Monday
November 2
2009

Margot Brandenburg and Sarah Gelfand

Impact Reporting and Investment Standards – Comment Now!

The idea that for-profit investment can have positive social and environmental impact has been talked about for some time, and is increasingly being put to practice. This phenomenon of Impact Investing has the potential to complement philanthropy and government in addressing to some of the planet’s most deeply entrenched challenges, including climate change, agricultural productivity, shelter, and health, among others. By tapping the global capital markets, impact investing can unlock financial resources to address these challenges at a scale that government and philanthropy cannot match.

However, unlike mainstream investors, impact investors are not supported by established institutions-such as regulators, industry networks and service providers-to help them make investment decisions. A first step toward a more efficient impact investing industry is to establish a common vocabulary and framework for defining, reporting, and tracking the social and environmental performance of impact investments. This will bring transparency and credibility to the sector and enable critical industry infrastructure like performance benchmarks, investment databases, and rating systems that serve to further stimulate additional investment into impact enterprises and funds.

Developed by Rockefeller Foundation, Acumen Fund, and B Lab, the Impact Reporting and Investment Standards (IRIS)-which you’ve read about here before-address this need. Similar to the way that the International Financial Reporting Standards (IFRS) dictate a standard for reporting financial performance, IRIS provides a model for reporting on social and environmental performance.

Use of standardized terminology and metrics can improve the integrity of non-financial performance reporting and give investors a more accurate understanding of the value of their impact investments. These standards also prevent the (false) side-by-side comparison of companies and funds on the basis of metrics that may share the same name but have different underlying meanings; for example, the metric ’jobs created’ may include seasonal or part-time jobs for one organization, but apply to only year-round full-time jobs for another.

IRIS is not an exhaustive set of indicators. As such, aligning data with IRIS is not intended to preclude an organization from tracking and reporting on metrics outside of IRIS, it only requires that these metrics be given names that do not risk confusion with the standard ones.

For example, a company that tracks the number of clients with incomes less than, say, $8/day – is only required to define this metric as such, and not refer to it with a name like ’poor clients’ for which a different standard definition exists in IRIS.

Common reporting standards streamline and simplify the reporting requirements of organizations that would otherwise face competing and sometimes inconsistent requests for information from investors and donors. Most importantly, IRIS helps impactful enterprises attract more capital from investors committed to using social and environmental performance metrics to inform their investment decisions.

A few months ago, the newly-formed independent nonprofit called the Global Impact Investing Network (where Sarah works) became the institutional home for IRIS. The Global Impact Investing Network and all the IRIS partners believe that IRIS must be developed as a non-proprietary public good if it is to achieve widespread adoption and overall success.

To the same end, we are collecting public feedback on preliminary IRIS performance indicators and their definitions prior to the launch of the next version of IRIS, which is planned for early 2010. A first open comment period last spring generated more than 200 comments from more than 50 organizations. The second open comment period is currently underway through November 13.

We encourage you to visit the IRIS website where you can leave comments about the indicators and their definitions and propose new ones. If you’d like to get more information about IRIS and more detailed instruction about how to leave feedback on the website, you can sign up for webinars running this week-the first is tonight at 9pm EST-by clicking the link here.

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