Imagine a World in Which the Impact of Every Investment is Known
It all started when…
mainstream investors including TPG, Blackrock and UBS announced that they were getting into impact investing a few years ago. At the time, many experienced impact investing players and practitioners recognized this as an important moment to solidify the meaning of the term "impact" - or risk its corruption and demise. The Impact Management Project (IMP) was created as a response, led by Bridges Impact+. Beginning in 2016, Bridges skillfully facilitated a consultative process that to date has engaged over 2,000 stakeholders- including a wide array of investors, practitioners and standards bodies across more than 50 countries- to agreement on norms for what the word "impact" means, and how investors relate to different styles of impact investing, particularly as they relate to private sector enterprise and investment.
The collective wisdom of these thousands of practitioners and investors was that there are five dimensions of impact that it is necessary to understand and account for: Who is affected, What is the nature of the change, How Much change is there, what is the Contribution to the change made by the enterprise and/or investment, and what is the Risk that the impact is not or will not be what we think. The shared fundamentals also include a matrix of investor intentions and strategies relative to impact, which is a helpful on-ramp for investors and their advisors to understand their relationship to the impact inherent in a given investment opportunity or portfolio. These shared fundamentals are simple, yet there is a great deal of sophisticated information and nuance rolled up within them, which IMP and others' guidance documents are beginning to reveal.
Having arrived at this remarkable consensus, the Impact Management Project is now moving into its next major stage: adoption. Adoption of the investor matrix and the five dimensions may be both widespread and of good quality and skillful, or widespread but superficial and unskillful, and therein will lie the difference between whether the Impact Management Project and its shared fundamentals of impact will achieve their potential to help economic activity align with widely shared human values of environmental sustainability, health and well-being, or perpetuate the disconnect between economic activity and these values.
In September I was honored to represent Social Value International among the group of anchor partners who have joined arms with the IMP's facilitators to announce the launch the new IMP structured network. Its goal: to accelerate widespread adoption of impact measurement and management norms. "The network consists of nine leading organizations with expertise in data, principles, disclosure standards and benchmarking," one of the organizations, the World Benchmarking Alliance, recently wrote. The network "offers a unique shot at agreeing on standards of practice that might ultimately become generally accepted globally." Clara Barby, Lead Facilitator of the Impact Management Project, was quoted in their recent press release:
“In financial management, ‘general acceptance’ of norms for how we talk about, measure and manage financial performance enables capital to flow efficiently across value chains and across borders. If we want impact management to become the norm for every enterprise and investor... we need shared principles, reporting standards and benchmarking methods for impact. The IMP network is the first time that such a diverse group of organizations, from across the entire value chain, have chosen to work on content in a deliberately coordinated fashion. This is our best shot at creating an impact management approach that can ultimately become ‘generally accepted’ globally.
Along with Bridges Impact+, the nine global organizations taking the lead in this next stage of the Impact Management Project bring substantial bench strength in key areas: measurement and reporting principles and standards, assurance protocols, and capacity building both for delivering and investing for impact:
The Global Impact Investing Network (GIIN)
The Global Reporting Initiative (GRI)
The Global Steering Group for Impact Investment (GSG)
The International Finance Corporation (IFC)
The Organization for Economic Co-operation and Development (OECD)
The Principles for Responsible Investment (PRI)
Social Value International (SVI)
The United Nations Development Programme (UNDP)
The World Benchmarking Alliance (WBA)
The concrete task that these organizations are charged with is to translate the IMP's agreement about meaning and terms into a conceptual framework, practical guidance and tools such as principles and certifications to help enterprises, investors and advisors who use them not only navigate the impact space, but generate real "impact" through their investment decisions.
But, speaking for myself as an individual and not for these organizations, I believe that the real task before them and all of us is one of continued and ever-wider community engagement.
This is because the IMP's greatest achievement to date has not been its distillation of the collective wisdom, although that was been done excellently when one drills into each of the dimensions; it is the IMP's engagement of thousands of investors and practitioners from around the globe in the process of taking ownership of the meaning of "impact." Potentially, these audiences can help to ensure that the delivery of impact is not expedient and superficial, but authentic and meaningful. Only if many more thousands and ultimately millions if not billions of people actively participate in activating the 5 dimensions, and holding investors and enterprises accountable for them, will the 5 dimensions avoid the fate of becoming perfunctory, on-paper-only hoops for those with money and power to (hire others to) jump through.
The primary of the five dimensions of impact that the IMP's original stage agreed upon was "Who"- who is affected by the investment, particularly those who are traditionally "underserved" (i.e. marginalized populations), where are those whos located, and how important do they feel the effect on them is? But who gets to decide who the "Who" is that matters? How will those Whos participate in defining what effects they are experiencing? If investors find it inconvenient to hear what they say, will those Whos have any ability to call foul?
As this and the other five dimensions of impact are translated into tools investors can employ to inform their decisions, it is up to all of us who care about the impact economy to ensure that this "Who" is thoughtfully defined, and remains central to any product the market understands as impact.
Please visit IMP’s website for more information about the network and the shared fundamentals of impact, and please reach out to them, me or Social Value US if you are interested in keeping up to date on and/or voicing your views on IMP developments.