ImpactAlpha, Dec. 8 – For all the clamor for greater disclosure and transparency in impact investing, few investors are likely to digest all of the year-end impact reports from fund managers and wealth advisors that are dropping into their inboxes just about now.
Not to worry! ImpactAlpha read through the latest pile of impact reports so you don’t have to. Our takeaway: Impact reporting has improved, but methodologies vary widely and many remain mostly marketing exercises.
The impact verification firm BlueMark, part of Tideline, has canvassed stakeholders about what constitutes good impact reporting. The best impact reports are clear about progress towards goals, incorporate multiple stakeholder perspectives and dimensions of impact, put things in context and acknowledge failures and risks, says BlueMark’s Sarah Gelfand (disclosure: BlueMark is a sponsor of ImpactAlpha).
Gelfand says Bluemark focuses on three key pillars in verifying impact performance reports:
- Relevance. Clear articulation of impact goals and their links to reported information, and integration of widely accepted frameworks such as the U.N. Sustainable Development Goals.
- Balance. Depth and coverage of both quantitative and qualitative information, and inclusive of both positive and negative results.
- Reliability. Use of data sources and quality-control practices to ensure data is accurately and consistently defined and calculated.
As more asset managers and other intermediaries improve their reporting and verification, Gelfand says, “the data in impact reports will be increasingly useful in facilitating analysis of and driving towards improved impact performance.”
Low-carbon transition: Energy Impact Partners
The New York-based investment firm focuses on later-stage technologies that its 30 strategic investors can adopt right away to increase their efficiency and reduce their carbon footprint. Those corporate partners include some of the world’s largest utilities, including Duke Energy, Southern Company and Xcel, as well as Microsoft and Enterprise Rent-A-Car (for background, see “Corporate collaboration”). EIP manages $2 billion across its six funds,
“We think of our impacts as going beyond simply getting our carbon-saving products into the marketplace,” EIP’s Peter Foxpenner tells ImpactAlpha. “We want to use our coalition as a slingshot to accelerate deployment by first scaling within our coalition, then into the marketplace as a whole.”
EIP’s 2021 ESG and impact performance report measures the direct impact of the firm’s portfolio companies, such as emissions avoided; their harder-to-measure impacts, such as resiliency and cyber security; EIP’s contributions in helping its corporate partners meet climate and diversity goals; and the sharing of insights with the public.
Topline findings: EIP’s portfolio companies saved 3.2 million megawatt hours of electricity and 2.8 million tons of greenhouse gas emissions in 2020. That helped its strategic partners cut their own greenhouse gas emissions by 40% from their base years (EIP shows how in a detailed appendix).
EIP also tracks and reports on broader ESG metrics across its portfolio companies, including workforce diversity. Women make up 27% of portfolio companies’ management, and minorities 20% (for EIP, the numbers are 25% and 20%, respectively).
Impact game-changers: Capricorn Investment Group
The firm began as the impact-oriented family office of eBay billionaire Jeff Skoll. It now manages $10 billion in assets, including at least $8 billion in outside capital. Capricorn is increasingly known for its two Technology Impact Funds, which have stakes in high-profile cleantech plays like Form Energy (batteries), Helion (fusion) and Redwood Materials (battery materials).
Capricorn’s report, “Levers of Impact” (pictured above), details the holdings and strategy of its in-house Sustainable Investors Fund. The in-house fund has $365 million to invest in the general partnerships of impact and sustainability-driven asset management firms to help them raise and deploy third-party capital at scale. (Earlier, Capricorn says it had invested $1.7 billion in a dozen early-stage sustainable investment managers.)
Since 2019, the fund has taken stakes in eight asset managers, including Lafayette Square, Osmosis Investment Management, Ecofin and Sustainable Development Acquisition Corp., a SPAC. The new impact report digs deeper into Aristata Capital, Respira International and Community Investment Management.
“Much of SIF’s intended impact may not be readily apparent for years,” Capricorn says. The firm says it is committed to regular reporting and to holding itself accountable for ensuring that its investments “go beyond final returns and have a multiplier effect that spurs broader behavior changes.”
World-positive investing: Obvious Ventures
Obvious founder Ev Williams once eschewed impact measurement and reporting for the firm’s portfolio companies. “We have to believe they have a positive impact,” Williams said back in 2018. But “trying to measure that is a complexity that is burdensome for a company.”
Obvious, which has raised nearly $600 million across three funds, has changed its tune. In Its second annual “world positive” report, the San Francisco-based B Corp. makes an effort to quantify the portfolio’s positive impacts.
Plant Prefab, for example, produces 30% less waste than conventional building construction. The cashew-based milk, butter and other products made by Miyoko’s Creamery generate up to 98% less greenhouse gas emissions than their conventional dairy counterparts. Planet’s network of over 200 tiny satellites helps companies like Unilever respond to deforestation alerts in palm oil-sourcing regions. Medable’s decentralized clinical trial platform has enabled customers to enroll patients three times faster and cut costs in half – facilitating the development of more than 80 novel therapeutics.
Whether the numbers bear out the firm’s ambitions remains to be seen. “We see extraordinary opportunities in fragile, dated, and entrenched industries whose products are often scarce, contaminated and expensive,” the report says. “The companies in which we invest are bold, taking aim at incumbents to build new consumer and enterprise categories with deep technology delivering impact on a planetary scale.”
Place-based progress: Coastal Enterprises, Inc.
A reopened ski resort that restarted a community’s economy. A business lab to help immigrants from Angola and Somalia open their own child care centers. A loan to help a biochar company purchase equipment.
In the past year, Brunswick, Maine-based Coastal Enterprises distributed some $36 million in loans and equity financing to 95 New England businesses, helping to create or preserve 427 jobs, according to its latest impact report. Since 1977, CEI’s network of funds have invested nearly $1.5 billion in more than 3,000 businesses and projects.
A year ago, philanthropist MacKenzie Scott made a grant of $10 million, which CEI is using to respond to the effect of COVID on its borrowers and to support entrepreneurs of color, among other initiatives.
“The pandemic is shining a spotlight on barriers in our economic system that prevent people from gaining a foothold, even when they work full time,” said CEI’s Betsy Biemann. COVID’s disproportionate impact has highlighted the role of CDFIs like CEI, she said, “as capillaries channeling financial resources and small business support to people and enterprises on the edges of our economy.”
Dennis Price contributed reporting.