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Flaws in the way credit risk is assessed have played a critical role in the U.S. subprime mortgage meltdown. At the same time, SVT is seeing increasing calls for ratings of risk in the emerging social capital markets: not just ratings of credit or financial risk, but also ratings of the likelihood of a certain social or environmental outcome. For example, this topic has come up in conversations about how to address the problems of cost and access in health care, where a need is being defined for not only better ratings of patients’ “credit risk” in the sense of their ability to pay so that healthcare providers might price services more affordably to a given individual and thus have a greater likelihood of receiving payment (nonpayment being a billion dollar problem for both healthcare providers and patients), but also for ratings of patients’ “health risk,” in terms of how individuals manage aspects of their health over which they have influence. The latter is analogous to an individual’s credit score, except here the score would be related to how well one had managed one’s health factors.

Another illustration is in the impact investing space, where there is both a desire to be able to gauge both what novel risks to financial return may exist in investment opportunities that have a social or environmental spin to them, and a desire to gauge in a simple, low-cost way the degree to which a given investment opportunity counts as a “positive impact” investment.

The key question is, how should health risk, or impact, or impact “risk,” be assessed? And, if it were, how would we know this was a good measure? What if it was flawed- would individuals who’d gotten a low “health credit score” be able to appeal? If so, to whom? Would companies who fill out ratings surveys to gauge their sustainability be held accountable for the accuracy of their self-reported data? By whom?
I like swishing around in this murky territory…. But no matter how unclear the answers are, one thing is certain. the fact that these conversations are taking place and experimental solutions are being piloted means the social capital marketplace is maturing into a full-fledged market.