty-action.org/ overview study/saving-health-expenditu- res-kenya ii Demirgüç-Kunt, Asli, Leora Klapper, Doro- the Singer, Saniya Ansar, and Jake Hess. xiii Demirgüç-Kunt, Asli, Leora Kla- 2018. The Global Findex Database 2017: pper, Dorothe Singer, Saniya Measuring Financial Inclusion and the Fin- Ansar, and Jake Hess. 2018. tech Revolution. Washington, DC: World The Global Findex Database Bank 2017: Measuring Financial In- clusion and the Fintech Revo- iii https://oecd-development-matters. lution. Washington, DC: World org/2017/04/03/unlocking-the-potential-of- Bank smes-for-the-sdgs/ xiv Leora Klapper, Mayada El-Zogh- iv http://www.ilo.org/wcmsp5/groups/public/- bi, and Jake Hess. Achieving the --dgreports/---dcomm/---publ/documents/ Sustainable Development Goals: publication/wcms_615594.pdf The Role of Financial Inclusion. CGAP v https://openknowledge.worldbank.org/ bitstream/handle/10986/26324/113906- xv http://www.people.hbs.edu/ WhatsHappeningintheMissingMiddleLes- nashraf/FemaleEmpowerment_ sons inSMEFinancing-29-32017-14-20-24. WorldDev.pdf pdf?sequence=1&isAllowed=y xvi http://www.goldmansachs. vi https://www.smefinanceforum.org/sites/ com/our-thinking/public-policy/ default/files/Data%20Sites%20down- gmi-folder/gmi-report-pdf.pdf loads/MSME%20Report.pdf xvii Leora Klapper, Mayada El-Zogh- vii https://www.cgap.org/sites/default/files/ bi, and Jake Hess. Achieving the CGAP-Forum-Latest-Findings-from-Ran- Sustainable Development Goals: domized-Evaluations-of-Microfinan- The Role of Financial Inclusion. ce-Dec-2011.pdf CGAP viii http://documents.worldbank.org/curated/ xviii https://www.iea.org/energyaccess/ en/730041468152101741/pdf/WPS6655.pdf database/ ix https://www.povertyactionlab.org/evalua- tion/impact-food-and-cash-loans-smallhol- der-farmers-zambia x http://www.nber.org/papers/w20946.pdf xi http://www.ilo.org/wcmsp5/groups/public/--- ed_emp/---emp_policy/documents/publica- tion/wcms_437194.pdf 35

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