Impact Reporting and
Investment Standards (IRIS)

Creating a Common Language for Social and Environmental Impact

In the last few years, a proliferation of investment dollars has been allocated to funds and enterprises seeking to generate social and/or environmental impact as well as a financial return.  The sector has grown to over $50B in total assets and the pace of new investment grew by an average of over 35% over the past 5 years until the middle of 2008ⁱ. In addition, close to 150 organizations are providing approximately $4B in capital and services to small and growing businesses in developing countriesⁱⁱ.  And areas like Clean Tech and Socially Responsible Investing have seen double-digit growth year-over year, despite challenging economic conditions.  Within the next 10 years, Impact Investing has the potential to grow to about 1% of total managed assetsⁱⁱⁱ, which would result in about $500B of capital channeled toward social and environmental impact.

Taken together, these statistics suggest that there will be continued growth in this relatively new capital market.  The progress of this growth may be limited, however, by a lack of transparency and credibility in how funds define, track, and report on the social and environmental performance of their capital. Transparency, credibility and enabling infrastructure are required for participants to more fully capture the value of the marketplace.

Evolution of Social and Environmental Impact Investing

Adapted from Investing for Social and Environmental Impact – The Monitor Institute, 2008

To address these challenges, The Rockefeller Foundation, Acumen Fund and B Lab initiated the Impact Reporting and Investment Standards (IRIS) effort to create a common framework for defining, tracking and reporting the performance of impact capital. Significant progress has already been made in sectors like Microfinance measures, data aggregation and rating tools have been developed. The IRIS initiative will build on these sector-specific efforts to create a common language that will allow comparison and communication across the breadth of organizations that have social or environmental impact as a primary driver. IRIS is an essential element in the evolution and maturity of the social and environmental impact investing market. A common language for measuring and reporting performance forms a basis for enabling infrastructure and leads to transparency and credibility.

The ultimate success of the initiative will require collaboration and cooperation from a great number of organizations. The challenges of this effort cannot be underestimated; neither can the potential benefits resulting from the more robust and efficient flow of capital with a social and environmental benefit.

Related Project Efforts

In conjunction with the development of the framework, the IRIS project team is also working on two parallel efforts:

• Portfolio Data Management System: Beyond identifying a common set of metrics, the IRIS initiative will coordinate with the continued development of Acumen Fund’s portfolio data management system, called Pulse.  Pulse 1.0, will be available in Q2 ’09 will allow individual funds to track and manage financial and non-financial metrics through a user-configurable, open source XBRL-enabled toolset.
• Global Impact Investing Rating System (GIIRS): B Lab is leading an effort to define a social impact rating system for institutional investors, financial service intermediaries, and companies seeking mission-aligned growth capital and liquidity. These ratings will provide investors with an independent, objective way to assess the social and environmental impact of companies and investment portfolios

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ⁱ Microfinance Exchange
ⁱⁱ Dalberg Group
ⁱⁱⁱ Monitor Institute