Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
sectors and geographies. The standards include metrics related to the social aspects
of a business’ operational practices as well as of its products and services.
The standards are overseen by an independent governance body that provides
guidance toward the ongoing advancement of the framework and ensures its
alignment with existing best practices. Furthermore, the standards are updated
through an iterative review process that involves broad participation and objective
consideration of comments provided by various industry stakeholders.
With standard metrics in place, benchmarks can be developed
Among other things, a set of standard definitions enables the production of industry
benchmarks, and the IRIS initiative maintains a repository of IRIS-compatible
performance data generated from across the impact investing field. These data are
kept anonymously and, once sufficient data is collected, will be used to produce
industry benchmarks and other aggregate analyses.
Investors need to adopt this taxonomy to provide industry-wide comparability
Common reporting standards will only improve investment efficiency and market
intelligence with widespread adoption. The success of the IRIS reporting standards
relies on broad participation by organizations that are committed both to assessing
their social impact and to understanding the industry’s impact more broadly.
Impact rating systems will help inform investment decisions (and lower costs)
With the IRIS reporting standards in place, a wider set of specialized information
services, such as impact ratings, can reference that framework. Just as in financial
risk measurement, a third-party rating system can reduce investors’ due diligence
costs and enable performance benchmarking over the life of an investment 109 .
Ratings can also improve the social impact of an investment by creating clear
guidelines about what generates impact and enforcing accountability for impact
across the sector as it grows. Specialized ratings have been developed in
microfinance and US community development finance, which are among the most
mature sectors of impact investing. The recent proliferation of investment
opportunities across a variety of sectors, as well as countries, requires impact rating
systems with equally broad reach.
GIIRS will assign relative value to investments’ social impact
The Global Impact Investing Rating System (GIIRS) was launched in 2010 in
response to this need for a broader impact rating system. GIIRS, which is being
incubated by the independent non-profit organization B Lab, will assess the social
impact of companies and funds using a ratings approach analogous to S&P credit risk
ratings. The GIIRS methodology utilizes IRIS reporting standards wherever
applicable, and provides an overall company rating that is based on sub-ratings
across five stakeholder categories and multiple sub-categories.
GIIRS will provide company and fund ratings in both developed and emerging
markets, and supplement individual ratings with tailored key performance indicators
as well as benchmark and trend analysis. It is well suited for a number of impact
109 We caution investors against relying solely on third-party ratings as nothing should
substitute due diligence; rather they should be taken in conjunction with due diligence and can
provide a standardized source for much of the information that currently is predominantly
obtained through interviews that can be time consuming for both the investor and the investee.
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