22 Apr. 2014 | Comments (0)
Arguably, most investments have economic, social and environmental impacts, but approaches to measuring the social impact of investments are still in their infancy. In a recent edition of the Giving Thoughts series, I classify 30 impact measurement frameworks to help practitioners navigate through these tools and select the most appropriate framework for their needs. Only some of the 30 frameworks analyzed in that report address “expected impact”, a concept that the Dutch investment group PGGM and the Erasmus Center for Strategic Philanthropy introduced in the Social Impact Scorecard.
An estimation of expected impact allows PGGM to make more informed environmental, social and governance investment decisions, and to work with fund managers to achieve greater social impact and reduce negative impacts.
Using academic studies to inform expected impact
Through the Social Impact Scorecard, PGGM draws on academic studies to estimate expected social impact, so that in future—as funds start to report their performance on wider impact indicators—the data can be compared to actual social impact of PGGM’s investments. Such a process will allow PGGM to refine the methodology and assess more accurate expected impact measurements over time, an advantage of the Social Impact Scorecard that other frameworks, including most of those in my recent Giving Thoughts series publication, do not provide. Based on that analysis, PGGM scores the expected impacts of each fund on a scale of -3 (highly negative impact) to + 3 (highly positive impact). PGGM then publishes fact sheets based on this analysis that present information such as ongoing related issues and a calculation of the key impact of investing €1 million in a particular fund (e.g., the reduction in carbon emissions obtained from an investment in a renewable energy fund). See the images below for an example.
The Social Impact Scorecard was built in such a way that it can incorporate ongoing outcomes. Academic data can be replaced by actual data as it becomes available through more extensive fund reporting, allowing for more specific conclusions to be drawn. The information on expected as well as real impact guides dialogue with fund managers to encourage them to continuously improve the social impact of their underlying investments. PGGM expects the insights of this framework to help identify appropriate investment opportunities, as well as achieving greater impact.