If I see one more post about the lack of progress on impact metrics I'm gonna lose it

I just read another screed about the failure of metrics to solve the mega problem of business and investment destroying the planet. "ESG is like less wife beating," the author complains. I applaud the soundbytiness of that phrasing, actually, because it's great to get people to pay attention to the subject and at the end of the day, crass grabs eyeballs. What's not great is their blanket and wrong assertion that there's been no meaningful progress in ESG systems in the past decade, as though these systems and the people who design them are living off in some fantasy castle in the sky, untouched by society's increasing alarm at the accelerating rate with which business as usual is killing of large percentages of all living species, and doing nothing meaningful about it.

The article in question was sent to me by a longtime friend in the broader social entrepreneurship field, who created what has been for a decade one of the biggest platforms for impact investors and entrepreneurs. He asked me, "is this what metrics are?" "Metrics," I've observed, is a subject he has mostly preferred to avoid, and one that to my knowledge was never on the main stage at his events. I'm simultaneously glad he's getting curious about the topic, and find it impressive that he can be asking that question almost 20 years after we first met early on in our mutual quest to figure out how to get money to invest in people and planet. Could he still be unclear on the difference between metrics, ESG and impact or their relevance to investment intended to benefit people and the planet? I'm usually the first to provide encouragement to folks around these topics, but given his longevity in the wider field, to be completely candid I find it noteworthy that he isn't embarrassed to ask.

The article, like so many others, asserts that "ESG data is not picking up on this information [about whether a business is creating a net positive impact] yet." But, it is.

The Dow Jones Sustainability Index in 2019 asks about the material environmental and social issues facing the business, what kind of scenario planning it is doing around those risks, and what strategies are in place to address these risks– an evolution of its criteria that speaks directly to the concern the author of the article above raises. This evolution may be driven by the same underlying factors that led also to criticism this spring by the world's largest asset manager, Blackrock, of systematic mis-pricing of climate-related risks by investors, or to 30 Central Banks coordinating a standardized way for corporations to publicly disclose their carbon footprints to support investors' ability to understand the way their investments are driving climate change (because to be sure they do not want that exposure). And these examples are just the tip of the iceberg.

I can understand that these advances may feel disjointed. But that too is improving. There is an effort, now in its fourth year, to "provide coherent and end-to-end ‘rules of the road’ for impact management" which the G7 has just endorsed. This "Impact Management Project" has facilitated over two thousand global practitioners, standards bodies and investors to a consensus on what the shared fundamentals of impact are, and this year these fundamentals are being percolated out into principles, disclosure standards, practical seals and certifications, audit criteria, training materials and more, all undergirded by a common conceptual framework. These deliverables are being produced through an unprecedented collaboration of a dozen of the major global impact investing bodies, practitioner networks, development finance standards organizations, and ESG standards bodies (including this one upon which a ton of ESG reporting is based). The shared fundamentals of impact are centered on stakeholders' experiences, especially the most vulnerable, and even ask those stakeholders how important the change they're experiencing is, introducing a form of grassroots valuation into the equation as a counterpoint to the all-powerful financial valuation that has in recent decades left out so much that matters. And all of these efforts can be lumped into the ESG bucket, and all are feeding the investor's capacity to thoughtfully ask about companies' actual impacts, risk management practices, and ability to foresee change and design business models to make things better.

Which is why I have begun to find it more than curious that so many people continue to chant: "Sadly, for those asset owners looking to allocate capital with the intention of generating positive impact, a broadly accepted framework does not yet exist." I call B.S.

The marketplace for impact, and the global economy along with it, can no longer afford to pretend that there has been no agreement about what the right set of information is. There IS agreement.

There is consensus that the following three types of information are needed by managers and investors: (1) the overall, important effects of the company on the world (using one of these dominant, pre-set, trusted checklists), combined with (2) the company's unique, material social and environmental value (as judged using these nuanced criteria), and (3) how the company's financial performance is integrally related to its social and environmental value creation (using this framework).

So readers, beware: those who still in 2019 bemoan the lack of progress decade after decade probably have something to sell you. Or, they might have something they want to keep free from accountability. Or, maybe they're just having a hard time recognizing the change that is happening because the results haven't manifested in a big way yet. But progress there is.

So readers, beware: those who still in 2019 bemoan the lack of progress decade after decade probably have something to sell you. Or, they might have something they want to keep free from accountability. Or, maybe they're just having a hard time recognizing the change that is happening because the results haven't manifested in a big way yet. But progress there is.

Whose interests are truly served by continuing today to act as though there has been no progress toward sound ways of measuring and managing impact?

Though it is not everyone's cup of tea to keep tabs on the somewhat technical evolution of the infrastructure to hold assets accountable for their effects on the planet, the time when professionals in the impact arena could complain about a 'lack of progress in the field' while promoting their groundbreaking impact measurement solution is over.

Today the name of the game is moving from 'what to measure?' to 'how do we use this information to drive results?' Those charged with using ESG information today need to have more "multilingual" skills than in the past around figuring out what they should be looking for, and how to get it from the information they're being provided. While a lot of companies still aren't disclosing, many are, and the problem is no longer that it's the wrong information. The problem is that the reader of the information must know what to look for to get something useful from the information.

Skilled impact analysts are needed to bring value to the information companies and investors are producing. That is a different problem than an ESG reporting problem: it's a human capital problem. We need skilled impact analysts to drive the next phase of the impact economy.

We need skilled impact analysts to drive the next phase of the impact economy.

The next time you hear someone complain about the lack of progress on metrics, how bad existing metrics approaches are, and/or that they have a brand new solution (step right here to purchase!), please check closely whether the solution they propose:

  1. discloses and improves its material ESG issues in accordance with any existing consensus-based standard;

  2. reports in alignment with the IMP shared fundamentals of impact, and shows how it is learning from this information;

  3. discloses the ways the entity's financial performance depends upon these factors, and how this dependency informs its strategy; and

  4. provides information that meets your standards for not only quality of disclosure, but for performance results, regenerative or otherwise.

And if the proposed solution does not do those things, check what the stated rationale for this is. If there isn't one, it's best to move on.

The bottom line is, we do have the tools to understand the impact of the global capital marketplace in all its diverse and terrible glory. Let's own the wonderful fact that we've collectively accomplished this! Sure there's room to keep making it better, and we must, but by George, let's stop muddying the water, and confusing people, and letting them off the hook while they wait until that mythic day when all questions are perfectly settled before they have to start accounting for their impacts on people and the planet.

Instead, recognizing what we do have, let us teach the use of this information to inform decisions to drive the kind of results the world needs now.


To grow your skills in asking and answering good questions about ESG & impact, check out the following resources offered by these nonprofit organizations who are working collaboratively to build the field: