Monday, December 12, 2011

Building Trust Through Information

This post, by Christina Conrad Cuenca, Manager, Lending and Advisory Services, was originally published on November 2, 2011, in the Microplace blog

Impact investing has been getting a lot of great publicity lately, but that doesn't necessarily translate into comfort for investors. Knowledge and information, on the other hand, do. Which is one of many reasons we are so glad to be a part of the Global Impact Investing Rating System, or GIIRS, an independent third party that assesses the social and environmental impact of companies and investment funds.

GIIRS is a project of B Lab, one of our borrowers, and was announced officially in September at the Clinton Global Initiative meeting in New York.

Calvert Foundation is one of the “15 Pioneer Investors” who have declared a preference for GIIRS-rated funds and companies in their impact investing decision process. Furthermore, our participation in this is a signal to more mainstream institutions and investors that credible metrics on impact are necessary for impact investing to succeed.

As the head of Calvert Foundation's risk management team, I take a special interest in encouraging efforts such as GIIRS. One of the great challenges we face in evaluating investment opportunities is a lack of standard metrics across sectors (such as affordable housing and microfinance) and organizational models (such as social enterprises and co-operatives). While we have been successful at navigating our way through these challenges - often by creating our own metrics and screens - the industry as a whole has a better chance to grow and thrive if there is a third-party rating system that investors can turn to for information and comparison.

GIIRS, which has an aggressive five-year plan to provide ratings for more than 2,500 companies and over 350 funds, typically rates venture capital and private equity funds and for-profit companies. Because of this, most of the organizations we invest in wouldn't qualify yet - and neither (as a 501c3) would we. Because of Calvert Foundation's complex model, we often don't quite fit into a defined model, but we are working with GIIRS and the industry at large to change this, one step at a time.

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