A3- One of the things that is missing is a common language (and metrics) between companies and investors for how companies are creating positive impact. At CISL we developed an ‘impact framework’ (https://www.cisl.cam.ac.uk/business-action/sustainable-finance/investment-leaders-group/measuring-investment-impacts) to bridge this gap. Based on the SDGs, it identifies 6 outcomes that fund managers can use to track impact. Businesses can also use it to identify their positive and negative impacts. It will be interesting to see what comes out of the European Union’s review of the non-financial reporting directive. This could have a significant impact on the convergence of non-financial reporting approaches.
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A3: In venture investing, like-minded investors also form “syndicates” with like-minded investors. Examples include Toniic and Pymwymic (“Put Your Money Where Your Mouth Is Community”). Funds also collaborate through venues such as the European Venture Philanthropy Associations, or they have informal groups through which they share investment opportunities, or co-invest.
A2: Investors and stakeholders should actively participate in defining a company’s purpose, and their views are taken into consideration by a wider range of business functions.
Investors is an important stakeholder in a corporation, and as such, their voice and influence carry weight.
Agree @Benkellard. Common language and common metrics are the foundation of any collaboration.
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A good example here is also the Impact Management Project (IMP) they are working with over 2,000 organizations to establish global consensus on how enterprises and investors can measure, compare and report the risks and positive impacts of their businesses or investments.
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Thansk, yes investors can get behind these initiatives to converge non-financial reporting around a consistent and robust set of metrics that work for businesses and investors. I would hope it also streamlines sustainability reporting that becomes a lot more relevant to investors.
@erinsteinhauer absolutely. Because of their work across clients, financial institutions have a helicopter view on the risks & challenges faced across industries. They can be a valuable partner for a brand/business and spot the most “material” issues of a purpose.
A3: At Acumen, we’re interested in all three approaches, both within our own portfolio, and through collaboration with large public companies. As an investor, we want to catalyze innovations that will shift corporate behavior. So we invest in early-stage innovators that are building purpose-led businesses that we believe will engage with and influence how business is done. But we’re also building leadership development tools through our online platform (Acumen Academy), and developed a tool to capture user data to understand social impact, Lean Data. More on that…
A recent example we are seeing more of in the US in regards to collaboration between investors and companies for purpose is the growing interest in steward ownership models. While this is an old legal structure in Europe its new to the US using a legal structure called a purpose trust where the trust beneficiary is not a person or group but a purpose. More info here https://www.impactterms.org/tag/steward-ownership/
- In venture investing, there is also a new trend around “impact carry”, whereby fund managers’ bonus upon exit (the “carry”) is tied not only to the financial return but also to the impact outcomes achieved by portfolio companies. The impact outcomes and metrics are agreed when the investment is made, which gives the fund manager an incentive to help the company achieve impact growth. For example, if a company makes solar panels and the metric is CO2 saved, then the investor will want to support the company to make more efficient panels too (rather than just grow revenue and profit). The European Investment Fund has been a large promoter of these incentive structures, which means that many new impact venture funds in Europe use them.
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Agreed they should be consulted and invovled, but I think there also need to be clear roles. The Board is the ultimate determiner of the purpose. So investors, non execs have an important role in challenging and scrutinising what they come up with and to hold them to account.
A3. To be honest, I really can’t think of any examples because I don’t know of any company that is collaborating with its investors in this way. Materiality is the line of sight for the ESG issues on a company’s operations and Impact is the line of sight on positive and negative externalities. SASB provides good guidance on the former, GRI on the latter. Yes, Leadership is important but it has to come from the investor as well. What I’d add to this is shareholders and other stakeholders need to know how a company will make tough trade off decisions. Furlough employees while maintaining dividends, stock buy backs and executive comp or the other way? Purpose becomes real when it hurts and the choices a company makes reveal whether its words about purpose are authentic or not.
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To support our investees in tracking impact and improving their responsiveness to low-income customers, we developed the Lean Data methodology. Lean Data uses technology and short surveys to capture customer voice, and is designed to take into account the realities of early stage enterprises. It provides swift actionable data that entrepreneurs can use to improve their business performance and social impact. The tool is now widely used by impact investors, foundations and governments, as well as corporations including Unilever, Hershey and ECOM (a global commodity trader) among others, and we think could be a powerful tool for corporations seeking to integrate social and commercial goals into their operations. Use of Lean Data grew so quickly across impact investors that Acumen spun it out last year into a separate social enterprise, 60 Decibels.
Although it may seem at first like the opposite to a collaboration, this call on governments to institute mandatory human rights due diligence for companies by a group of investors (coordinated by the IAHR) is a good example of investors coming together to promote regulation that would ‘level the playing field’, which is actually welcome by many companies. https://investorsforhumanrights.org/news/investor-case-for-mhrdd
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Very interesting the trend around “Impact Carry” @Rares_Pamfil. It sounds like a good way of shifting the organizational culture of financial institutions.
A3: An important part of this would be to establish shared goals and measurements. The SDGs is an example of commitments corporates and investors could relate to.
See 60 Decibels above. 
What seems to be happening is that businesses and investors are waking up to the fact that businesses can’t operate in a moral vacuum and assume infinite supply of raw materials, talent and be reply on producing huge amounts of waste, emissions and inequality with impunity. Society (and business value chains) can’t bear the cumulative effects of our current economic model. This asks questions of business that they aren’t used to answering. Such as ‘how do you benefit society?’ ‘What are you doing to negate your negative impacts?’. Failure to do is likely to increase costs, deter stakeholders and risk their very licence to operate. Conversely, those that are getting on the right side of the future are experiencing growth, resilience and are able to attract the best talent. For example the fast growing values-led companies in the food sector like Pukka Herbs and Impossible Foods. They are the future of the category, the same is true in personal care, energy and other sectors. Investors need to get a much better handle on what’s driving their success- crucially the intangible value drivers and not just the easier to measure tangible ones
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As the world’s leading school for social change, Acumen Academy offers courses for social change agents, and increasingly we are seeing demand from representatives of the business community. Courses like Human Centered Design, Impact Measurement, and Moral Leadership are all attracting business participants, which we see as positive evidence of growing interest in transformative change. Our leadership work through Acumen Academy is not investment driven, but we believe it is relevant and valuable in the context of both ethical investing and purpose-driven business.
A3- Interesting that BP wrote down up to $17.5bn of its asset base this quarter due to “stranded assets” — hydrocarbons that can never be burnt. Earlier this year, Lex estimated big energy groups will have to write off $900bn at current prices.
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