Architects of a ‘Social Investment Data Engine’

A new group is aiming to revolutionise the standard maths used to select investments for billions of dollars worth of assets by constructing a data engine that contrasts – and quantifies – the tangible social benefits of investing opportunities.

Tom Stabile | Financial Times

Tom Stabile of the Financial Times writes about the Global Impact Investing Network and the emergence of an impact investing industry that supports for-profit investment in funds and businesses that produce social or environmental benefits.

From original article

A new group is aiming to revolutionise the standard maths used to select investments for billions of dollars worth of assets by constructing a data engine that contrasts – and quantifies – the tangible social benefits of investing opportunities.

The common recipe to judge an investment’s relative worth often hinges on its performance against benchmarks or peers, but the new system’s architects want to inject a measurement of social good into that valuation. The New York-based Global Impact Investing Network and its partners aim to introduce a broadly accepted arbiter to determine, for instance, whether 20 seasonal jobs on a Kenyan coffee farm produce the same social good as 20 full-time positions at a textile factory in Guatemala – and help investors use that information alongside financial returns data.

The drive to build and pilot a taxonomy, database, portfolio management tool and rating system to standardise comparisons of social benefit started out in the “impact investing” world – a smallish community of organisations trying to bring capital to developing world business enterprises on the front lines of combating poverty and underdevelopment. The sector, which focuses on merging goals of generating both social good and financial returns, now has more than $50 billion (GBP 33 billion, EUR 37 billion) in assets, but an industry estimate sees potential for that volume to grow to $500 billion within the next decade.

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The target of GIIN’s Impact Reporting and Investment Standards initiative are the masses who would be willing to choose investments based on their social benefit if only they had a credible way to measure it, says Sarah Gelfand, director of the IRIS project. The approach differs from better-known environmental-social-governance (ESG) reviews, because those tilt more toward analysing actions to minimise socially negative behaviour and often do not capture comparable, quantifiable data points.

“The difference here is that we’re trying to look at the proactive, mission-driven organisations that maximise positive impact,” Ms Gelfand adds. “This absolutely is meant to build a market for the for-profit investing world to participate, and to use standards, auditing practices, and rating agencies that would make [impact investing] more accessible to the broader investment community.”

http://www.thegiin.org/cgi-bin/iowa/resources/clipping/83.html

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