Theory of Change for Funders

Publication date: 
December, 2014

Growing numbers of charities are using theory of change as a strategy and evaluation tool. This popularity is partly a symptom of funders asking charities to provide a theory of change in their application or evaluation. But can the approach also be useful for funders themselves; and how does the tool differ in this setting?

Theory of change describes the change you want to make and the steps involved in making that change happen. It also captures the assumptions behind your reasoning, and where possible, provides evidence to back them up. It is enormously helpful as a tool for both strategy and evaluation—and yet most funders do not use it.

Without the kind of strategic thinking it encourages, our concern is that funders could be missing opportunities to identify neglected issues and join up funding with others.

Theories of change are not for all funders; and the benefits will differ depending on how far a funder is able to go in completing one. Some funders are able to draw out a full theory of change, whereas others are only able to do a partial theory of change.

This report talks through three different types of theories of change, each relating to one type of funder impact:

  • a theory of change for impact on beneficiaries;
  • a theory of change for impact on grantees; and
  • a theory of change for impact on a social problem.

For each theory of change, the report discusses the associated benefits, how the theory of change should be used, and what types of funder it is useful for.