The Measure of Money: Social Impact Investing Grows Up
Are financial markets a force for social good? 1000+ entrepreneurs, NGO staffers, and financiers attended the second annual Social Capital Markets Conference (SOCAP09) to answer the question. One year later, the conversation transformed from enthusiastic optimism to a more scrupulous discussion about measurement, metrics, and proof. Interest in environmentally and socially beneficial investment is at an all time high, and so is the need for a common way to understand how money delivers positive impact.
Socially-focused investment has been around awhile. You can choose a social mutual fund, or work with your broker to screen out companies that do the worst harm, or screen in companies that are more consistent with your personal values.
Therein lies the problem with social investing. For financial returns, everyone agrees that measures like discounted cash flow, earnings per share, and market capitalization are all indicators of a company’s health. For social and environmental returns, the measures are more subjective, and even the more quantitative metrics like a company’s carbon footprint do not follow a standardized method for measurement. Even the Triple Bottom Line methodology has been put into question for its lack of teeth and “vague commitments to social and environmental concerns,” according to two ethicists Wayne Norman and Chris MacDonald.
How will emerging standards organizations address social and environmental impact with greater rigor and transparency?
The Impact Reporting and Investment Standards organization (IRIS). Launched at SOCAP09, and led by The Rockefeller Foundation, Acumen Fund, and B Lab, IRIS plans to create a common language and framework for defining, tracking and reporting the performance of impact capital. One of the group’s key initiatives is to share the Acumen Fund’s measurement Pulse software management system for non-financial data (developed in partnership with Google and Salesforce.com). Launched as a “user configurable open source toolset,” the plan is to evolve as an industry standard for funders and grant givers to transparently track impact.
Perhaps by next year’s Social Capital conference, we will have a shared understanding of how to measure for good, and green.