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Investment impact reporting: A framework that tackles a growing need

last modified May 12, 2016 10:02 AM
22 June 2015 – Investors, sustainability reporting organisations and information providers collaborate on a shared vision for reporting investment impact to beneficiaries at a workshop in New York.

All investments carry impact, whether or not this is anticipated or measured. Recent initiatives including voluntary moves from investors to disclose the carbon footprint of their portfolio (such as the PRI's Montreal Pledge) and moves from regulators (such as France's announcement that investors will be required to report on portfolio carbon exposure) are indicative of a wider trend of increased demand for investment impact disclosure. The development of impact reporting methods has therefore never been more pressing.

The Investment Leaders Group (ILG), comprised of eleven investment managers and owners and convened by the University of Cambridge Institute for Sustainability Leadership (CISL), is developing a framework to assist investors with the disclosure of the social and environmental impact of their investments to beneficiaries and asset owners.

This framework is differentiated from others in its field in three ways:

  1. it measures social and environmental impact rather than just financial materiality;
  2. it measures sustainability outcomes rather than management; and
  3. it simplifies complex issues into simple proxies that allow for decision-making by beneficiaries.

Responsible investment is judged on whether or not it generates tangible benefits for society above and beyond its financial benefits to investors and beneficiaries. The framework therefore defines impact as being based on outcomes that contribute towards sustainable development. To this end, it summarises the UN Sustainable Development Goals into six key themes relevant to the investment industry.

Ultimately, the framework will empower investors to answer the question: 'What information should be communicated to savers, trustees and other forms of asset owner and investment beneficiaries, and what form should it take, so that these actors can determine whether their interests in non-financial outcomes are being realised?'

Together with ILG member TIAA-CREF, the ILG hosted a workshop on 22 June with a select group of key organisations throughout the investment supply chain who are involved or developing impact reports to obtain feedback on the framework. At the workshop, stakeholders fed back on the reporting format with a view to enabling decision-making by beneficiaries, as well as on metrics.

The GRI and the UN Global Compact, whose SDG Compass project with The World Business Council for Sustainable Development (WBCSD) aims to 'translate' the SDGs into metrics for business, welcomed investors taking a similar approach. The Global Impact Investing Network (GIIN) also expressed support for mainstream investors assessing impact and provided valuable input based on their experience with impact investing. Opportunities for data collection with information providers such as Bloomberg and Oekom were identified, and guest investors, Bridges Ventures and PGGM, shared their experiences of engaging with asset owners and pension plans on impact reporting.

The input collected during the workshop will feed into the framework, due to be launched early 2016.

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Investment Leaders Group members. Cambridge Institute for Sustainability Leadership.

 *HSBC Bank (UK) Pension Scheme



Kajetan Czyz, Senior Programme Manager, Investment Leaders Group