Investments aligned with this Strategic Goal aim to improve children’s health, educational, and economic outcomes through early childhood care and learning opportunities that support physical growth and overall development of skills from an early age.

What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Many children worldwide suffer from poor health and nutrition, receive inadequate support for their socioemotional development, and lack quality early-learning opportunities to prepare them for first grade. Inequalities in child development are stark: cross-country evidence shows that by the time children enter primary school, significant gaps already exist in their development. Nearly half of children under five in developing countries are stunted or live in extreme poverty, threatening their ability to benefit from the opportunities education can provide (1).

Improving early childhood care and education to set children on high-development trajectories requires fostering their cognitive and socioemotional development through early child nutrition, health care, stimulation, and learning opportunities. Interventions will have the greatest impact when they are multi-sectoral, integrated, and holistic (6). Investments in pre-primary education can:

  • deliver products or services to build foundational skills and promote child–teacher or child–caregiver interaction;
  • foster crucial pre-academic abilities through play, such as emotional security, curiosity, language, and self-regulation; and
  • offer professional development so teachers can effectively implement relevant curricula while providing positive, engaging classrooms that promote children’s innate drive to learn.

Investments in early child health, nutrition, and psychosocial wellbeing can:

  • improve maternal nutrition through diet, supplements, and fortification, while reducing child mortality and early health problems;
  • improve sanitation and access to child health services; and
  • build caregivers’ capacity to support healthy development and to coach parents and caregivers at home on positive discipline.

What is the scale of the problem?

In 2015, 69% of children participated in pre-primary learning worldwide, including just 43% of children in low-income countries. This compares to 92% of children in high-income countries. Just one in five children in low-income countries around the world attend preschool, and the one-quarter of children worldwide who are stunted cannot achieve their potential in school (1). Stunting is also associated with reduced school participation and achievement and can reduce income in adulthood by as much as 22% (3). Less than two-thirds of children aged 36 to 59 months are developmentally on schedule in several countries, including the Democratic Republic of the Congo, Mauritania, and Nepal (4).

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

Children Aged 3–6: Products and services to help children develop in their early years can improve their chances of success in later years. By the time children enter primary school, gaps in cognitive development are already apparent, with children from lower socioeconomic backgrounds lagging noticeably behind children from wealthier backgrounds (2).

Poor and Disadvantaged Students: Globally, children in the richest households are two to three times as likely to be enrolled in preprimary school compared to children from the poorest households (2). Poor children are more exposed to health shocks and less likely to receive stimulation, care, and protection from stress. Nutrient deprivation, infectious diseases, and chemically toxic or physically dangerous environments affect many poor children not only after birth but also in the womb (1).

Parents and Caregivers: In the child’s first year of life, interaction with parents or caregivers is the main source of stimulation. Programs that build caregivers’ capacity to support healthy development can substantially improve outcomes for their children (1). Investments in this strategy can ensure adequate flexibility and support for parents so they have the resources to select appropriate care for their children (2).

Teachers: Settings with qualified and trained early childhood development professionals yield improved cognitive and social development outcomes.

Schools: Establishing infrastructure and service-delivery standards for centers providing early childhood development services, such as adequate space for all students and ensuring the overall safety of the learning environment, can ensure that all children are guaranteed at least a minimum level of quality and safety. In addition, small class sizes and high caregiver-to-child ratios are structural inputs associated with positive child outcomes.

What are the geographic attributes of those who are affected?

The level of access to pre-primary school in developing countries ranges from a low of 21% in Southern Asia to a high of 75% in Latin America and the Caribbean, contrasting with near-universal access to primary school in many developed countries (4). Socioeconomic status results in significant inequalities in pre-primary school access in many countries. Many children in low- and lower-middle-income countries suffer malnutrition, worms, malaria, and high levels of disability, all of which affect their ability to learn (3).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

Investments in early childhood care and education can address early gaps in opportunity, yielding sustained high returns and lifelong benefits for participants and society in general. Examples of benefits include reduced inequality, increased wage-earning potential, decreased crime, and lower reliance on welfare (1). Participating in quality pre-primary programs increases the likelihood of primary school attendance and decreases grade repetition and drop-out rates. High-quality preschools also improve school readiness, leading to better primary school outcomes, particularly for poor and disadvantaged students (3). Regarding early childhood care, well-nourished children who are free from disease are better able to participate in school and learn (5).

A robust system for early childhood care and education must be integrated with programs in all essential sectors and targeting all groups, including pregnant women, infants and toddlers, preschoolers, and caregivers and parents more broadly. Additionally, monitoring and evaluation are essential to ensure program quality, protect children’s well-being, and promote their development and learning.

Since the economic value of early childhood programs is often highest for those least likely to receive services, success should be measured not just by examining national averages but by comparing differences in access across different segments of society. Increasing preschool enrollment to 50% of all children in low- and middle-income countries could increase lifetime earnings by an estimated USD 15–34 billion (2).

The returns to investment in early childhood development also have a strong gender component. Besides directly increasing female labor force participation, access to affordable and high-quality childcare correlates with increased female participation in primary and secondary school, as older female siblings are freed from the expectation that they care for younger children (2).

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

More than 200 million children younger than five living in low- and middle-income countries fail to reach their developmental potential because of the negative consequences of poverty, nutritional deficiencies, and inadequate learning opportunities (2). One in four children younger than five have stunted growth and development due to undernutrition (3).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

Investments in early childhood care and education prepare children for school, promoting better educational outcomes. Growing evidence demonstrates that the returns to investments in children’s early years are substantial and efficient compared to equivalent investments made later in life. Investments in early childhood development have been linked to lifelong benefits for recipients and society in general, including increased wage-earning potential, decreased incarceration rates, and lower reliance on social welfare (2).

Some examples of impact from investments aligned with this Strategic Goal include the following:

  • In Jamaica, the Reach Up and Learn program, which promoted early child stimulation, led to lower crime rates, better mental health, and 25% higher earnings two decades later (1).
  • In countries from Ethiopia to the United States, high-quality, center-based programs have shown substantial benefits in developing children’s linguistic, cognitive, motor, and socioemotional skills (1).
  • In Brazil, low-income girls who participated in community preschool programs were two times more likely to reach fifth grade and three times more likely to reach eighth grade than their peers who did not attend preschool (3).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

Stakeholder Participation Risk: Inappropriate tailoring of products⁠—to address client needs, preferences, and local norms, misunderstanding of the objectives and experiences of those affected by poor early childhood care and education, or stakeholder mistrust in education or health service providers⁠—can greatly reduce positive impact. Mitigating this risk requires that investors adapt to local norms, particularly when promoting early-childhood health, nutrition, and psychosocial wellbeing.

External Risk: The lack of a supportive local regulatory agency for health could impede the development of early-childhood care and education. Investors can mitigate this risk by understanding existing regulatory environments and resources available to affected stakeholders that may impact their access to quality early childhood care and education. Investors should also thoroughly understand the plans businesses and initiatives have designed to encourage uptake of their product or service.

Execution Risk: Some solutions could benefit an unintended demographic in a given country or context, perhaps benefiting upper-middle classes or private schools, for example, and deepening inequalities. To mitigate this risk, investors should collect data and indicators to verify the demographic served by the investee or fund.

Evidence Risk: Efforts to assess impact may be hindered if a startup lacks the capacity to monitor and evaluate all of their outcome metrics. Inability to measure impact metrics or reliance on a third party to monitor progress introduces the risk for error. To mitigate that risk, investors should carefully consider the type of indicators investees provide and require realistic social impact performance metrics that are relevant to the local context and to the intended outcome of their solution.

What are likely consequences of these impact risk factors?

These risks could prevent clients from effectively leveraging provided services and could even negatively impact clients who face opportunity costs from the use of products and services that are do not meet their needs.

Illustrative Investment

Hippocampus Learning Centres operates preschools designed to improve learning opportunities in rural India. The company’s kindergarten programs aim to educate preschoolers to achieve personal standards of excellence in both academic and non-academic areas through self-learning, enabling students to recognize and optimize their full potential. Lok Capital, among other investors, invested in this solution. At the time of investment, Hippocampus had 84 centers serving 1,100 students; at Lok's exit, Hippocampus had 700 learning centers serving 11,000 students.

Kinedu provides an educational platform intended to help parents develop nourishing and meaningful relationships with their toddlers through creative activities. The platform includes activity videos based on the latest research from both Harvard and Stanford’s Departments of Child Development and field tested in Advenio Child Centers, enabling parents to boost the cognitive, social, linguistic, emotional, and physical progress of their toddlers in early development. Social Capital and 500 Startups, among other investors, invested in this solution. Over three million families are using Kinedu’s early childhood development solution to date.

Kidogo provides childcare services intended to offer educational services to people living in Nairobi’s urban slums. These services include play-based learning, child-centered learning, and holistic development, offering families living in informal settlements and urban slums proper access to education. Education Design Studios and the United Nations Foundation invested in this solution, among other investors. Kidogo has benefited more than 1,000 mothers and provided more than 500,000 hours of play-based early childhood development education to date.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 3
The Promise of Preschool in Africa: A Randomized Impact Evaluation of Early Childhood Development in Rural Mozambique

Martinez, Sebastian, Sophie Naudeau, and Vitor Pereira. 2012. “The Promise of Preschool in Africa: A Randomized Impact Evaluation of Early Childhood Development in Rural Mozambique.” Save the Children, Fairfield, CT, February 14. World Bank, Washington, DC.

This randomized evaluation of a preschool intervention implemented by Save the Children in Mozambique shows that children who attend preschools are more likely to enrol in primary school at the right age. They show large improvements in cognitive and problem solving abilities, fine motor skills and social behaviour, and their siblings are also more likely to go to primary school.
NESTA: 3
Effect of integrated responsive stimulation and nutrition interventions in the Lady Health Worker programme in Pakistan on child development, growth, and health outcomes: a cluster-randomised factorial effectiveness trial

Yousafzai, A. K., Rasheed, M. A., Rizvi, A., Armstrong, R. and Bhutta, Z. A. 2014. Effect of integrated responsive stimulation and nutrition interventions in the Lady Health Worker programme in Pakistan on child development, growth, and health outcomes: a cluster-randomised factorial effectiveness trial. The Lancet, Vol. 384, No. 9950, pp. 1282-93.

A recent study in Pakistan compared the effects of two types of intervention delivered by these home visitors: nutrition education and supplementation and psychosocial stimulation. It was found that the largest impact came from psychosocial stimulation, with significantly higher scores for cognitive, language and motor skill development at 12 and 24 months of age.
NESTA: 2
The impact of early childhood education on early achievement gaps : evidence from the Indonesia early childhood education and development (ECED) project

Jung, Haeil; Hasan, Amer. 2014. The impact of early childhood education on early achievement gaps : evidence from the Indonesia early childhood education and development (ECED) project (English). Policy Research working paper ; no. WPS 6794; Impact Evaluation series ; no. IE 119. Washington, DC: World Bank Group.

This paper assesses whether the Indonesia Early Childhood Education and Development project had an impact on early achievement gaps as measured by an array of child development outcomes and enrollment. There is clear evidence that in project villages, the achievement gap between richer and poorer children decreased on many dimensions.
NESTA: 2
Investing in School Readiness: An Analysis of the Cost-Effectiveness of Early Childhood Education Pathways in Rural Indonesia

Nakajima, Nozomi, Amer Hasan, Haeil Jung, Sally Anne Brinkman, Menno Prasad Pradhan, and Angela Kinnell. 2016. “Investing in School Readiness: An Analysis of the Cost-Effectiveness of Early Childhood Education Pathways in Rural Indonesia.” Policy Research Working Paper 7832, World Bank, Washington, DC

This paper presents evidence on the cost-effectiveness of early childhood education pathways in rural Indonesia. It documents the existence of substantial differences in school readiness between 6 to 9 year old children.
NESTA: 2
Early Childhood Development Interventions and Cognitive Development of Young Children in Rural Vietnam

Watanabe, K. R. Flores, J. Fujiwara and L.T. H. Tran. 2005. “Early Childhood Development Interventions and Cognitive Development of Young Children in Rural Vietnam.” Journal of Nutrition 135 (8): 1918-25.

The goal of this research was to determine whether an early childhood development intervention added to a nutrition intervention during preschool ages had lasting effects on the cognitive development of school-age children in communes of Thanh Hoa province in rural Vietnam. Significant effects of the early childhood development intervention compared with the nutrition intervention were detected.
NESTA: 1
Interpreting the Evidence on Life Cycle Skill Formation

Cunha, Flavio, James J. Heckman, Lance J. Lochner, and Dimitriy V. Masterov. 2006. “Interpreting the Evidence on Life Cycle Skill Formation.” In Handbook of the Economics of Education, Vol. 1, edited by Eric A. Hanushek and Finis Welch, 697–812. Handbooks in Economics Series 26. Amsterdam: North-Holland

Efforts to improve children’s lives can significantly increase individual and societal productivity while reducing inequality.
NESTA: 1
Strategies for Reducing Inequalities and Improving Developmental Outcomes for Young Children in Low-Income and Middle-Income Countries

Engle, Patrice L., Lia C. H. Fernald, Harold Alderman, Jere R. Behrman, Chloe O’Gara, Aisha Yousafzai, Meena Cabral de Mello, et al. 2011. “Strategies for Reducing Inequalities and Improving Developmental Outcomes for Young Children in Low-Income and Middle-Income Countries.” Lancet 378 (9799): 1339–53

The quality of child-caregiver interactions is a key determinant of such programs’ impacts, as Indonesia and Mozambique demonstrated with effective center-based preschool programs for children ages 3 to 6. These programs included minimal infrastructure investments but improved children’s cognitive abilities thanks to their interactions with well-trained caregivers.
NESTA: 1
The evidence base on early childhood care and education in global contexts

Yoshikawa, H. and Kabay, S. B. 2015. The evidence base on early childhood care and education in global contexts. Background paper for EFA Global Monitoring Report 2015

Multisector approaches have proven successful in Colombia with 25% of low-income children receiving comprehensive early childhood education services and 42% are enrolled in day care.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.