Sarah Gordon, CEO, Impact Investing Institute (III), and I sat down across a virtual desk last week to discuss her role, who the III are what they plan to achieve. 

Sarah started by explaining that the III builds on from previous initiatives around social impact investing that were set after the UK leadership of the G8 in 2012, to see what was stopping the impact investing market realizing its potential in the UK and internationally. 

Dame Elizabeth Corley and Sir Harvey McGrath who chaired these initiatives brought them together to form the III. Backed by the City of London Corporation, two government departments and ten financial services organisations, they are a small team of ten working with a broad set of volunteers. 

She went on to tell me that: “those volunteers are senior representatives of the social investment sector policy academia and institutional investors, so we have all our different work led by volunteers who sit on our board and we also have an Advisory Council which is about 25 people at the moment and it's one of the real strength of the institute's.

“One of the things that I thought very hard about is how to leverage that connection and that convening power. So, our objectives are building on that comparative advantage really and particularly those very deep links with the city and with the pools of capital in the city which are international.”

As Sarah spoke of mobilising large pools of capital as the biggest way to make change, she went on to talk about their work with pension schemes, education and awareness and enabling the public to invest in line with their values. 

On the latter point she referred to research by the Department for International Development which states: “The results show that when presented with a choice, most people in the UK would prefer their investments to consider impact on people and the planet, alongside financial considerations. In other words, most people want to invest in a better world. This is particularly clear among those with investable assets over £25,000. High levels of interest are also found among ‘millennials’, those aged between 18-39."

We discussed the work of Make My Money Matter who plan to get the public thinking more carefully about how their pensions are invested. Sarah spoke of partnering with them but the III is focused on working to ensure the pension industry can deliver impact investing into their portfolios and strategies. 

Moving on to the challenge of greenwashing in the industry, I asked about reporting, data and the work going on to create standards and transparency in the creation of products and portfolios in this space. 

Sarah stated: “One of the main focuses of the institute's work is supporting global convergence  of standards for measuring and reporting impact and we are working very closely with another partner organization, the Impact Management project, a structured network particularly focused on the 13 standard setters who are trying to build consensus in that group for global convergence of impact reporting and measurement standards.”

She continued: “We think that longer term we will move to IFRS reporting of impact, where businesses will have to report their positive and negative impacts alongside their financial performance. We need to get to a place at some point where there is agreement globally around how to account for your impact and part of that will be the slow introduction of managing it through reporting positive and negative impacts by business.”

Sarah was acutely aware of adding burden to businesses, particularly at this time, but she felt convergence and reduction to key impact metrics would be helpful to reduce the regulatory burden and make this area business as usual.  In response to my questions about losing necessary variation in a drive to a comparable but manageable set of metrics, Sarah felt that there was room for both, and some industry specific metrics could be applied with a generalized set. 

Talking to the speed of such standardisation processes Sarah felt that policy and standards setters can move fast and perhaps one silver lining of this horrible human and economic crisis would be a recognition that we need to plan forward and to take swifter and more comprehensive action around climate and social impact.

We shifted through the gears talking about annual reports incorporating negative as well as positive impact and moved on from reporting to evidence. The Institute is building separate pieces of evidence that show the sort of risk, return and impact profile of different types of investments both domestically and internationally, because one of the perceived issues that big institutional investors have is that they say “there's no assets at scale and there's no track record.”

Sarah pointed out that isn't the case: “There are assets at scale and there are track records. I mean CDC which is the UK’s development finance institution has been doing impact investment for nearly 100 years.  They didn't call it impact investment but we are working with CDC and a number of institutional investors to build an evidence base to take to many institutional investors.”

Turning to the role of technology Sarah went back to the role of the IMP+ACT Alliance, which is developing a digital platform that allows you to classify the impacts of your portfolio and then link those impacts to the SDGs. 

She recommended some of the case studies on the Impact management projects websites, such as PGGM the huge Dutch pension scheme and Snowball in the UK, which shows investors what the impact their portfolios are having and how that has changed behaviour.

In the retail consumer space she spoke about Fair4All Finance which is run by Richard Collier Keywood and an app called Cogo where you can show the impact of your shopping decisions.  

To conclude, I asked Sarah what we can expect in the short term from the III and she was clear that their absolute focus is on responding to current needs which includes working on an emergency lending facility which is being managed by Social Investment Business and supported by Big Society Capital to get emergency lending to social enterprises and charities within the UK. 

Longer-term she feels that the crisis has shown that impact investment has a clear role in building resilient and fair societies and her belief in that has been reinforced.