Projections vs. Evaluations

Abstract

The Impact Purchase, a philanthropic funding mechanism, exclusively purchases certificates for already-completed activities, rather than making funding decisions based on predicted impact. This approach prioritizes retrospective evaluations of impact over predictions, offering advantages such as lower prediction costs, reduced compliance monitoring burden, and incentivizing performance rather than fundraising. Evaluations also yield valuable information and have broader positive social effects. However, capital allocation remains a challenge with this model, as large funders’ predictions are often necessary to initiate projects. Alternatives include gradual scaling up of successful small projects and direct financing by implementers or interested philanthropists. Transparency and explicit evaluations of past performance can mitigate potential drawbacks of retrospective evaluations, such as restricting funding for similar activities and lack of compensation for early stage funders. – AI-generated abstract.