A rating system launched this week to provide private investors with the information they need to more effectively put their money to work in for-profit social enterprises.
For the first time, "Impact Ratings" will be available to mission-oriented investors so they can direct capital to businesses that have the greatest social and environmental impact.
Investors commonly analyze a company based on financial measures, but until now, there’s been no way to objectively explore a company’s social/ environmental impact.
"These Pioneer Investors recognize that we can’t build an industry for impact investments without credible, comparable metrics on impact. GIIRS has the potential to catalyze hundreds of billions of dollars of sidelined investment capital to flow to the world’s most inspiring and talented entrepreneurs. These businesses demonstrably create high quality jobs that increase economic opportunity here and abroad," says Andrew Kassoy, co-founder of B Lab.
B Lab sees the potential for GIIRS to drive $1 trillion toward impact investments in 10 years.
GIIRS Impact Ratings make it easy for investors to get comprehensive, comparable, and third party verified assessments of companies’ and funds’ social and environmental impact.
The GIIRS Analytics platform will have aggregated data on the social and environmental impact of companies and funds across geography, sector, organizational maturity, and size.
In five years, GIIRS plans to have Impact Ratings for over 2,500 companies and 350 venture capital funds, providing over 150 institutional and high net worth investors with the ability to benchmark social and environmental impact – as they can for financial performance today.
15 major investors have committed to use the system, which has been developed by B Lab, a US nonprofit that certifies companies on their social/ environmental practices.
GIIRS Pioneer Investors are a diverse group of global private equity investors and credit providers, including mainstream global financial institutions, foundations, family offices, leaders in social finance, and a multilateral development bank. Each has declared an investment preference for GIIRS-rated funds and companies as part of their impact investing strategy.
They include: Annie E Casey Foundation, Armonia, Calvert Foundation, Farm Capital Services, Gatsby Charitable Foundation, Impact Investing Foundation, Inter-American Development Bank, KL Felicitas Foundation, J.P. Morgan, Prudential Financial, The Rockefeller Foundation, RSF Social Finance, Skoll Foundation, Tony Elumelu Foundation, W.K. Kellogg Foundation. More investors will be announded in the coming months.
Three GIIRS Pioneer Funders – Deloitte, Prudential Financial, and The Rockefeller Foundation – committed a combined $9 million to accelerate industry adoption of the platform.
"The Inter-American Development Bank is committed to supporting entrepreneurs across Latin America and the Caribbean who show great potential to effect change in their societies," says IDB Executive Vice President Julie Katzman. "GIIRS Ratings & Analytics provides tools to clearly measure the impact of our investments in venture capital funds – both at the level of the fund and the individual company."
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 attracts mainstream capital to the impact investment space.
B Lab was founded on the belief that government and non-profits are necessary but insufficient to solve society’s most challenging social and environmental problems. Currently, there are over 450 Certified B Corporations from over 50 industries, representing a diverse multi-billion marketplace.
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