Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
~Larry Fink, Chairman and CEO of BlackRock, Inc
It has been over two years since Larry Fink, leader of the biggest asset management firm in the world, made this statement in his yearly letter to CEOs. Of course, when the lead fiduciary to more than $6.5 trillion in global assets says that positive social impact is a core business value, the business world pays attention. Let’s take a look at what has happened since.
The size of the impact investment market has ballooned from $228B to $715B in assets under management (AUM). Private equity giants like KKR, Partners Group, Blackstone, TPG, and BlackRock have closed billion dollar impact investment funds. Harvard Business School launched The Impact-Weighted Accounts Initiative (IWAI).
The impact investment “movement” has officially hit the mainstream.
The International Finance Corporation (IFC) recently estimated that investor appetite for impact investing is as high as $26 trillion — $21 trillion in publicly traded stocks and bonds, and $5 trillion in private markets. According to the IFC, “Turning this appetite into actual investments will depend on the creation of investment opportunities and investment vehicles that enable investors to pursue impact and financial returns in ways that are sustainable.”
Impact-weighted accounts. Sustainable pursuit of impact and financial returns. What do these seemingly paradigm-shifting notions mean for enterprises of today? What should CEOs make sure to do now, to maximize their company’s value in the future?
To paraphrase the words of Sir Ronald Cohen and George Serafeim, invest in measuring and communicating your impact performance.
At Proof, our mission is to leverage data science and other exponential technologies to empower enterprises to create transparency around their impact, and ultimately transform non-financial operational and performance data into economic value and positive outcomes. Like Cohen and Serafeim, we know that high-fidelity, transparent impact data is in high demand, as evidenced by the rapidly growing capital flows looking for investment opportunities with measurable impact and/or environmental, social and governance factors — which have now reached more than a third of the world’s professionally managed assets.
“The era of impact transparency has begun, and it is moving the goal posts for businesses and investors. Technology and Big Data have combined with longstanding efforts by many individuals and organizations to make the measurement and valuation of corporate impact a reality. With the arrival of impact transparency, impact and profit set the new rules of the game” ~ Harvard Business Review, September 2020
Even when visibility into enterprises’ operational data is lacking, investors are already integrating social and environmental performance into their investment decisions as best they can. Regulators are already working on creating tax incentives around impact performance. With an imminent, catalytic shift in corporate behavior, it is time for enterprises who aim to become leaders among their peers to ensure they have a transparent, verifiable impact story.
In order to do that, enterprises will have to identify an impact measurement and management (IMM) framework that is fit for purpose — based on their objectives, target market, and operational context. With a rising sea of measurement methodologies and overarching toolkits like the Impact Management Project (IMP), Impact Reporting and Investment Standards (IRIS), Social Return On Investment (SROI), the IFC Operating Principles for Impact Management and more, it can be a daunting task to establish a coherent system that is in lockstep with commercial activities.
So who has the time or money to spend on monitoring non-financial performance while running a dynamic, growing business? How can enterprises thrive in this new era of impact transparency while minimizing the operational burden of IMM?
Given today’s wave of impact-driven consumers and investors, an investment in IMM is one that every enterprise should make. But that shouldn’t mean that you must hike your overhead on dedicated personnel with experience in impact monitoring and evaluation, or even external consultants that leave a void when it’s time for implementation.
Proof’s platform offers automated solutions for data collection, transformation and analysis to help your enterprise prepare for the steadily escalating standards for impact transparency. By leveraging a suite of algorithmic techniques and data science tools, we turn an otherwise complex and costly process into an end-to-end solution for transforming operational data into meaningful impact metrics — helping you make clear distinctions between operational impact, employment impact and product impact.
What’s more, the Proof platform is powered by distributed ledger technologies (DLT) — more commonly known as blockchain — offering your stakeholders future-proof data integrity. For our shrewd readers already asking how we apply DLT — not only does Proof make IMM easier and more efficient through automation, our platform makes impact data transparent through tokenization.
Impact tokens can represent quantified units of an impact that can be traded and potentially used as offsets or as a contribution to companies’ CSR initiatives. A key component of impact tokenization is the reliable measurement of impact. This is an area where blockchain can significantly improve transparency and reliability in a cost-efficient manner…Projects feeding operational data to the blockchain will have better valuations than the ones relying on conventional technologies for collecting and storing data.
~ International Institute for Sustainable Development, April 2019
When Franklin Templeton, a global leader in asset management with over $700B in AUM, invested in the development of the Proof platform, it was because they understood that transparent, digital impact data infrastructure is paramount for enterprises of tomorrow, and that the new economic paradigm of risk, return and impact is already taking form.
As we get ready to launch our enterprise beta, we are seeking 25 enterprise partners to innovate with us and help shape our product offering around their impact management, capital raising and consumer facing objectives. They’ll get to leave their mark on our journey and thrive in this new era of impact transparency. Spots are limited so that we can dive in and leave you with automated impact performance insights and visualizations that investors and consumers can understand, engage with and trust.