Created
last fall under the fiscal sponsorship of Rockefeller Philanthropy Advisors,
the not-for-profit Global Impact Investing Network is emerging as one of the
central hubs and primary catalysts for the orderly growth of a transparent and
efficient global impact investing market.
The GIIN’s mandate is highly focused: to elevate the profile of impact investing and to support the development of a market infrastructure that will drive significant new capital flows into the most effective impact projects. It now serves as an enabling umbrella organization for a number of promising collaborative activities: providing a "space" for the sharing of best practices among leading impact investors; helping to incubate the development of a set of definitions and metrics for tracking social and environmental impacts; and setting in motion the construction of an impact investment fund database.
The GIIN Investors' Council is a group of institutions, including large-scale family
offices, private foundations, and institutional investors, that meet to share
their experiences in the sector, and to refine and promote industry best
practices. Members include The
Rockefeller Foundation, The Bill and Melinda Gates Foundation, Deutsche Bank, JP Morgan, TIAA-CREF,
The Annie E. Casey Foundation, and Triodos Bank.
Its
first working group, Project Terragua, is exploring ways to increase investment
in sustainable agriculture in sub-Saharan Africa that will benefit the poorest
populations of the region. Terragua
members are sharing business models and discussing possible
joint investments.
The
GIIN’s Impact Reporting and Investment Standards (IRIS) project is a
partnership among The Rockefeller Foundation, Acumen Fund and B Lab to develop
a standard vocabulary and system of measuring impact investing projects. The goal of IRIS is to give investors a
framework and set of tools to track and evaluate the social and environmental
outcomes of specific impact investing projects and vehicles. A pilot version of IRIS is posted on an
open comment platform at http://iris-standards.org/framework-overview.
IRIS aims to create a consensus for defining a set of operating indicators for
six impact investing sectors:
agriculture and artisanal; energy, environment and water; education;
community development finance; microfinance; and healthcare. IRIS might, for
example, allow an investor to determine how many jobs have been created, how
many gallons of clean water produced, how much carbon abated, or how much
affordable housing built for a given income level by a given impact project or
enterprise. “Getting everyone to agree to and utilize a base set of metrics
will be a huge accomplishment,” says GIIN’s Director Amit Bouri. But, he
reports, the adoption of IRIS won’t preclude funds or investors from choosing other
ways to articulate their impact, either qualitatively or quantitatively. IRIS
is currently in a pilot phase with 6 investment funds. “We are working on a 2.0 version of
IRIS for release later this year,” says Bouri.
GIIN
is also working with RSF Social Finance and Imprint Capital to develop a
database of impact investment funds. “The focus there is to help create
transparency in the market,” says Bouri. “At the moment, if you are interested
in affordable housing opportunities in rural communities it is hard to find
them. Our database will not provide an evaluation of such projects but it will
provide a starting point to allow an investor to identify the right people to
talk to. This kind of information is completely absent in the space now. If you are searching for a large
cap mutual fund for your 401k you will have no problem finding one; but for
impact investing it is much more difficult. It is hard to see the depth of the product inventory even
when it exists.”
Bouri
does not shrink from acknowledging the significant challenges facing the impact
investing market. Among them, he
notes, is the task of matching a diverse group of investors with opportunities
aligned with their often equally diverse impact investing goals. “We operate
under a broad tent,” says Bouri, which includes everyone from high net worth
individuals with a few million dollars to invest to multibillion-dollar pension
funds and financial institutions with hundreds of millions of dollars to place
in impact investing portfolios. Investor are also often likely to have specific sectoral,
geographic, and asset class preferences which the current market may or may not
be able to satisfy. Managing these
expectations is an art in itself.
“The truth,” says Bouri, “is that there are real capacity constraints in
this markets.” This means that investors will be required to exercise some
combination of flexibility and patience, as they seek to identify suitable
projects and secure optimum risk/return profiles.
Bouri says that GIIN’s preliminary research indicates that there are large pockets of unlocked capital waiting to be tapped in each subsector of the impact market and it should not be overlooked that these sources of capital will provide indirect support for projects that, as yet, have no market-based solutions. Furthermore, he reports, while venture funds and foundation endowments may need to achieve market rates of return there are many family offices and high net worth individuals that are willing to take a financial haircut to achieve deeper impact. “Our goal is to create enough clarity for the right capital to find the right recipient,” he maintains.
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