Despite countries adopting an array of policies to mitigate and adapt to climate change—such as investing in clean energy and energy-efficient technologies and installing early warning systems—it is evident that these efforts alone will not suffice to prevent all climate-related disasters. Even if global warming is miraculously limited to the 1.5°C threshold, the intensity, frequency, and unpredictability of extreme weather phenomena will continue to cause unavoidable and irreversible loss and damage for years to come. This holds true for both rapid-onset events (such as cyclones, floods, and landslides) and slow-onset developments (such as desertification, ocean acidification, biodiversity loss, and rising temperatures and sea levels).

As for developing economies, strained resources are further taxed by the additional costs of climate damage. They bear the brunt of climate change more heavily than developed nations. According to the sixth assessment report of the Intergovernmental Panel on Climate Change (IPCC), the average mortality from floods, storms, and droughts in particularly vulnerable countries , is 15 times higher compared to countries with very low vulnerability. In India, the potential income loss from the reduction of labour capacity due to extreme heat was estimated to be USD 159 billion, or 5.4 percent of the country’s GDP, in 2021. The L&D fund has primarily been established to support vulnerable countries with the resources they need to recover from climate impacts,both economic and non-economic. Loss of livelihood, crops, property, and ultimately the national GDP count as economic losses because they can be assigned a monetary value. On the other hand, injury to and loss of life, health, rights, biodiversity, ecosystem services, indigenous knowledge, and cultural heritage are categorised as non-economic losses. Loss of income from working days forfeited to heatwaves is an example of an economic loss, while the displacement of communities from coastal villages due to beach erosion would count as a non-economic loss.

Is it the same as adaptation finance?

The L&D fund has emerged as the third pillar of climate finance alongside adaptation finance and mitigation finance; it is meant to help communities restore and rebuild what is lost and damaged. The fund can be utilised, for example, to rebuild infrastructure destroyed by extreme weather events, establish resettlement colonies, set up alternative livelihood programmes, offer counselling services, and initiate projects to commemorate the loss of life and cultural heritage. Some reparative actions—for example, a resettlement housing colony for people displaced by rising sea levels—could be categorised either as adaptation or as loss and damage. However, the commonly understood threshold separating one from the other is that loss and damage includes impacts that are beyond the limits of adaptation. Put simply, it’s when loss and damage occurs even after adaptation measures have been deployed, either because the measures are ineffective or due to the unanticipated severity of the climate impact. The more effective and timelier the adaptation strategies, the lower the risk of loss and damage.  

How did the fund originate?

The L&D fund was operationalised at the 28^th Conference of the Parties (COP 28) held in Dubai in November 2023. However, it has been more than thirty years in the making. The proposal for climate-related financial assistance was mooted as early as 1991, when the UNFCCC was being drafted. At the time, Vanuatu, the Pacific Island nation representing the Alliance of Small Island States (AOSIS), rallied for a globally contributed insurance scheme to assist countries impacted by rising sea levels. The proposal was ignored.

It was in 2007, at the COP 13 in Bali, that the term ‘loss and damage’ first appeared in a UNFCCC decision. Inked into the Bali Action Plan, it outlined three thematic areas of work: assessing the risk of loss and damage, exploring a range of approaches to address it, and defining the Convention’s role in implementing the approaches. In 2013, the Warsaw International Mechanism for Loss and Damage was formed to enhance knowledge of risk management approaches to address loss and damage, strengthen dialogue and coordination between stakeholders, and mobilise financial, technological, and capacity-building support for it.

However, the crucial ground plan for funding remained sketchy. The economics of reparative action was once again left out of the 2015 Paris Agreement, in which loss and damage was covered in Article 8. It spelled out the importance of averting, minimising, and addressing loss and damage, and formulated potential scenarios of loss and damage that nations, particularly vulnerable ones, were likely to encounter in the future.

It was finally in 2022, at COP 27 in Sharm El-Sheikh, Egypt, that money was (notionally) placed on the table, when Parties agreed to operationalise a dedicated fund to address loss and damage. A transitional committee—comprising representatives of 24 developing and developed countries—was appointed to discuss its governance and institutional framework, funding arrangements, and implementation. Over the course of a year, the committee held five meetings, two workshops, two ministerial meetings, and a dialogue. After protracted negotiations, it submitted its report to the Conference of the Parties. And thus, the Loss and Damage Fund was operationalised on November 30, 2023, at COP 28 in Dubai. This also marked a first in the history of the summit: the adoption of a monumental decision on day one. An independent secretariat and governing board were appointed. The World Bank was appointed interim trustee and tasked with hosting the fund for four years. It would oversee the coordination, collection, and allocation of resources in consultation with the Warsaw Mechanism, the International Monetary Fund, and the Santiago Network.

Why are critics sceptical?

More talk, less action:

Since November 2023, the L&D fund has received USD 661.39 million in pledges from several countries, with others expected to contribute later: Italy and France pledged USD 108 million each, Germany and the UAE USD 100 million each, the UK USD 50.6 million, Japan USD 10 million, while the US—the world’s largest economy and second-largest carbon emitter after China—pledged only USD 17.5 million. Experts say the money that all of these countries have pledged in sum is inadequate and covers less than 0.2 percent of what developing countries need, which is a minimum of $400 billion a year as per The Loss and Damage Finance Landscape report. Developing country members of the Transitional Committee proposed that the fund programme a minimum of USD 100 billion a year by 2030.  

The gulf between what developing countries need and what they receive has not only severely compromised their ability to adapt to climate change, but has also heightened the risk of greater loss and damage in the future—risks already amplified by the delay in mobilising accessible climate finance. A report by the Council on Energy, Environment and Water (CEEW) estimates that India itself may require USD 1 trillion between 2015 and 2030 for adaptive actions. The Climate Policy Initiative (CPI) pegs the country’s investment needs for adaptation-based development at USD 14–67 billion annually, for the same 15-year period.

Concerns around climate justice:

Climate justice is anchored in a principle of international law called ‘common but differentiated responsibilities’ (CBDR), which acknowledges that even as all countries are called to take mitigative steps to reduce climate impacts, some have a higher responsibility—and capability—to address climate challenges than others.

By this measure, developed nations, which have had a long head start in building and benefiting from their fossil fuel-based economies and are the primary drivers of climate change—ought to pay a proportionate price towards climate finance, one that helps developing countries deal with it effectively. Who pays, and how much they ought to pay, are vital questions that need to be addressed. The Adaptation Gap Report 2023 emphasises that “a justice lens underscores that loss and damage is not the product of climate hazards alone but is influenced by differential vulnerabilities to climate change, which are often driven by a range of socio-political processes, including racism and histories of colonialism and exploitation.” Critics point out that the fund falls short on delivering on climate justice by failing to set clear, fair, and time-bound expectations on payment, and by doing so, undermines the principles of equity, historic responsibility, and polluter pays, which are codified into the Paris Agreement.

Lack of clarity on operationalisation:

The hard-won voluntarism written into the body text of the COP 28 decision text absolves developed countries of all liability. By inviting them to contribute instead of requiring them to compensate for their relative contributions to global warming, the treaty shields them from potential litigation claims by developing countries. Moreover, there is no floor set for the quantum of the fund. Had developed countries been held to account, they would have had to pay far more than they pledged. By one calculation, the US’s fair share of loss and damage finance in 2022 alone was USD 20 billion, rising to USD 117 billion annually by 2030. The lack of legally binding commitments also has advocacy groups concerned about the long-term stability of the fund. Timing is another concern. With developed countries having delayed nominating members to the Loss and Damage Board, one worry is that efforts to operationalise the fund in time will be hampered.

One way to address the technical shortcomings of the mechanism is to include it in the global stocktake (GST), the 5-yearly review initiated to monitor progress on the Paris Agreement’s long-term goals. The GST, however, does not address loss and damage as a separate pillar, as it does adaptation and mitigation. This, experts say, may result in L&D being subsumed into the adaptation assessment.

Articulating what constitutes loss and damage can advance research on the subject.

Critics have also drawn attention to the need for a clear definition of loss and damage and of what constitutes non-economic losses and damages, which the UNFCCC is yet to frame. The lack of distinct parameters increases ambiguity around which kind of impacts and which countries should be prioritised for the money. Interpretations of the term range from the effects of anthropogenic climate change to only those that occur after the adaptation ceiling has been breached. Articulating what constitutes loss and damage can advance research on the subject and help formulate concrete actions to address it. But actions are reliant on data and there is scant data on these twin themes (loss in particular), not least because of the lack of clearly defined processes and tools to record, measure, and report them. 

It’s therefore vital to establish standardised assessment methodologies at the national, subnational, and local levels of what constitutes loss and damage.

Sources of finance:

The fund is expected to be built with contributions from a spectrum of sources, including public and private finance, and innovative funding instruments such as taxes, levies, and debt swaps—primarily from developed countries. However, the process for capitalisation (beyond initial commitments), has not been spelled out.   

In addition to public finance such as government-issued sovereign green bonds, alternative inflows to the fund could come from multilateral development banks, climate funds, philanthropies, carbon markets, and from carbon taxes and levies imposed on historic, large-scale polluters like the fossil fuel industry and the aviation and maritime sectors. Some states in the US are in the process of legislating for a ‘climate superfund’, which would make fossil fuel producers and refiners liable to pay for local adaptation measures and loss and damage expenses.

Private finance, in the meanwhile, can be raised through bonds and loans, although these run the risk of being conditional and extractive, privileging institutional profit over public interest. The Loss and Damage Finance Landscape report warns that “funding mobilised through financial instruments which seek to profit from the climate crisis, create greater debt burdens or shift responsibility for finance onto vulnerable countries, should not be considered as contributing toward the floor of US$400 billion per year.”  

A paper by CEEW recommends that the L&D Fund sit alongside, but distinct from funding mechanisms like the Green Climate Fund and the Global Environment Facility, and that it be deployed exclusively for loss and damage. Grants and unconditional transfers are preferable financing instruments. The money, it emphasises, should be new, additional, predictable, adequate, fair, debt-free, and accessible to all developing countries.

The role of the World Bank: 

Another point of contention is the appointment of the World Bank as interim trustee and host of the fund’s secretariat for the first four years. Developed countries, such as the US and EU member states, rooted for the World Bank on the grounds that it would speed up operationalisation of the fund. However, 68 organisations have expressed disapproval over the bank’s trusteeship, sceptical of its ability to administer the fund fairly, concerned about the influence that the US, which appoints the bank’s president, may have on its decisions, and wary of the unjustly high interest rates it has charged developing countries in the past. In addition, the bank charges exorbitant administrative fees, which can vault up to 20 percent of a fund’s flows. 

Concerns have been allayed by reassurances that the bank will, over this interim period, be closely scrutinised for accountability, transparency, and fair play. In the meanwhile, the World Bank is yet to accept all the conditions to trusteeship laid down in the decision text. Disputation over any condition can stall the implementation of the fund even further. 

Is India eligible for this money?

Advanced economies like the US, as well as Small Island Nations, have insisted that India and China also contribute towards reparative climate finance. India is the world’s fifth largest economy, with a GDP of USD 4.11 trillion (one spot ahead of the UK), but it still counts itself as a developing country. India is the third largest greenhouse gas (GHG) emitter after China and the US, with 3,380 metric tons of carbon dioxide-equivalent (MtCO₂e) released in 2019. However, in per capita terms, the country ranks 10th in global emissions with 2.5 tCO2e per person. The global average is 6.5 tons; the US leads with 17.6 tons per person.

As an emerging economy with the world’s largest population, and having started down the road to industrialisation two centuries after Europe and the US, India has argued that it cannot be held to the same funding benchmarks as historical emitters. Moreover, like other developing countries, it too has suffered catastrophic climate impacts: in 2019, it lost nearly USD 69 billion to climate-related events. The Reserve Bank of India, citing secondary research, projects that climate change could cost the country 2.8 percent of its GDP and depress the living standards of nearly half its population by 2050. A recent district-level assessment of climate impacts claims that 80 percent of India’s population lives in districts that are highly prone to extreme weather events. 

Yet it’s unlikely, observes a TERI report, that India stands to benefit from the Loss and Damage Fund anytime soon, given the size and scope of the money pledged. But it can leverage its position as a political and economic heavyweight to shape the narrative around how and where the money will flow.  

Joeanna Rebello Fernandes and Shreya Adhikari contributed to this article with inputs and insights from Pranav Garimella, Programme Manager – Climate Program, WRI India.

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Know more

• Learn about rural mitigation measures for water scarcity in this photo essay.
• Watch this video to learn more about loss and damage.

The Constitution of India, adopted on January 26, 1950, serves as the supreme legal document governing the world’s largest democracy. Framed by a constituent assembly, and drafted by Dr B R Ambedkar, the Constitution embodies the principles of justice, liberty, equality, and fraternity. It provides a comprehensive framework for the functioning of the government, delineates the powers and responsibilities of various institutions, and guarantees fundamental rights to its citizens. Its relevance today is undeniable, as it continues to guide the nation’s governance, ensuring a balance between individual rights and collective interests.

The Constitution acts as a dynamic blueprint that upholds democratic principles, safeguards human rights, and fosters a pluralistic and inclusive society. Find out more about the Preamble, Fundamental Rights, Directive Principles of State Policy, and Fundamental Duties, and learn how we can include these in our work and daily lives.

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Know more

• Read this article to find out more about how nonprofits can use constitutional values to promote active citizenship.
• Watch this television series about the history of how the Constitution was made.
• Learn about the Har Dil Mein Samvidhan campaign, which helps create awareness about the Constitution of India.

The concept of farmer producer organisations was developed in the early 2000s to help farmers collectivise and start group enterprises, which would allow them to pool together their produce; trade in larger quantities; and, depending on their capabilities and funding, start value-addition activities and identify non-local buyers.

What is a farmer producer organisation?

A farmer producer organisation (FPO) is a legal entity that is owned and managed by farmers, which, in this context, includes cultivators, dairy producers, fishers, plantation owners, and others engaged in primary production in the agriculture sector. FPO is a generic term for farmer collectives and can refer to one of the following:

• A company (under the Companies Act)
• A cooperative society (under the Multi-state Cooperative Societies Act)
• A mutually aided cooperative society (under the Mutually Aided Cooperative Societies Act).

FPOs are one type of producer organisation; others include collectives of weavers and artisans. Since most farmer producer organisations in recent years have been registered as producer companies, the terms FPC and FPO are often used interchangeably.

Farmer producer organisations perform different kinds of functions. Many FPOs buy inputs (such as fertilisers and pesticides) from manufacturers in bulk for their member farmers in order to get significant discounts and better-quality products. Others focus on commodities produced by their members such as milk, grains, fruits, and vegetables. Among these, most sell the produce in bulk to traders or agents, and some sell their products after value addition to bulk buyers, retailers, or directly to consumers.

In order to generate farmer income and create more employment opportunities for small and marginal farmers, the government launched a scheme called the Formation and Promotion of 10,000 New Farmer Producer Organisations in February 2020. The scheme has a total budgetary outlay of INR 6,865 crore. Farmers with small and marginal holdings face multiple production challenges such as the inability to add value to their product, lack of access to technology, and low-quality seeds. This scheme is designed to combat these challenges. Some state government schemes and nonprofits with a rural development focus are also working towards the aggregation and promotion of FPOs.

How do farmer producer organisations work?

There are many different ways in which FPOs can operate. Most FPOs operate as stand-alone businesses, doing everything from aggregating the produce to grading, sorting, processing (if any), and marketing. FPOs can also be part of consortiums that may provide certain services such as connecting with buyers (called ‘market linkage’) or access to loans at better rates. Some FPOs are part of a two-tier structure where supplier FPOs focus on aggregating, sorting, and grading the produce, while a market-facing FPO adds value to the produce and markets and sells it.

However, there are some things that are common to all FPOs. The member farmers of an FPO provide the capital and have a stake in the company. A minimum of 10 shareholders are required to start a producer company. According to a 2020 report by Azim Premji University (APU), the majority of FPOs have an average of 200–250 shareholders. The composition of FPOs varies significantly—from large-scale farmers to small and marginal farmers as shareholders. The capital provided by the shareholders can be used as working capital to procure the produce of member farmers or to purchase equipment for storage and processing and other resources.

Promoting organisations and resource institutions, funders, and investors (government and non-government) are some of the other stakeholders in this ecosystem. To establish an FPO, either a group of farmers can come together and decide to form a producer company on their own, or a promoting institution (often a nonprofit) might convince a group of farmers about the benefits of forming a producer company. The law requires a minimum of 10 members, though most nonprofit-promoted producer companies aim for much higher numbers to pool together greater resources, as registering an FPO can cost anywhere from INR 20–40,000. Registration also makes it possible for the FPO to qualify for government schemes.

How are farmer producer organisations structured?

Since FPO is a generic category and refers to different types of farmer collectives, how it is structured and run depends on how and by whom it is formed. At the government level, there are several nodal agencies that facilitate the formation of FPOs, such as NCDC, NABARD, and SFAC. These agencies engage other organisations, such as nonprofits or consulting firms, to aggregate and support FPOs for a period of five years. FPOs formed under schemes started by state agriculture departments or by CSR arms of corporations may work differently.

As per NABARD guidelines, FPO members have to collectively specify the rules for a company’s operations and indicate which activities they can undertake. Some other guidelines are that the budget is approved by the member shareholders, the FPO’s performance is monitored by the board, and the CEO takes care of day-to-day affairs. But how an FPO functions can look vastly different in practice. In many cases, the nonprofit or promoting organisation that started the FPO will end up running the operations, simply because most Indian farmers do not have the business know-how required to run a company.

Why are farmer producer organisations important?

Collectivisation of farmers is not a new concept in India, and the Cooperative Credit Societies Act 1904 is one of the earliest legislations on farmer collectives. But most cooperatives have been unable to sustain themselves as member-controlled independent business entities due to a resource crunch and local political interference. This has led to excessive dependence on the government for funds, dormant membership, bureaucratic functioning, lack of capital formation, and so on. Therefore, FPOs seek to bring in primacy of a ‘business perspective’, which was previously lacking, to the cooperative model.

Collectivisation is considered beneficial to farmers because their incomes and landholding sizes remain low. According to the Agriculture Census 2015–16, small and marginal farmers whose landholdings are under 2 hectare account for 86 percent of all farmers and own just 47.3 percent of the total crop area. In addition, small and marginal farmers only make approximately 50 percent of their income from farming; the rest comes from working as wage labourers.

Lack of capital can block a farmer’s access to the market, but when capital is pooled, transportation and selling costs are minimised. Moreover, resources such as seeds, fertilisers, pesticides, and farm equipment may be too costly for individual farmers, so collectivising can enable them to buy these in bulk at wholesale rates. Collectivisation also helps in value addition to the product that can help minimise the losses incurred by farmers after harvest.

A lot of farmers are not able to sell their produce at remunerative prices—this can be because of small quantities of produce, low negotiating power, and not having the market linkages required to sell to anyone other than local intermediaries. FPOs can foster an environment of information exchange. Farmers also have more bargaining power against intermediaries and corporate entities when they act as a collective. Inconsistent pricing by intermediaries can result in fluctuation in market prices, but FPOs can ensure greater transparency and fairness in product pricing. All the members of a farmer producer organisation are stakeholders and get a say, which gives the decision-making power to women farmers as well if they are enrolled as members in the FPC.

What are the challenges faced by farmer producer organisations?

According to the APU report, one of the biggest challenges that FPOs face is raising the capital required to buy members’ produce or for performing activities such as value addition. It can be difficult to convince farmers to become FPO members and put in their money at the outset. If monoculture (growing one crop per season such as wheat or rice) is the dominant practice, then it can take multiple procurement cycles to get more people to join the FPO. If only some farmers join in a given year, then there may have to be multiple seasons of successful procurement to get non-member farmers to become members.

The report also mentions that FPOs find it difficult to attract and retain skilled professionals who can discharge CEO and other managerial responsibilities. FPCs need to be commercially successful to be sustainable, so having people with business acumen on board is essential. Studies cited in the report have listed “poor inventory management, lack of skills for developing feasible business plans and managing the business” as some of the reasons that producer companies are unprofitable. Although there has been a sharp rise in the number of FPOs, a lot of them struggle to function, and many have gone defunct.

In 2017, a national conference on FPOs organised by the Institute of Rural Management Anand brought together academics, researchers, and FPO representatives. These are some of the challenges mentioned by the FPO representatives.

• Lack of member loyalty: This can happen when the member farmers’ expectations of the FPO are not met. They then end up selling their produce wherever they get the highest price. There is also lack of awareness about the benefits of becoming a member.
• Low capacity for governance: This is due to the low level of literacy among farmers; limited awareness on how to run an FPO; and lack of time. Running an FPO also requires some knowledge of bookkeeping and of financial provisions and laws that the FPO needs to comply with. All of this can be too cumbersome for farmers, and hiring professionals is unaffordable.
• Lack of consistency in policy: There are many different types of farmer collectives that can operate in any setting, and policies do not cater to the needs of FPOs. There are disparities regarding credit availability, the price at which fertilisers can be procured, and minimum support price (MSP) availability.

Jasmine Bal and Srishti Gupta contributed to this article with inputs and insights from Richa Govil, Emmanuel Murray, Arjuna Srinidhi, and the report Farmer Producer Companies: Past, Present and Future.

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Know more

• Learn more about the emergent challenges and opportunities related to FPOs.
• Read about a day in the life of an adivasi women who manages an FPO in Maharashtra.
• Listen to this podcast that discusses the importance of FPOs in Indian agricultural system.

Tanaya Jagtiani contributed to this article, with inputs and insights from Dr Shankara Prasad, Sonali Srivastava, Jyothsna Devi, Ila Reddy, and Anant Maringanti.

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Know more

• Explore the government’s India Panchayat Knowledge Portal—a one-stop repository for everything you need to know about rural local governance in India.
• Listen to ‘The Seen and the Unseen’ podcast, which discusses the importance of cities, the state of urban governance in India, and how urban governance can be reformed.
• Learn more about how urban governance, democratic local governance, and the Panchayati Raj Institutions work in practice through PRIA’s Knowledge Resource Centre.
• Dip in to Praja’s research carried out across two years and 21 states, to understand the challenges in the implementation of the 74th amendment.

But RCTs are complex, and there seem to be lingering questions around the subject. From conceptual queries to the ethics of RCTs, here are some of those questions, answered.

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Insights in this explainer have been sourced from J-PAL’s Introduction to Evaluations, in consultation with other sources.  

Ayesha Marfatia contributed to this article. 

1. What is impact investing?

   Impact investing refers to the act of making investments in companies, organisations, and funds, with the intention to generate positive, measurable social and environmental impact, alongside a financial return.Financial returns for impact investments can range from simply recovering the original investment amount (the principal), all the way to matching commercial market returns. Impact may be demonstrated in various ways, including creating jobs, improving incomes, and/or serving low-income consumers through affordable housing, education, healthcare, or inclusive finance.Impact investing in India began in earnest in 2001 with the establishment of Aavishkar, India’s first for-profit impact fund, and the entry of the nonprofit Acumen Fund.

2. Who are impact investors?

   An impact investor is an organisation or individual who invests money in a social enterprise, with the expectation of a financial return and positive impact for society at large.In most cases, impact investors raise funds from different players to deploy them in multiple social enterprises. These funds could come from multiple sources:- High net-worth individuals (HNIs) and family offices- Angel networks- Domestic and global foundations- Development finance institutions (DFIs)- Public and private sector banks, and insurance companies- Institutional funds including pension, endowment, sovereign wealth, and venture funds- CSR funds from corporatesImpact investing can also take place through funding platforms or exchanges like the Impact Investment Exchange based out of Singapore, or the proposed social stock exchange in India.

3. How big is the impact investing market?

   According to a study by the Global Impact Investing Network (GIIN), the current size of the global impact investing market is USD 502 billion. This capital is managed by more than 1,340 impact investors across the world. About half of these investing organisations are headquartered in the US, and about a quarter in Europe.In India, the impact investing sector attracted over USD 5.2 billion between 2010 and 2016.  There are about two million social enterprises, and at least 75 impact investors active in India. Over 90 percent of the investments made in India however, are by DFIs; which means that their behaviour drives most of the trends in this space.In July 2019, Brookings India published a study to quantify the sector in India. They interviewed more than 25 impact investors, social enterprises, and stakeholders for the study. Here are some findings from their report.

4. What are the main sources of funds?

   The chart below shows the amount of impact investing funds generated from different sources in India.Funding sources, 2017 | Source: IIC dataThe largest source, ‘others’, is dominated by ‘fund of funds’, including insurance companies. Notably, government and charitable organisations are relatively smaller contributors.

5. What is the average size of investments?

   In financial year 2018, half the impact investors in India (those surveyed by Brookings India) had total investments of USD 20 million and above.Value of investments, 2018 | Source: Brookings surveyThe size of individual investments by these investors ranged between USD 1,00,000 and USD 10 million, and they were made to social enterprises at different stages of growth. Although a majority of the investments were seed or early-stage funding, the trend is shifting, with investments moving towards mid- and growth-stages.

6. How are investments distributed across sectors?

   As per GIIN data, financial services, energy, and microfinance are the top sectors where global impact investors deploy capital. While up until 2017, the same could be said of India, there is a considerable shift now. The three sectors that have increasingly been getting a significant proportion of the impact investment funds are: health, education, and agriculture. The table below indicates the proportion of investors who invest in a particular sector.¹Investments across sectors | Source: Brookings survey

7. What are the average returns from investments?

   According to Ritu Verma, co-founder of Ankur Capital, “In India, the concept of impact investing is still nascent, and most traditional capital is not asking more from its money, in terms of impact. There is a concern that money with impact will require a compromise in returns. In reality, impact investment has delivered returns on par with, if not higher than, global standards.”Nearly 42 percent of respondents in the Brookings study stated that their funds generated returns of more than 20 percent. Another 25 percent achieved returns in the 15-20 percent range, and eight percent of the respondents between 10-15 percent. Twenty five percent of impact investors achieved below market returns of between 5-10 percent.Average rate of returns, 2018 | Source: Brookings surveyThe expected returns for the various sub-sectors vary. It is, on average, greater than 20 percent for agriculture, 5-20 percent for education, 15-20 percent for healthcare, and 10-15 percent for financial services.

8. What are some of the challenges impact investors face?

   According to Brookings, the top three challenges faced by impact investors in India are availability of appropriate capital across the risk-return spectrum, suitable exit options, and impact measurement.Challenges faced by Indian impact investors | Source: Brookings surveyAccording to Brookings, the top three challenges faced by impact investors in India are availability of appropriate capital across the risk-return spectrum, suitable exit options, and impact measurement.

9. How do impact investors measure impact?

   The cornerstone of impact investing as a concept, is the measurement of social impact. Ironically, this is also one of the biggest challenges for players in this industry.Impact is defined loosely—as profitably serving an underserved market. In India, impact indicators are chosen in an ad hoc manner and done to fit services and products that are offered by investees. They differ from investment to investment, with few common indicators and references.According to Vishal Mehta, co-founder of Lok Capital, “The funding available today is all geared towards market return seeking capital; there is very little around catalytic impact where people are willing to think about subsidising their impact expectation. With almost all global money, there is no compromise on returns. As a result, impact can be defined as anything.”Collecting or showing impact data is not mandated by industry associations like the Impact Investors Council or government agencies such as the Quality Council of India. As a result, efforts to measure impact remain in exploratory or pilot phases.The loose definition of social impact, coupled with the aversion of investors to compromise on returns, has blurred the boundaries between impact investment capital and mainstream commercial capital, says Vishal Mehta.Making impact more standardised in the sector would bring accountability and transparency, and encourage risk-averse or resource-scarce funds to join. For investors, it could make investments comparable, and help make better decisions. For investee organisations, common metrics can help reduce reporting burdens, and effectively demonstrate the impact of their programmes and services.GIIN, in partnership with Rockefeller Foundation, Acumen Fund, and B Lab, spearheaded the development of the Impact Reporting and Investing Standards (IRIS) project. While IRIS is slowly becoming the unified standard behind which various industry stakeholders measure impact globally, a lot more work needs to be done at an industry level in India.Other initiatives towards the standardisation of metrics include: Impact Management Project (IMP), Global Impact Investment Rating System (GIIRS), and Portfolio Risk, Impact, and Sustainability Measurement (PRISM).Despite these resources and tools, many impact investors have not established a standardised mechanism and a set of metrics to measure impact across investees. They pursue impact measurement on a case-by-case basis, working with the entrepreneur to determine metrics that make sense.

10. How can we build a more robust impact investing ecosystem?

    Here are some changes that can help build a robust impact investing ecosystem in India:Move from qualitative to quantitative dataReporting impact data so far has mostly focused on qualitative and anecdotal data in narrative and case study formats. But to mobilise capital towards the sector, it is imperative to develop methodologies and indicators both on financial returns and social impact. This can help drive early-learnings within and across portfolios, attract additional capital, and present comparisons and trends.Document results consistentlyInvestors and investees can be more consistent in the way they document impact and measure data, taking care of aspects such as key assumptions applied, units of measurement, and so on. Creating and promoting an online public database, which houses guidelines and documentation protocols, can further facilitate the impact investment market.Ease the entry of funds into IndiaFunds based in India are subject to unfavourable laws that change often, with little to no prior notice. There is also concern over policies and regulatory requirements that differ across states, making compliance more difficult, as well as over the lengthy judicial process in India. As a result, global fund managers are often wary of establishing funds in India, or investing in Indian enterprises.There is a need for the government to step in and regulate the market through policy interventions.Enable the growth of intermediariesThere has been a growth in new types of organisations that support impact investors and social enterprises. For instance, intermediaries such as Unitus Capital help broker deals between funds and enterprises, and incubators such as Unltd India and Villgro provide support to enterprises early on in their lifecycle. These players play a critical role in facilitating the growth of the impact investing market.Increase collaboration amongst investorsFormal collaborations among impact investors offer benefits of shared lessons, costs, and databases. While Indian impact investors reported that they consulted co-investors during due diligence phases of investments, a similar process can be undertaken when impact reporting requirements are determined as well. Leveraging industry players, such as nonprofits active in the field and government agencies, can help coordinate research and learnings.

Footnotes:

1. These are in terms of the number of investments made, and may not be the sectors receiving the highest amount of investments.

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Insights and quantitative data in this explainer have been sourced from The Promise of Impact Investing in India, a Brookings India report published in July 2019.

Saahil Kejriwal contributed to this article.

What is FCRA and why is it important?

Foreign Contribution (Regulation) Act, or FCRA, is an act in the Indian Constitution, the purpose of which is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality¹ by certain individuals or associations or companies and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.

Simply put, FCRA regulates the inflow of foreign contributions or aid to India. The law is enforced by the Ministry of Home Affairs.

The intention behind this act is to prevent foreign organisations from dominating—or even influencing—social, political, economic, and religious discussions in India. Examples of such influence are: religious groups carrying out conversion programmes in India, or organisations funding Indian activists protesting against large dams or nuclear plants.

FCRA prohibits certain individuals and organisations from accepting any foreign contribution. These include political parties, government employees, print or visual media outlets, and so on. Companies that are allowed to receive foreign funds can only do so after obtaining a registration.

It is important to note here that foreign money that flows into the country as payment for goods or services to Indian businesses is outside the purview of FCRA.

All data quoted in the article has been derived from the report Estimating Philanthropic Capital in India, published by the Centre for Social Impact and Philanthropy (CSIP), Ashoka University.

Saahil Kejriwal contributed to this article.

Saahil Kejriwal contributed to this story; inputs and insights from Divya Pamnani.

1. Who are Frontline Health Workers?

   Frontline Health Workers (FLWs), also known as Community Health Workers, are those who take health services directly to communities, where access is often limited.In India, FLWs are women who come from the communities that they are serving; they act as an essential link to health facilities by bringing services to people’s doorsteps.India has three types of FLWs that fall within the purview of two ministries, the Ministry of Health and Family Welfare (MoHFW) and the Ministry of Women and Child Development (MoWCD).Anganwadi worker (AWW)Anganwadi workers form a critical part of the Integrated Child Development Services (ICDS) programme, whose mandate is to provide pre-school education for children under six, and nutritional support and healthcare for children and pregnant or lactating mothers, to reduce mortality, morbidity, and malnutrition.AWWs run Anganwadi centres (AWCs)—the village- or slum-level delivery mechanism of the ICDS—and work with Accredited Social Health Activists (ASHAs) and Auxiliary Nurse Midwives (ANMs) to offer a package of six services. They fall within the purview of the MoWCD.Accredited Social Health Activist (ASHA)ASHAs are part-time, trained community health volunteers, who work as an interface between the community and the public health system. They fall within the ambit of the MoHFW, and are a key component of the National Rural Health Mission (now called the National Health Mission). They are selected from the village to which they are accountable, and their role entails tracking pregnant women and newborns, delivering key health-related information, and promoting the better health-seeking behaviour, whether it’s in the home or at a medical institution.Auxiliary Nurse Midwife (ANM)ANMs work at health sub-centres, which provide healthcare services at the village-level and are the closest service provider to the community, within the health system. ANMs have preliminary qualifications in midwifery and Maternal and Child Health, as well as in treating common illnesses. They provide a range of services, such as dispensing medication, immunisation and family planning, assisting with deliveries, etc.

2. What do FLWs do?

   AWWs have varying responsibilities, from conducting regular health surveys of families and maintaining files and records to spreading awareness on health, nutrition, family planning, and child growth and development. AWWs also coordinate with block healthcare establishments and inform them of any cases of disabilities or infections among children. They are responsible for immunisation of children as well as their pre-school education.ASHAs go door to door visiting the poorest and most vulnerable, counselling couples and pregnant women, supporting peer educators at the village level, helping with village health plans, providing medical care for minor ailments such as diarrhoea and first aid for minor injuries, and mobilising people for immunisations. They also create awareness about the various health and health-related services available to people, and encourage them to use those services. Additionally, they work with adolescents, bring married couples to primary health centres (PHCs), provide contraceptives, monitor pregnant women and accompany them to medical facilities for delivery.ANMs, unlike AWWs and ASHAs, play a supervisory role, and participate in a range of health activities such as maternal health, child health and family planning services, nutrition and health education. They also work towards improving environmental sanitation, immunisation for communicable diseases, treating minor ailments, and offering first aid in emergencies and disasters. Picture courtesy: Paula Bronstein/The Verbatim Agency/Getty Images

3. Why do FLWs matter?

   The neonatal mortality rate (NMR) in India is about 30, which means that out of 1,000 newborn babies in any given year, around 30 die within the first month. In 2018, India’s NMR ranks 12^th from the bottom, among 52 low-middle income countries.The maternal mortality ratio (MMR) is also high at 130 per 100,000 live births. Though MMR has declined significantly—by 22% since 2013—India still accounts for 17% of all global maternal deaths.In addition, the number of doctors vis-à-vis the size of India’s population is 0.62 per 1,000 people, compared to one doctor per 1,000 people, as prescribed by World Health Organization (WHO). This figure varies vastly across states. For many Indians living in villages, hospitals and other medical facilities are inaccessible owing to poverty, distance, and lack of knowledge, among other things. Because FLWs reside in the villages or districts they serve, they better understand the problems of the village and are trusted by the community.The understanding, communication skills, and approach of FLWs make them arguably the most important component in any government initiative for the health of women and children. Their connect to the last mile make them crucial as an intermediary between the community and the healthcare system, especially in a culture where many women are deprived of freedom of movement. It is therefore important for policy to underscore their role, which is key to implementing sustainable changes at the local level.

4. When were FLWs introduced in the Indian health system?

   AWWs became a part of the Indian health system in 1975, when the ICDS was launched. The ASHA cadre came about in the year 2005, whereas ANMs have been a part of the Indian public health system pretty much since the early days.

5. How do ASHAs, ANMs and AWWs interact?

   ANMs are trained and have specialised skills, as a result of which they play a supervisory role with AWWs and ASHAs. This relationship is especially important for ASHAs, as apart from supervising their work, ANMs educate ASHAs on maternal care, pregnancy and labour. While this is how ANMs and ASHAs are supposed to interact, the extent of supervision varies widely in practice.Though these FLWs have distinct skills, roles and schedules, their responsibilities overlap. For instance, the ICDS was designed to achieve a convergence of services provided by the MoHWF and MoWCD; however, in the field there is duplication of work across the three categories.One event that brings all of them together is the monthly Village Health Nutrition Day (VHND), when the ANM visits the Anganwadi centre, and the AWWs and ASHAs mobilise the villagers to assemble there. On the VHND, the villagers can interact freely with the health personnel, and obtain basic information and services, such as immunisation.

6. How many FLWs does India have?

   In May 2015, India had a total of 12.96 lakh AWWs, who were running a total of 13.5 lakh AWCs. Anganwadi Helpers*, who assist AWWs numbered 11.65 lakh. Each AWW is supposed to serve a population of 1,000, and is paid around INR 4,000 per month, though this figure varies across states. Last week, Prime Minister Modi announced a hike in the remuneration to AWWs and the monthly honorarium to ASHAs.In January 2017, there were a total of 8.82 lakh ASHAs. They are supposed to serve a population of 1,000 in rural areas, and a maximum of 2,500 in urban areas. Because they’re volunteers, they do not receive a salary, but get monetary incentives for specific activities. For instance, they are paid INR 350 for every institutional delivery that happens because of them.As for ANMs, in March 2015 India had a total of 2.12 lakh. With 155,708 functioning health sub-centres (which are supposed to serve a population of 5,000 each) and two ANMs per sub-centre, India’s total requirement for ANMs is around 47% higher than the current supply. Picture courtesy: Paula Bronstein/The Verbatim Agency/Getty Images

7. How much of a positive effect have they had?

   Measuring the impact of FLWs is very challenging. However, we know from the experience of field workers and nonprofit programmes that they have played a crucial role in improving access to health and nutrition services. AWWs, for instance, have had a huge impact in terms of delivering food to children. Like the Mid-Day Meal scheme, ICDS has been successful in providing one meal daily to children in villages. However, whether this has improved nutrition outcomes is still a question.According to the government’s Children of India 2018 report, institutional deliveries have doubled since 2005, since the introduction of the Janani Suraksha Yojana (JSY), which gives cash incentives for institutional deliveries (which are known to improve chances of survival for babies, than if delivered at home). ASHAs have been instrumental in mobilising women to avail of the JSY scheme.

8. How do their challenges and constraints affect their ability to do a good job?

   a) Low literacy makes tasks harder: Many FLWs, especially ASHAs, come from poorer backgrounds and have difficulty reading and writing. Though their literacy levels differ widely across states, where they are low, it not only affects their ability to discharge their daily activities, but also makes them less confident to deliver new ideas in group settings. This is especially true if the ideas are unfamiliar or relate to topics like condom-use, which they may be shy to speak about openly.b) Lack of role structure and definition confuses priorities: The work of FLWs is not always structurally defined; they can be pulled in for all kinds of government work—immunisation, polio, helping with elections, and so on. While AWWs are paid an honorarium and ANMs are paid salaries, ASHAs are paid incentives. So they lack the institutional support structure that the others get. Further, only some of their duties are incentivised, which influences their priorities.c) Large workload and limited training impact quality: FLWs are supposed to be the go-to resource at the village level, but they may not always be equipped or sufficiently trained to handle all their responsibilities. Besides, many different kinds of responsibilities are placed on AWWs and ASHAs, such as conducting the census or undertaking additional surveys.ASHAs also need to be mobile, as they must go from house-to-house and accompany women to the hospital. Their days usually start early and they must be available at odd hours. This combined, places a tremendous burden on FLWs and their ability to execute their tasks well.d) Community dynamics create cultural constraints: FLWs need to engage with all community stakeholders. Not only must they bring their own families on board (given their arduous work schedule), but also the families they serve, many of whom may come from upper caste backgrounds and object to interacting closely with FLWs belonging to a lower caste. Alternatively, she too may have issues about interacting with those from a lower caste. Both caste and gender also come into play when working with local leaders and community elders, many of whom are male.

9. How can India improve its Frontline Health Worker system?

   a) Selection: We need better selection criteria for FLWs, which go beyond their education and age. Given the nature of their work, it’s important to ensure some basic skills during recruitment, such as the ability to talk to people, the propensity to learn, and so on.b) Training: Many of FLWs’ challenges can be solved by effective and structured training. AWWs and ASHAs don’t have a health background, making it even more important to equip them to carry out their duties. We need greater investment in both pre-service and in-service training.c) Supportive supervision: While training is important, FLWs also need supportive supervision till the time they’re confident in their skills. Though ANMs are supposed to supervise ASHAs, in practice this remains limited largely to ANMs visiting on the Village Health and Nutrition Day.d) Motivation: An important way to improve the FLW system is to provide the right encouragement. For ASHAs, there has been an ongoing debate around whether a fixed honorarium might be more effective than incentives. But even with incentives, there are often delays in payment, which affects motivation levels.FLWs do very essential and hard work for the health of our people, and more respect, appreciation, and community recognition might go a long way in improving the system for them and the people they serve.FLWs do very essential and hard work for the health of our people, and more respect, appreciation, and community recognition might go a long way in improving the system for them and the people they serve.

*The Anganwadi helper is a woman selected from the local community, whose primary task is to assist the AWW. She is responsible for maintaining the AWC, getting children to the centre, or any other help that the AWW might require in carrying out her duties.

With inputs and insights from Shireen Jejeebhoy and Shamik Trehan.
Saahil Kejriwal contributed to this story.