Metrics
GIIN / IRIS

IRIS Tackles 'Metrics Gap' To Help Entrepreneurs, Investors Measure Triple Bottom Line

Burgess COMMENTARY

Peter Burgess

IRIS Tackles 'Metrics Gap' To Help Entrepreneurs, Investors Measure Triple Bottom Line

The Global Impact Investing Network (GIIN) recently announced the latest version of the IRIS measurement system for impact investors.

The focus of the upgrade, the fourth since the metrics were introduced in 2008, is what Kelly McCarthy, senior manager of IRIS and impact measurement, calls “metrics gaps” in the IRIS catalog and was based on market feedback and other research.

IRIS provides standardized social, environmental and financial performance metrics for assessing the performance of investments. In other words, investors can analyze the progress of enterprises’ social and eco-goals with the same rigor they evaluate financial results. For entrepreneurs, it’s a useful tool for working with investors who want not only to make sure the for-profit enterprises they’re supporting have legit social/environmental missions, but also to be able to compare the performance of their various investments.

Kelly McCarthy (Photo credit: The GIIN)

“We’re seeking to provide standards that allow social and environmental performance to be considered equally alongside financial performance,” says McCarthy. “Each new version of IRIS gets us one step closer to that.”

To that end, the changes cover:

Metrics gaps across specific investments deemed to be of particular importance to investors. That means adding more metrics around such sectors as forestry, education, housing and community development and inclusive finance. One example: under inclusive finance, there’s more depth pertaining to measuring wage equity.

The update also aims to help broaden the view of a company to include not just products and services, but also operational performance metrics evaluating the daily workings of a business. “We realized it’s important to track and manage impact in a more holistic way,” says McCarthy. Thus, metrics cover such factors as the employment practices of investments.

How to improve the use of metrics in the investment management process. To that end, there’s more guidance about how to use metrics. Example: If you’re looking at the number of jobs created, you might want to see how many are, say, full-time or part-time, or the number of women in management positions.

Interpretation of the metrics using “footnotes”. That means providing what McCarthy calls a “contextual wrapper” — descriptive information with more context for the metrics. Take the matter of jobs. The issues surrounding a position in an emerging market, for example, might be different from those pertaining to employment in an area of high economic stability.

First developed by the Rockefeller Foundation, Acumen Fund and B Lab, IRIS was started to create standardized impact investment metrics and definitions, providing a more coherent foundation for investors and entrepreneurs. The goal: to help impact investors and social entrepreneurs wade through the clutter of different measurement approaches, terms and metrics, thereby enabling them to speak the same language and, as a result, boosting the acceptance of impact investing. In a recent survey of impact investors, 98% recognized the need for standard measurements, according to McCarthy. The majority of investors surveyed reported using IRIS.

With 559 metrics in all, the prospect of following every IRIS measurement might be a daunting task for many investors. With that in mind, McCarthy emphasizes you don’t have eat the whole thing, so to speak: Investors aren’t expected to use all the metrics in the system. “You choose the sectors and themes that are appropriate,” she says.

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