Joint Impact Model

Over the years, development finance institutions (DFIs) and multilateral development banks (MDBs) used input-output modeling to estimate indirect impact associated with their investments. In 2019, AfDB, BIO, CDC, FinDev Canada, FMO and Proparco together with Steward Redqueen (SRQ) signed a Memorandum of Cooperation to harmonize their methodologies on indirect jobs, value added and emissions estimations. Later, CIF, OeeB, KFW, and PIDG joined the initiative and formed the Development Panel. The initiative was named the Joint Impact Model (JIM). 

In 2021, these partners worked on several work streams to further improve the JIM and align it with international standards. In November 2021, the JIM 2.0 was launched, which aligned with the PCAF Global Standard. Currently, we are using the JIM version 2.01 which has some technical corrections in comparison to the previous version. This is the same version that was used in the 2021 Annual Report. A full description of all the version changes can be found on the JIM website. Please refer to our website for further information about how FMO applies the JIM and its methodology. 

Limitations of the model

The impact model allows quantifying the wider impact of investing in various economic regions and sectors both directly and through financial institutions and funds. The model makes use of data from international statistical sources and investment-specific information which we obtain from our customers’ annual accounts. The JIM is an economic input-output model, which enables us to trace product and money flows through an economy. It can provide more complete impact insights as it is applicable to the full portfolio and has low data burden. As with any model, there are several limitations:  

  1. Estimates of indirect impact are based on industry averages (via input/output tables). In reality indirect effects will be different at the individual company level due to differences in individual company characteristics. As a result, model outcomes become less accurate for smaller numbers of investments.  

  2. Estimates are based on historical relations, while the methodology is based on the most recent (macro) economic data available, which means that the JIM reflects neither the COVID-19 pandemic nor the war in Ukraine.  

  3. FMO’s investments are treated as investments from any other lender and it has been assumed that FMO’s financial support does not affect the relations of sectors within an economy. 

Local impact only

Taking these limitations into account, we report results only on portfolio (and sub portfolio) level. In addition, we perform activities to provide insight in ex-post development effects, such as monitoring of direct effects, sector evaluations, effectiveness studies and impact evaluations. More information about how we measure impact and the JIM methodology is available on our website.  

JIM attribution rules

FMO provides part but not all the capital a company may need. Other investors likely also contribute to a company’s business (either by providing capital or advice). In addition, external circumstances such as changing market conditions, climate change and technological developments may also influence the impact created by a business. This raises the question of attribution: which portion of results of an invested company or portfolio of companies is due to the activities of an investor, taking into account other investors and additional factors that may have influenced the achievement of the results? The JIM takes a pragmatic approach to this attribution question and applies prorating to attribute part of the impact to the investor’s intervention. In line with the PCAF Global Standard we use book values for debt investments and apply an ownership percentage for equity. For a full description please see the JIM application methodology.