A company that restores an aquifer, recycles electronic waste, or helps farmers adapt to drought undoubtedly generates valuable benefits for development. However, that impact is not always evident or immediate, and when we seek to attract funding, we must be able to demonstrate those results with the precision that investors require. Having verifiable evidence helps ensure that claims of impact translate into confidence to invest.

This challenge takes on particular relevance when seeking financing for sustainable development within a growing innovation ecosystem. In this context, strengthening the capacity to measure and demonstrate results is part of a necessary effort to ensure the ecosystem develops and more solutions can emerge.

This is reflected in the report Climate Technology in Latin America and the Caribbean, published by IDB Lab and HolonIQ, which identified and analyzed more than 1,200 environmental technology startups in Latin America and the Caribbean that had raised $3 billion in venture capital since 2010.  

The Cost of Failing to Demonstrate Impact

Many benefits of environmental sustainability solutions, such as soil remediation or aquifer recharge, take time to materialize. In other cases, the benefits consist of avoided harm, such as a crop that is more drought-resistant or waste that is recycled rather than ending up in a landfill. Assessing these outcomes requires a clear baseline of what would have happened without the intervention.

For buyers and investors, having evidence of these results makes it easier to evaluate solutions and support their environmental commitments. However, when a financier cannot assess an impact claim with sufficient confidence, they may need more information, extend their analysis, or, in the worst-case scenario, decide not to move forward. This cost of uncertainty is known as the “distrust premium,” which can also affect young companies that generate real benefits but do not yet have the capacity to document them.

What Makes Data Reliable

To help inform investment decisions, information must make it possible to understand what was measured, how the result was obtained, and what its limitations are. Four attributes are particularly important:

1. A clear reference point. Defining a baseline or comparison scenario makes it possible to assess what has changed. In the case of avoided emissions, it is necessary to specify what would have happened without the intervention.

2. Traceability. It must be possible to trace the origin of the information: which area, waste lot, or intervention was assessed, on what date, and using what method.

3. Adequate verification. The review must be appropriate for the intended use of the information and meet the requirements of the applicable instrument or standard. When required, it must include independent verification.

4. Comparability over time. The indicators must allow for tracking changes in results over time. If the methodology changes, adjustments must be documented, and their impact on comparisons must be explained. 

Satellite imagery, sensors, digital monitoring platforms, and artificial intelligence models, for example, can reduce the costs of collecting and processing field data. These tools expand the options available to early-stage companies, although their usefulness depends on data quality and an appropriate methodology.

Measurement should also be commensurate with the company’s maturity and the intended use of the information. A limited set of rigorous metrics can provide more value than a large amount of data that is difficult to maintain or interpret.

How Measurement Is Integrated into Business and Investment

The following IDB Lab initiatives operate in different sectors and at different stages. Their approaches integrate results monitoring, traceability, and indicator design into business and investment. For example:  

Toroto (Mexico): designs and implements projects for ecosystem restoration, aquifer recharge, and carbon sequestration in partnership with rural and indigenous communities. Its Toroto Track platform tracks field activities and quantifies results, providing information that helps its corporate clients monitor the progress of the initiatives they support. IDB Lab approved financing for its expansion and for investment in measurement and monitoring technology.

GAIA Vitare (Colombia): recovers and recycles electronic waste in partnership with recycler associations. For each batch processed, it issues environmental certificates of recovery or final disposal, which its clients can use to document the materials’ final destination. IDB Lab approved a $2 million loan to expand its plant and process up to 4,000 metric tons of engineering plastics annually, with the goal of benefiting more than 1,000 recyclers.

Regenera Ventures I (Mexico): is a fund focused on the transition to regenerative practices. The IDB Lab project aims to reach up to 12 rural companies to implement sustainable management of more than 85,000 hectares and to reach more than 7,000 small-scale producers. Investments in the IDB Lab portfolio include technical assistance to help companies monitor, evaluate, and measure impact. Incorporating these capabilities from the outset makes it possible to define expected outcomes and how they will be tracked throughout the investment.

From Data to Investment Decisions

Consistent, traceable, and verifiable evidence helps assess development impact and can strengthen the conditions for accessing financing. It does not replace a viable business model or eliminate investment risks, but it enables better-informed decisions about the outcomes a solution can deliver.

For IDB Lab, this means incorporating measurement from the very design of the investment and supporting the capabilities needed to sustain it. Defining useful indicators, allocating resources, and tracking results help companies and investors learn what works and where they should scale up their efforts. In this way, measurement contributes both to building trust and to guiding the growth of solutions for sustainable development in Latin America and the Caribbean.

You can read the full report here.