At SOCAP, Lessons on Measuring the Impact of Investments

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How can investors make money and protect the environment?

That question was on my mind last week, when I attended the third annual Social Capital Markets Conference in San Francisco. SOCAP, as it’s called for short, is the world’s leading conference on socially responsible investing. Last week, it brought together more than 1,200 people for three days to focus on how society can mix positive social impact with positive financial returns.

At Conservation International, we wrestle every day with how the business world and the world of social good can, and should, intersect. We partner with some of the world’s largest corporations, and we work with communities around the world to foster sustainable economic development.

We also have a program dedicated to just the sort of social investing that was the talk of the town in San Francisco. Verde Ventures, where I work, is a CI-managed investment fund providing support to small- and medium-sized businesses that contribute to healthy ecosystems and human well-being.

These businesses play a vital role in job creation around the world and, consequently, can be a key source of employment at the intersection of conservation and human well-being.

So far, Verde Ventures projects have:

  • Taken in about $15 million of investments, supporting work in more than a dozen countries;
  • Helped to protect and restore more than 750,000 acres (300,000 hectares) of important land;
  • And employed more than 15,000 local people.

As a recent news article outlines, the field of “impact investing” is taking off. Emboldened by success in similar fields such as microfinance, investors are interested in the possibility of marrying, as the Times article says, “hard-nosed capitalism and bleeding-heart causes.”

And you can also insert the environment into the equation—making an investment that can simultaneously benefit planet, people and profit. Investors know that as the “triple bottom line.”

Measuring success

But this kind of investment comes with a thorny question: How do you measure the social and environmental performance of your investments?

The field of social impact assessment can trace its roots back more than 50 years. But it has only recently taken off, prompted by interest from the private and government sectors in social investment. In the words of McKinsey’s Laura Callanan, “[I]nvestors are waiting to be able to quantify social returns before they start writing the really big checks.”

In recent years, a far-reaching group of businesses, foundations, nonprofits and investment funds have worked on solutions to this issue.

Take, for example, the Global Impact Investing Rating System (GIIRS), a recent creation of the nonprofit B Lab. The system generates a single number to assess the social and environmental impact of investments and investment funds, similar to the way S&P sums up credit risks in the financial world by giving simple letter grades.

At SOCAP, B Lab announced that 12 investment funds in North America have agreed to become “pioneer funds” that receive GIIRS ratings. They join 13 funds in emerging markets; together, these 25 funds represent $1.2 billion in investment.

This project is notable for a few reasons.

First, it piggybacks on metrics work done by a number of organizations, including the trio—The Rockefeller Foundation, Acumen Fund, and B Lab itself—that helped develop IRIS (Impact Reporting & Investment Standards), a set of industry standards to measure social and environmental performance. It shows that social impact assessment tools aren’t simply remaining stagnant.

Second, GIIRS takes one of the enduring problems in metrics—making the complex simple—and offers a potential solution.

At Verde Ventures, we’re watching such work intently. Anything with the potential to illuminate our own monitoring efforts is welcome—and reminds us that we’re part of a larger community working to ensure that Earth continues to support healthy ecosystems and prosperous people.

Neel Inamdar is fund manager for Verde Ventures.

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