APPROACH AND METHODOLOGY
Approach leading up to the GIIRS Global Beta Test:
After the first global impact investor convening at the Rockefeller Foundation in 2008, the non-profit B Lab interviewed 200 investors, developed a business plan at the request of the impact investor community, and created a wholly-owned non-profit subsidiary called the Global Impact Investing Rating System (GIIRS). Subsequently, GIIRS successfully recruited 25 Pioneer Funds and 200 Pioneer Companies, representing some of the leading social entrepreneurs in over 30 countries to participate in a GIIRS Global Beta Test. Each of these funds and companies sat down with GIIRS staff to complete the GIIRS Impact Assessment (which captures the data to generate a rating), providing in depth feedback on the content and standard that was being established. Two Standards Advisory Councils, one for emerging and one for developed markets, comprised of over two dozen academics, impact practitioners, investors, and intermediaries, led the effort to design the content and weightings methodology, incorporating beta feedback into the first iteration of the GIIRS Impact Assessment. With the launch of GIIRS, these 200 leading social enterprises and 25 Pioneer Funds are now completing the data verification process in order to receive their GIIRS Impact Ratings.
The power of the GIIRS Rating & Analytics platform is that it gives investors the tools to analyze aggregated, verified, and comparable data on the social and environmental impact of companies and funds across geography, sector, organizational maturity, and size.
To receive a GIIRS Impact Rating, companies and funds complete the GIIRS Impact Assessment, responding to roughly 120 questions covering a number of stakeholder areas, including workers, community, environment, governance, supply chain, and consumers. Every rated company and fund goes through a verification process and, on an annual basis, 10% of GIIRS rated companies are selected for an on-site review, all with GIIRS' verification services provider, Deloitte. More than half of the metrics and questions within the GIIRS Impact Assessment rely on the Impact Reporting & Investment Standards (IRIS) taxonomy, resulting in the collection of more than 200 individual impact metrics.
Data collected through the Impact Ratings will populate the GIIRS Analytics platform, a subscription-based data tool analogous to Capital IQ for financial data. GIIRS Analytics will enable investors and investment advisors to benchmark their portfolios, aggregate a broad set of portfolio data in one place, screen prospective investments, and allow for industry trending and target setting.
The commitment of the GIIRS Pioneer Investors and Funders will facilitate the scaling of this platform to include 350 rated funds, 2,500 rated companies, and 150 subscribers to GIIRS Analytics in five years. The public declaration of these investors is critical to driving widespread adoption of GIIRS, making it an industry standard for the impact investing field. Leveraging these investor commitments, GIIRS will recruit an additional 25 investment funds to get rated by the end of 2011, providing ratings to companies in over 30 different countries, spanning sectors from microfinance institutions to renewable energy providers to sustainable agriculture producers.
By providing credible, comparable, and verified impact ratings and creating a robust analytics platform, GIIRS provides the needed capital markets infrastructure to create a $1 trillion asset class of impact investments in 10 years.
IMPLEMENTATION, TIMELINE, AND DELIVERABLES
GIIRS Impact Ratings: The pledges of the GIIRS Pioneer Investors and Pioneer Funders will enable the Global Impact Investing Rating System (GIIRS) to rate:
- more than 400 companies and 50 funds by the end of 2011; and
- over 2,500 companies and 350 funds by the end of 2016.
GIIRS Analytics: The pledges made through these commitments will enable GIIRS to:
- accelerate development of the GIIRS Analytics platform--Capital IQ for impact investors--which will launch in Q4 2011;
- drive adoption to scale the data-set accessible through GIIRS Analytics; and
- subscribe over 150 investors to GIIRS Analytics by the end of 2016.
Government and non-profits are necessary but insufficient to solve our most challenging social and environmental problems. As entrepreneurs around the world develop market-based solutions, they need investment capital to help them scale. Increasing interest in 'impact investing' (investments targeting social and environmental impact in addition to financial return) requires improved capital markets infrastructure to become a $1 trillion marketplace in ten years (JP Morgan, November 2010).
This infrastructure includes generally accepted standards for defining, measuring and comparing positive social and environmental impact (Monitor Institute Report, 2009). Without credible third party standards, there are significant barriers-to-scale including: a fragmented market where each investor defines impact differently, high due diligence and transaction costs, limited understanding by investors of how to manage for impact, and a weak policy environment due to a dearth of information. GIIRS helps remove these barriers to growth and attract mainstream capital.
The launch of GIIRS Ratings & Analytics is the culmination of the past three years of B Lab's work and underscores the commitment of leaders from across the impact investing sector to adopt a transparent, credible, and verified platform for measurement of social and environmental impact. Recognition of this standard will help to propel impact investing into a $1 trillion investment industry.