NB Financial Innovation
Measuring Impact With Meaning: 50 Funds That Are Best For The World
December was a big month for impact investing, wrapping up an even bigger year. The momentum of our movement was on display at an oversubscribed GIIN Investor Forum in Amsterdam, where more than 800 investors and supporters of impact gathered for a two-day deep dive on the state of the industry. Nearly a decade in, the vision of a trillion-dollar impact investing space seems within our reach as more mainstream investors are allocating capital and developing product for impact.
Now more than ever, there is greater urgency to clarify what asset owners and managers mean by “impact” and to leverage standardized tools that allow for comprehensive management of impact with rigor and consistency, while not creating a burdensome process that distracts an entrepreneur from the goal of scaling a business impactfully and profitably.
Some players in the market, in seeking a simple solution, have settled on measuring impact through a few metrics. While we should commend those institutions that are transparent about where they are on their impact management journey, this strategy fails to capture the wide range and quality of positive impact of businesses in their portfolio. The instinct to find clear, concise measures of impact is right; the oversimplification of how to do so creates a risk that impact investing becomes meaningless to the mainstream capital markets.
One solution is highlighted in our recently released inaugural Best for the World Funds list, which includes 50 fund managers that are doing impact management with meaning. B Lab is proud to extend our Best for the World honors beyond the community of Certified B Corporations and into the world of impact investing. These 50 funds have gone through the rigorous GIIRS Impact Rating process, which measures the impact intent of the fund and the actual impact performance of its underlying portfolio companies. The rating process covers business model impact (think socially or environmentally beneficial products/services and key beneficiary groups, weighted by intentionality, intensity, scale and outcomes) as well as the environmental, social and governance (ESG)/operational impact of the portfolio.
The 50 Best for the World Funds invest all around the globe, across sectors, asset classes and impact themes. They are a diverse group with one common thread: They are deeply committed to measuring impact, putting the data to use to improve performance over time, and to transparently sharing with their investors impact performance over the lifetime of their fund.
One fund honored for its exceptional business model impact is Vital Capital, a leading impact investment, private-equity firm that invests primarily in sub-Saharan Africa. The fund’s investment strategy allows them to invest in companies across a variety of sectors, including urban communities, agriculture, health care, energy and water. Vital Capital’s outstanding Platinum Impact Business Model rating (part of its overall GIIRS score) reflects the fact that each of Vital’s portfolio companies is focused on more than one type of business model impact, which is not the case for many funds. Their portfolio companies – which span five different sectors – are focused on having a positive impact on their consumers, their local community and the environment.
Vital Capital is a Pioneer GIIRS Fund, meaning the fund has been using the rating system since it was launched in 2011. The fund incorporates GIIRS and the tools on the B Analytics platform throughout its investment life cycle with companies. During the due diligence process Vital Capital managers ask companies to complete the GIIRS Rating assessment, and companies are rated annually once the fund has decided to make an investment. In addition to its impact leadership Vital Capital demonstrates that investing for impact can also achieve market rate investment returns.
The GIIRS team celebrated a number of these funds – including Adobe Capital, AlphaMundi Group, Annona Sustainable Investments, Bamboo Capital Partners, Bridges Ventures, Catalyst Microfinance Investors, Caspian Impact investments, Developing World Markets, Grassroots Capital, Gray Ghost Ventures, Leapfrog Investments, Microvest, Mov Investimentos, Pearl Capital Partners, Quona Capital, Village Capital, Vital Capital, and Vox Capital – together in Amsterdam to celebrate their individual and collective achievement in impact and their leadership in building a credible, robust impact investing industry.
We hope you will recognize the deep commitment to impact made by the Best for the World Funds, honor their achievement, and join them in the pursuit of measuring and managing impact with rigor.
GIIRS Ratings are the gold standard for funds to manage their portfolio’s impact with the same rigor as their financial performance. For investors wondering how to start measuring and managing impact, Measure What Matters programs and the B Analytics platform provide a seamless data collection, management and reporting solution for capital markets partners. Learn more at here or reach out to us at email@example.com.
Flory Wilson is the director of B Lab’s Measure What Matters Initiative
Image credit: Freddy Fam/Flickr.