Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
6.81 Certification may also evolve to a rating system. GIIRS is a recent initiative that aims at working
as a rating organisation specialised in SII (see Section 6.4.3 for details on GIIRS data collection). 32 Such an
approach is very important because it allows increasing informational efficiency, insofar as the creation of
an additional layer of information asymmetry is avoided.
6.82 Benchmarking is regarded to be one important but challenging aspect for investors in SII (Saltuk
et al., 2011). Currently, it is very difficult to assess the risk-return profile of a social impact investment. For
investments in mainstream capital markets, several indexes exist, against which asset performance can be
benchmarked. However, in SII performance measures go beyond the common valuation of expected
returns and foreseeable risks. Social outcomes create a wedge between the private pecuniary outcome and
the benefits that accrue the larger society.
6.83 It is important to allow investors to factor social impact into investment decisions, while rating
systems should help clarifying and tracking impact risk (WGAA, 2014). Both social impact and impact
risk should feature in a benchmark for SII. A number of initiatives such as GIIRS or Engaged X have been
working towards creating benchmarks for the SII market that incorporate metrics for social impacts and
access risks.
6.84 Further work to develop robust and comparable impact measurement practices (in delivery
organisations and for investors) can also help building the evidence base. The Impact Measurement
working group set a number of principles required to work towards an “impact measurement convention”
in the future. This would ensure a standardised approach for impact measurement and envisage a reporting
system that ensures the availability of quality impact data (WGIM). The governance model of such process
is however not yet clear. This would in principle entail a commitment from governments and industry to
set up a working group with representatives from governments and industry and a steering committee that
would agree upon the common impact measurement language, guidelines, and data infrastructure.
International organisations could provide the appropriate forum for such discussion.
6.85 As the SII market continues to grow in the future, commercial data providers that provide
information for investors might be increasingly interested in compiling SII information if selling SII data
becomes a viable business. Some of these commercial data providers have already seen value in gathering
information on certain SII-related components. For example, Factset compiles information on the NPI
sector, despite there is a very strong geographical bias towards the United States. 33 Given the embryonic
state of the SII market, the policy relevance of SII models and the role that Governments might play in
these initial stages, it would be important that efforts are made to collect (and share) systematic data within
an open-data approach.
6.86 Alternative strategies to gathering SII data were also discussed at the OECD SII expert meetings.
These included polls, community feedback mechanisms and tapping into big data. Even though these
approaches can provide rich and extensive information, data quality control and verification is extremely
challenging.
32. Information available at http://giirs.org/
33. A dataset obtained from Factset comprises 14 363 NPIs of which 97% are based in the United States. Over
89% are owned by another NPI, around 9% by foundations and the remaining 2% by other types of
companies (notoriously business ventures in the private sphere). Even for the United States, this dataset
only represents about 2% of the total number of Organizations Eligible to Receive Tax - Deductible
Charitable Contributions (IRS, available at: http://apps.irs.gov/app/eos/forwardToPub78Download.do).
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