Each year, the Monitoring & Evaluation (M&E) team of the Dutch Good Growth Fund (DGGF) conducts an annual monitoring exercise. This monitoring forms a fixed component of the fund’s governance and accountability framework and is aimed at systematically tracking performance, compliance with standards, and the impact achieved by the investment funds supported by DGGF.
Image: © DGGF
Purpose and scope of the annual monitoring
DGGF invests through local financial intermediaries in small and medium-sized enterprises (SMEs) in developing countries. The purpose of the annual monitoring is to gain insight into how these intermediaries and the underlying SMEs operate and the extent to which they comply with DGGF’s agreements and policy objectives.
The monitoring focuses on three core pillars:
- Impact - the social and economic effects of investments;
- ESG (Environmental, Social & Governance) - compliance with environmental, social, and governance standards;
- Tax - responsible tax behaviour and transparency.
Within these three pillars, DGGF uses a set of standardised indicators at both fund and SME level. These indicators include both quantitative and qualitative information and provide insight into, among other things, the size of the investment, employment, revenue growth, inclusiveness (such as the participation and representation of women and youth), knowledge transfer to SMEs, and relevant ESG and tax-related risks. By collecting these indicators annually in a standardised approach, DGGF is able to track developments over time and analyse results across funds in a comparable way. As part of this process, funds submit structured data annually for each of these pillars through reporting templates. This data forms the basis for further analysis and comparison.
Analysis and follow-up
The submitted data is analysed by various specialised teams within DGGF. This analysis assesses the extent to which funds meet the applicable criteria and whether the data provided is of sufficient quality and consistency. Reviewing the collected results over several years provides insight into trends, longer‑term improvements, and recurring challenges.
The outcomes of the annual monitoring are primarily used for internal management and quality assurance, these results are in turn also incorporated into DGGF outputs, such as annual reports and impact reports. When the analysis, for instance, shows that funds face structural challenges in specific areas - such as strengthening impact, improving reporting quality, or enhancing ESG processes - DGGF may decide to pursue targeted follow-up actions. In doing so, the DGGF teams and partners may also provide on-the-ground support to funds and companies. This helps to build a more comprehensive understanding of how policy and practice come together.
Support may, for example, take the form of training. In the past, such support has been provided to funds to help clarify their impact strategies. In addition, DGGF offers technical assistance related to its impact reporting requirements. This support aims to strengthen funds’ internal processes, for example by improving reporting structures. Through structured feedback, funds gain better insight into their own performance, processes, and impact, and are therefore supported in further professionalising their operations.
Further development of monitoring
Annual monitoring has now been carried out for several years and has been further developed over time based on lessons learned and practical experience. As a result, it has become an important learning instrument for both DGGF and the funds it works with. A concrete example of this development is the way in which the outcomes of ESG indicators are used to provide targeted support to funds. For instance, nowadays annual monitoring may reveal that funds have ESG policies in place, but that their implementation and documentation in practice are not yet sufficiently consistent. Based on these insights, monitoring discussions are held and additional guidance may be provided to further strengthen ESG processes. In this way, the monitoring contributes to improved risk management and governance within funds.
By reflecting annually on these results, practices, and impact, DGGF continues to build a stronger and more transparent investment programme, with the ultimate objective of increasing sustainable impact for entrepreneurs and communities in developing countries. Through annual monitoring, DGGF strengthens its accountability while also creating space for learning between DGGF and the funds, helping to improve the programme over time.