Date: 2024-07-17 Page is: DBtxt003.php txt00005156
Peter Burgess ... LinkedIn
The development of metrics
Social Stock Exchanges ... Is this the the critical next step for impact investing? Will we begin to see exits by impact investment firms?
Social Stock Exchanges Is this the the critical next step for impact investing? Will we begin to see exits by impact investment firms?
Sang Lee, Amira Berrada like this 2 comments
Michael Feldman
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Michael Feldman • There's a group in Singapore which just announced the launch of their social stock exchange: http://www.asiaiix.com/
Peter Burgess
I have been following the emergence of the social stock exchange in Singapore referred to by Michael Feldman for some time, and as I understand it, this will be a real stock exchange rather than merely a place to talk about social impact initiatives. From my perspective, the healthy development of any social stock exchange is presently limited by the state of development of the social impact metrics that are critical to the operation of a market that has any meaning. Many of the initiatives to do with measuring a company's impact have to do with merely assessing the company's internal processes relative to impact, rather than getting to grips with the impact that is actually happening outside the organization as a result of the company's activities. The reporting of financial results goes a lot further than telling the market that the company has a good accounting system, but that is more or less what seems to be the state of social impact reporting.
As I see it, there are four areas of impact: people, place, planet and profit.
People are impacted as staff in the company, as staff in the supply chain, as staff in the distribution chain, as families of all these people, and as members of the community (place) where all these people live.
Place is impacted by people as above and also by the behavior of the company and its associated supply and distribution chains in all the places where it operates. Jobs are positive, but pollution, congestion and consumption of resources are negative.
Planet is impacted by the use of resources and the generation of waste bye-products, including things such as greenhouse gases.
Profit is the financial measure commonly used in the corporate business world ... typically an internal measure within the organization.
In the case of profit, the reporting boundary is the organization. In the case of people, place and planet, the reporting boundary is larger than simply the organization. The reporting boundary has to include all the value chains associated with any economic activity of the organization.
Measuring impact requires a way to quantify value. A way to do this is to build a database of reference standard values ... how one value item stacks up against another value item, and how value changes depending on circumstances. If I am in a drought, a bit of water has a huge value ... if I am in a flood, water has a negative value. etc.
A key way to measure impact is to look at the state of something at the beginning of a period, and then again at the end of the period. Progress is the change in state. State is similar to a balance sheet in financial accounting, but about the aggregate of values that go into quality of life and the health of place and planet.
Running a business using profit as the key metric has been the norm for a very long time and the business schools have been training in this mode as long as they have existed. Optimizing for impact on people, place, planet and profit is more complicated and as far as I know there has been no business education for this up to now ... at any rate education that involves rigorous metrics.
There are many open questions about how social impact metrics can be implemented so that it is as ubiquitous and as rigorous as financial accounting, but there are many initiatives that are working on bits of this. My guess is that this will all come together quite soon and change the way the public, the media and capital markets look at corporate performance.
Peter Burgess TrueValueMetrics