How to Avoid Impact Washing in Portfolios
Yesterday I was invited to speak at the Women Advisor Summit 2020 (hosted by Investment News) alongside my good friend, Esther Pan Sloane from UNCDF.
As part of a fire round of Q&A, I was asked about resources or frameworks for getting started in ESG and how to avoid impact washing in portfolios by the audience (for which I thankfully had a slide ready - hat tip to the Investment News team for being in touch with their audience).
The Global Impact Investing Network (GIIN)'s Working Group on Impact Measurement created a set of Guidelines for Good Impact Practice, summarized below:
Setting clear goals and/or Theory of Value Creation (ToVC) as the basis for strategic planning and ongoing decision-making.
Developing an effective impact framework that outlines how specific metrics are used across the entire impact measurement process.
Efficient and effective data collection, storage, and validation (cross-check calculations and assumptions against known data sources and also provide an audit trail)
Analyze data (comparable data analyses utilize standard, objective processes where possible in order to produce widely understood and actionable results)
Evidence-based reporting that aligns with stakeholder expectations about the depth of information covered, presents information in a coherent manner and enables comparisons and decision-making.
Data-driven investment management decisions via a review of investment results including an assessment of stakeholder feedback about reported data as well as recommendations for actions needed to address changes to the ToVC/investment thesis.
Finally, some useful tools and resources to help when assessing or constructing an impact investment thesis/theory of change:
UN Principles of Responsible Investment and UN Women's Empowerment Principles
SDG Indicators Database - breaks down the Sustainable Development Goals into specific targets and measures
GIIRS Rating (Global Impact Investing Rating System) - GIIRS, developed by B-Lab (a nonprofit organization that certifies B Corporations and promotes the benefit corporation structure), is an impact ratings tool and analytics platform that assesses companies and funds on the basis of their social and environmental performance. GIIRS Ratings are the “gold standard” for funds that manage their portfolio’s impact with the same rigor as their financial performance
GRI Standards: based in the Netherlands, the Global Reporting Initiative (GRI) takes a global perspective on reporting publicly on a range of economic, environmental and social impacts.
SASB Standards: The Sustainable Accounting Standards Board (SASB) is an independent, private-sector standards-setting organization dedicated to enhancing the efficiency of the capital markets by fostering high-quality disclosure of material sustainability information that meets investor needs.
GIIN's IRIS+ - Impact Reporting and Investment Standards (IRIS) Plus tool is helpful for investors wanting to explore impact investing themes and approaches mapped to the SDGs (see below).
