The UN’s Sustainable Development Goals (SDGs) are in vogue at the moment. More and more of the impact investments I investigate include a few of these emblems and they are certainly gaining prominence.
The purpose of the SDGs is to provide a coherency to the complex problems inherent in our exploitative and unequal (largely capitalist) world economy. Historically growth has been all that is important, based around producing and consuming more. Lately this is being partly offset by the service industry.
The issue is, they the SDGs are not binary. They are relative, there are degrees of achievement. A $1 profit is not the same as a $1bn profit, but both are profitable.
What is more, we cannot solely evaluate the companies we invest in by their profit potential. It ignores too many of the true costs such as pollution and returns such as carbon capturing.
Enter the Global Impact Investing Network (GIIN), looking to do provide the standards to be evaluated against. Aiming to become the IFRS (accounting standards) – IRIS+ is the generally accepted impact accounting system.
“In May, the GIIN launched IRIS+, a comprehensive system for impact investors to measure, manage, and optimize their impact. IRIS+ provides core metrics sets to increase data clarity and comparability, allowing investors to identify evidence-based metrics that will be most relevant to their strategies and goals. This new system offers an updated IRIS catalog of metrics and is aligned with more than 50 metrics frameworks, standards, and platforms. See how IRIS+ works with investors’ impact measurement and management practices.”Extracted from their collateral
The sign up process is simple, and a profile is started with SDG goals or Impact that we want to be evaluated against.
Then each SDG currently has 1-3 tangible sub categories (themes), then goals and metrics.
Additionally, it recognises that their are costs associated with a return elsewhere. For example wind turbines may improve access to electricity, reduce prices and carbon emissions, but may have wildlife and noise pollution impact. Not some hack – They have consulted 800+ stakeholders and gone through multiple iterations.
It’s tough, to make it applicable, manageable and relevant at the same time, the best proxy it seems to use are financial metrics, such as $X spend on XXX in a reporting period. Which says nothing for the quality of the impact.
Without getting overly complicated, I cannot think of a better solution, but it certainly has it’s limitations, at worst, it’s a step in the right direction.