What makes a meaningful impact report?

What makes a meaningful impact report?

The new Impact Performance Reporting Norms, published for consultation last month by Impact Frontiers, signal an important milestone for the impact investing industry – providing much needed guidance as to what useful impact reports should include, as well as a structure for organizing the content therein.

Which is good timing, as the demand for reports that can be used to effectively gauge impact performance have become more pronounced.  Impact investing skeptics are hungry to know if this fast-growing industry is living up to the hype. Those on the inside–practitioners, investors, and their beneficiaries–seek guidance to more credibly show the results of their work.

Many of the recommendations outlined in the Norms build on research BlueMark previously conducted to better understand the key information required to interpret and draw conclusions about impact performance. Our research surfaced the need for several distinct types of information, including:

  •  Information about an investor’s impact thesis and objectives
  •  A combination of qualitative and quantitative results data that is relevant to the thesis and presented in relative terms (i.e in relation to a baseline, prior result, and/or external threshold)
  • Transparency into risks, negative impacts, and lessons learned
  • Clearly cited data definitions, sources, and assumptions

These concepts (among others) are accounted for in the Norms and accompanied by detailed guidance as to how report preparers should organize and structure this information.

At the same time, the Norms are flexible, allowing different types of impact investors to apply them in the context of their specific strategies and goals. While this flexibility may be vexing for those seeking more uniform and templatized impact reporting, it is precisely the approach needed as practitioners begin to disclose this rich mosaic of data more consistently. It is certain, as the Norms are tested and adopted, that more structured and prescriptive reporting templates will emerge. But, in their current form, the Norms offer fertile ground for practitioners to experiment and work out how best to disclose their impact data across a common set of information categories. 

The Norms also recognize the critical role that external reviewers play in strengthening the credibility and usability of impact reports. They are supplemented by a set of key questions and tests that independent parties should use when developing opinions or conclusions about the quality of an impact report and its alignment with the Norms.  As our market matures and as independent verification of impact reports becomes more commonplace, ensuring consistency in the rigor underpinning the interpretation and validation provided by third parties will be essential.

We strongly encourage investors to pilot the Norms and openly share their experiences with others in the market. Together, we can all work to deepen our understanding of impact performance, and hopefully, show the skeptics that the delta between what impact investors are claiming and creating is smaller than they think.

ImpactAlpha – “Adopting impact performance standards to hold sustainable investing accountable for real-world outcomes”

ImpactAlpha – “Adopting impact performance standards to hold sustainable investing accountable for real-world outcomes”

This article was originally published in ImpactAlpha and is jointly authored by BlueMark (Christina Leijonhufvud & Sarah Gelfand) and the Global Impact Investing Network (Kelly McCarthy & Dean Hand).

“You can’t manage what you can’t measure” is a now familiar trope in sustainable investing circles, reflecting the belief held by some that the answer to our sustainability challenges is a universal ESG metrics set.

With growing scrutiny over whether sustainable and impact investments are actually contributing to achieving the Sustainable Development Goals, the need for more reliable and verifiable performance reporting on sustainability and impact results is undisputable. A standardized, consistent set of metrics is undoubtedly a helpful tool for achieving comparability across investors against a baseline set of ESG considerations but is distinct from what is needed to achieve accountability for impact outcomes.

Acting on impact data is not about tracking a handful of universal metrics, but rather about evaluating how and which investment decisions can lead to better and longer-lasting outcomes for society and the planet. Investors and other stakeholders need access to information about the intentionality, context and distinct contribution to impact associated with impact investments.

  • Clarity about the intentionality of an investment is key to understanding and evaluating the relevance of an investor’s goals and KPIs.
  • Contextual information is key to interpreting the results. The scale of impact at a point in time, versus the pace of change over time, can tell an investor two very different stories of impact. Context also helps account for the qualitative aspects of pursuing impact, such as the scale of the sustainability challenge in a given market.
  • Further, information about an investor’s engagement with their underlying portfolio is key to understanding their role in enabling impact, including the relative contribution of their capital and expertise.

To put it another way, investors need access to a more complete set of information about impact. They also need tools to be able to interpret and confidently act on the information, especially if they are going to be able to make and manage investments in accordance with sustainability and impact goals and be accountable to the stakeholders they seek to benefit.

Private Markets ESG

Several initiatives are underway to harmonize measurement and reporting of ESG data, efforts that reflect the market’s thirst for more widely available, standardized and comparable information. While these initiatives could help establish a baseline requirement for ESG transparency, understanding progress towards and achievement of sustainability goals requires significant additional effort.

Two recent announcements aimed at improving the use of ESG data in the private markets signal progress, but also how much further we still have to go.

In the first announcement, a group of leading GPs and LPs with more than $4 trillion in combined AUM launched the ESG Data Convergence Project to “advance an initial standardized set of ESG metrics and mechanism for comparative reporting.”

As part of the initiative, several GPs have agreed to track and report to LPs on six metrics across their investment portfolios, including: Scopes 1 and 2 greenhouse gas emissions, renewable energy, board diversity, work-related injuries, net new hires, and employee engagement. These metrics borrow from existing ESG measurement frameworks created by CDP, CDSB, GRI, SASB, TCFD, and others, and broadly align with the ‘Stakeholder Capitalism Metrics’ introduced in September 2020 by the World Economic Forum’s International Business Council (IBC).

As Marcie Frost, CEO of CalPERS, put it: “We have found it challenging to effectively measure impact in our private equity portfolio because of the multitude of frameworks and definitions used by GPs and LPs. This initiative simplifies sustainability reporting by using comparable metrics which allow us to gain insight into the investment risks and opportunities in our private markets portfolio.”

The second announcement (less than a week later) was the launch of Novata, an ESG data hub designed to “enable private companies to collect, analyze, benchmark, and report relevant ESG information,” which was backed by a consortium of non-profit and for-profit leaders including the Ford Foundation, Omidyar Network, S&P Global, and Hamilton Lane. The 10 metrics chosen by Novata include a combination of Environmental issues (e.g., GHG emissions, water and wastewater management), Social issues (e.g., employee safety, data security), and Governance issues (e.g., board diversity, business ethics), all of which align to various established ESG frameworks.

Meanwhile, in the broader financial markets, the IFRS Foundation announced the much-anticipated launch of the International Sustainability Standards Board (ISSB) to develop “a comprehensive global baseline of high-quality sustainability disclosure standards.” The ISSB will build on the work of existing investor-focused reporting initiatives, with the IFRS Foundation committing to consolidate the teams and expertise of the Climate Disclosure Standards Board (CDSB) and Value Reporting Foundation (VRF) under a new board.

The inspiration behind this effort, according to Erkki Liikanen, Chair of the IFRS Foundation Trustees, is that “to properly assess related opportunities and risks, investors require high-quality, transparent and globally comparable sustainability disclosures that are compatible with the financial statements.”

Impact performance reporting

If only the answer to decision-useful impact performance reporting were as simple as aligning on a universal, standardized set of metrics.

Harmonized metrics, data aggregation platforms, and widely accepted disclosure standards are all foundational elements of a marketplace that supports greater ease of comparison, benchmarking, and investment decision-making. But the question remains: will such data contribute to better understanding of achievement of sustainability and impact outcomes and improved capital allocation towards investments that steward human and natural capital?

It’s one thing for investors to report on a universal set of ESG datapoints, based primarily on their relevance to financial performance. But it’s quite another to provide reliable and balanced information about the contribution of investments to broader social and environmental outcomes.

This higher bar for impact performance reporting is the north star for the impact investing industry, and a prerequisite for unlocking capital at a scale large enough to address today’s urgent climate and social inequity crises.

To address the information gap that limits flows of capital to and contributes to skepticism of sustainable investing, the market needs reporting and disclosure standards that reflect the broader set of factors required to assess impact results (positive and negative) and risks.

Clearly, more work remains to be done to harmonize impact performance reporting, including agreeing on the scope of content to be included, the desired frequency and format of reports, and a market-acceptable mechanism for independently verifying the completeness and quality of these reports. Several organizations are actively working to address this challenge, including the GIIN, B Lab, BlueMark and UNDP’s SDG Impact team, each of which is committed to a stakeholder-centered approach that goes beyond the financial materiality prism still governing much of the sustainable investing market in the U.S. and other jurisdictions.

In May 2021, after a lengthy public comment period, the GIIN released COMPASS: The Methodology for Comparing and Assessing Impact to provide impact investors and service providers with a “methodology to assess and, most critically, compare impact results.” This work builds on the GIIN’s IRIS+ system, and several years of gathering real-world impact performance data at the investment level, to provide guidance on calculations and approaches for interpreting change in impact over time as well as for assessing impact performance relative to the size of specific social and environmental solutions gaps. The COMPASS methodology reflects aspects of several industry-wide efforts designed to bring more rigor and meaning to analysis and comparisons of impact performance data.

In July 2021, BlueMark and the GIIN each received funding from the Tipping Point Fund on Impact Investing to conduct separate yet complementary research, in consultation with market actors, to clarify needs and opportunities related to the verification of impact performance data. These research efforts build on the recognition that independent assurance is key to increasing confidence in the quality and objectivity of reported information as well as to facilitating impact performance benchmarks that are built from a base of relevant and reliable data. For the industry, this work is foundational to evaluating impact performance at scale, and essential to driving the market upward toward ever improved impact yardsticks (disclosure: BlueMark is a sponsor of ImpactAlpha).

Ultimately, the emergence and market adoption of robust impact performance reporting standards and verification services, and the public availability of data about industry performance will contribute to enhanced accountability and confidence in impact investing and its role in helping to achieve our shared sustainability goals. These additional pieces of the puzzle are critically needed for a marketplace to effectively allocate capital for transformative impact.

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Christina Leijonhufvud is CEO and Sarah Gelfand is managing director at BlueMark. Kelly McCarthy is director of Iris and impact measurement and management and Dean Hand is research director at the Global Impact Investing Network.

ImpactAlpha – “Adopting impact performance standards to hold sustainable investing accountable for real-world outcomes”

ImpactAlpha – “Why impact investors should pay attention to practices, not just performance”

This piece was originally published in ImpactAlpha.

Most of us were taught growing up that the ends don’t justify the means. It matters how you go about achieving your goals. The same is true when it comes to impact investing – the process by which investors achieve their results matters as much as the results themselves. Just as an athlete or musician can only master their craft through disciplined practice, an impact investor will be better-positioned to achieve impact results if they have high-quality and rigorous impact management practices.

The good news is that the impact investing industry is advancing standards for both practices and performance, with recent progress particularly on practice standards. These standards and frameworks – notably including the Operating Principles for Impact Management (Impact Principles), Impact Management Project (IMP) and the SDG Impact Standards – describe how investors can integrate impact considerations throughout the investment process, from goal-setting to due diligence to exit.

Still, many practitioners are unsatisfied with the focus on process and practice, and believe that impact performance results and outcomes (e.g., carbon emissions reduced, quality jobs created, lives saved or improved, etc) speak for themselves. While it is hard to debate that results matter, the standards for impact performance reporting are still in development.

Certainly, encouraging progress is underway on this front thanks to the leadership of organizations like the Global Impact Investing Network (GIIN), which recently published its “Compass: Methodology for Comparing and Assessing Impact”, and the IFRS Foundation, which is working on creating an International Sustainability Standards Board (ISSB) to harmonize various sustainability reporting standards, an initiative led by Clara Barby from the IMP.

However, in the meantime, most investors and companies lack the information needed to effectively compare one firm’s impact performance results to another’s.

While efforts to establish unifying standards for impact performance measurement and reporting continue, rigorous evaluation of investors’ impact management practices can tell us a great deal about the authenticity of an investor’s stated impact objectives and their chances for achieving those objectives.

Consider a scenario where two fund managers specializing in real estate both claim to deliver similar levels of impact and financial performance – for example, providing 10,000 affordable housing units to communities in need while earning risk-adjusted returns of 6-8% per annum. An expert, third-party verification of those managers’ impact management practices by a firm like BlueMark would provide insight as to how each manager:

  • Defines and evaluates expected impact for each potential investment property;
  • Tracks and monitors whether the properties are achieving the impact expected; and
  • Works with property managers to solicit input from community members and other stakeholders in the evaluation of impact and to address instances of impact underperformance;

These are among the kinds of practices that the impact investing community considers proper impact management. Naturally, it’s fair to expect that the manager with the more thoughtful and disciplined approach to impact management would be more likely to realize optimal impact results.

This is why independent verification is an important enabler for allocators to efficiently “look under the hood” of managers’ investment practices to understand how effectively impact considerations are integrated throughout the lifecycle of the investment. A well-designed verification methodology that’s grounded in impact management expertise can be an important due diligence tool for allocators looking to compare the practices (as well as the performance) of various fund managers.

The standardization of best practices in impact management

The rapid rise of standards like the Impact Principles and SDG Impact Standards shows that impact management practices will remain an important piece of the impact investing puzzle. Already, there is a growing expectation that impact investors be aligned to one or more of these standards, with third-party verification emerging as an important accountability mechanism to assure that investors have the right systems, processes, and capabilities to contribute to achieving the intended impact.

BlueMark’s ‘Making the Mark’ research report, which was based on 30+ verifications of impact management systems, showed significant differences in how investors approach impact investing, with some investors earning top scores on their alignment with the Impact Principles while other investors had significant gaps or shortcomings in their approach. To take our research a step further we created the BlueMark Practice Benchmark, which functions both as a resource for investors to be able to see how they stack up against their peers and as a tool for asset allocators and other market participants to differentiate between Practice Leaders (those in the top quartile) and Practice Learners (those in the bottom quartile).

While impact investors shouldn’t lose sight of the importance of delivering impact performance in line with stated goals, the process by which those outcomes are achieved is just as important. Impact investors should be able to show, for example, that they are contributing to the achievement of reported impact results, engaging with investees to minimize negative consequences, risks, or side-effects, and taking measures to ensure impact is sustained beyond the life of the investment.

One day the impact investing industry may find a way to integrate both practices and results into a comprehensive disclosure and reporting framework. Until that day arrives, it’s imperative that impact investors back up their impact claims by adopting standards for impact management practices in addition to reporting out on their results.


Christina Leijonhufvud is the CEO of BlueMark, where she manages all aspects of business strategy, new product development, and external relations. To date, BlueMark has completed 40+ impact verification assignments across investor types and asset classes.