IRIS Webinar Series - November 2009 by Dongchen Park

IRIS Webinar Sessions – November 2009

Agenda     

Background IRIS Framework IRIS Adoption Feedback Process Q&A

Background

Impact Investing Definition: Impact Investing is actively placing capital in businesses and funds that generate social or environmental good and produce a financial return. Despite early success and momentum, the impact investing industry faces numerous challenges that limit its impact and threaten its future trajectory, including: • •

•

Investors lack a forum to share knowledge, best practices, and investment opportunities. The absence of basic market infrastructure, including a set of standards for measuring and benchmarking performance, constrains impact and capital flows. These problems are exacerbated by the weakness of market mechanisms such as rating agencies, market clearinghouses, and syndicated facilities.

IRIS aims to address these challenges by providing a common language to underpin communications and analyses and, ultimately, increase understanding of the full value of impact investments. 4 © Global Impact Investing Network, 2009

What is IRIS? The Impact Reporting and Investment Standards (IRIS) is a common vocabulary and framework for measuring social and environmental performance of impact investments. Similar to the role the International Financial Reporting Standards (IFRS) plays for financial terms, IRIS provides a model for reporting on social and environmental performance. IRIS is designed to meet the needs of a variety of stakeholders, including investees who report IRIS-compatible data, investors who use IRIS metrics to track the performance of their investments, and third parties like rating agencies, researchers, and others looking to analyze and evaluate these investment activities.

The common language provided by IRIS serves as a building block for additional infrastructure to scale the impact investing industry.

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The Origins of IRIS: Fusion of Parallel Initiatives 2007 RF convenes meeting of impact investors in Bellagio; social metrics ID’ed as priority activity

GIIN Social Metrics Working Group SVT hired to

landscape existing methods

Pulse

Q2 - PDMS launched internally within Acumen Fund; codevelopment agreement with Google signed

Spring ‘08

Summer ‘08

 Survey of investor perspectives and impact measurement tools

 RF convenes second meeting in Bellagio: GIIN conceived

 B Ratings System chosen as potential model

 Investors supportive of approach, see need for an impact ratings agency

 Beta testing of  Meeting hosted at PDMS with 15 social RF to talk about investors from ANDE vision of PDMS and and Acumen Fund “Product 2.0” data network with aggregator; PwC interest in outlines path redeveloping tool forward with XBRL technology and need for taxonomy

Fall ‘08

2009

 Business plan for ratings agency (GIIRS) initiated by B Lab, oversight from GIIN metrics steering group  Initial methodology developed for SGB market; piloted by 8 funds

 PDMS renamed “Pulse” and Salesforce commences work on rebuilding tool on its platform; PwC and Acumen Fund present RF with plan for taxonomy work

 Realization that we need a standardized set of financial, operational and impact metrics and a framework for reporting  Partnership with PwC and Deloitte to undertake this

Related Industry Infrastructure

Input Tool Pulse

• A data management platform for fund managers to track and manage financial and nonfinancial metrics • Pulse metrics will be compatible with IRIS and Pulse will be able to exchange data with the IRIS data aggregator

Global Impact Investing Network (GIIN) IRIS

 A common framework for defining, tracking and reporting the performance of impact investments

Data Aggregator

 A platform that receives IRIS-compatible data from various systems, compiles these data, and then enables comparative assessment

Output GIIRS

 A third-party ratings system that provides comprehensive and comparable social performance ratings for companies and funds  GIIRS will be both a user of IRIS and a contributor to the IRIS data aggregator.

7 © Global Impact Investing Network, 2009

Recent IRIS Activities: Timeline  Researched existing taxonomies & interviewed stakeholders  Developed initial IRIS framework and governance structure

Mar ‘09

 Launched taxonomy pilots with organizations including E+Co and SEAF  IRIS Communications Push – (e.g., SoCap, Economist article, CGI)  GIIN becomes the institutional home for IRIS

Jun ‘09  Launched IRIS website and conducted webinar outreach sessions  Conducted additional stakeholder meetings  Reviewed inputs and finalized v1 of the taxonomy

Sep ‘09

Dec ‘09  Public comment period begins with webinars  Prepare for convening of taxonomy committee to review inputs and finalize v2 of the taxonomy for launch in Q1 ‘10

IRIS Framework

Designing IRIS Over 40 taxonomies and reports were used in the development of IRIS Taxonomies - 15

Reports - 25 +

The Global Reporting Initiative (GRI) G3 and SME Draft Supplement

The Global Reporting Initiative (GRI)

ANDE Common Performance Metrics

ANDE/Dalberg

Measuring Impacts Toolkit

CDVCA â&#x20AC;&#x201C; Return on Investment Project

B-Ratings System and Green Building and SGB Supplements

B-Lab

CGAP Guidelines for Reporting in ESG Performance Indicators

World Bank and Accion: Center for Financial Inclusion

New Ventures: Monitoring and Evaluation Impact

World Resources Institute

Social Performance Standards

Social Performance Task Force Working Group

Impact Measurement Approaches: Recommendations To Impact Investors

The Social Venture Technology Group

From Poverty to prosperity: Understanding the Impact of Investing in Small and Medium Enterprises

SEAF

Making the Impact of Microfinance: Taking Stock of What we Know

Grameen Foundation

Providing Capital, Building Communities, Creating Impact

The CDFI Data Project

How Private Healthcare can help Africa

McKinsey Quarterly

Toward a New Approach to Product Development Partnership Performance Measurement

FSG Social Impact Advisors

ÂŠ Global Impact Investing Network, 2009

IRIS Stakeholder Engagement Over 60 stakeholders representing a variety of leading organizations have been engaged in the development of the IRIS taxonomy

ÂŠ Global Impact Investing Network, 2009

IRIS Framework Common Indicators, Meta-Layers and Sector-Specifics

Descriptors and metalayers Operational Indicators

Financial Indicators

Sector-Specific Outputs

ÂŠ Global Impact Investing Network, 2009

Adoption

IRIS Adoption Process Overview Organizations adopting IRIS will need to follow a process to align their indicators with the IRIS framework and to migrate and submit data to the aggregator

IRIS Mapping & Technical Assessment



Using the IRIS Mapping template, an organization reviews their metrics and indicates alignments with IRIS taxonomy Mapping Exercise is submitted for review and approval

One-time Process

Data Migration



Data Submission

Organization migrates data through either a manual or program-driven process to one of the data submission options: – Pulse – Excel Organization updates/adjusts any currently tracked data to ensure it aligns with the taxonomy



Once data has been migrated, the organization may submit data to the aggregator The Excel data submission template FTPs file to converter for XBRL coding and submission OR Pulse submits data to MapForce which then tags data in XBRL

Annual Process

Although new releases of the taxonomy may require organizations to update their mapping, this will generally be a one-time requirement

IRIS Information Flow Academics, Researchers

Rating Tools (GIIRS)

Companies, Fund Mgrs, Investors

Users of data

3 w/ access controls

Data Aggregator

2 Fund (via Pulse)

Fund (via legacy system)

Fund (via Excel)

Reporting via submission tools

Enterprise

Collecting IRIS compatible data

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example

Background

EnerTech’s IRIS analysis of Jua (“Sun” in Swahili) Solar  EnerTech is an intermediary focused on small/growing business (SGB) impact investing in Africa and Southeast Asia. They have 15 investments ranging in size from $50,000 to $500,000  Jua Solar is an SGB focused on providing rural areas with clean, renewable energy though the sale of small, 50kW solar photovoltaic units to community residents  Current system: EnerTech is currently using a series of Excel documents to track the financial and operational performance of its investments. In total, 17 indicators are tracked. EnerTech’s current indicators for Jua

Jua Solar’s distributed solar product

Investment Name

Jua Solar

Company Focus Investment Amount Location of Investment Date of Investment

Renewable Energy $125,000 Tanzania April 8th, 2008

Revenues COGS OPEX Net Income Units Sold Lives impacted Profit Margin Estimated # of solar units operating Avg generator capacity utilization Total energy being produced # new households with electricity Employees # indirect employees

example

Initial Mapping

 After a review of the IRIS taxonomy, EnerTech decides on a total of 25 indicators, with 4 additional indicators to be calculated based on the collected data  Several other indicators are identified as potential indicators that Jua Solar may be asked to report on in the future

Descriptors

8 Descriptor Indicators  Name of organization  Year founded  Primary region served  Primary country served  Sector activities  Operational model  Size (employees)  Target population

Financial Indicators

6 Financial Indicators  Accounting Standard  Revenue  Costs of goods sold  Operating expenses  Total assets  Net Income + 2 Calculations  Revenue Growth  Return on assets

Operational Indicators

5 Operational Indicators  Full-time employees  Healthcare benefits  Healthcare benefits, emp.  Wages & Salaries: FT  Number of training hours + 2 Calculations  Job growth  Wage growth

Energy Sector Indicators

6 Energy Sector Indicators  Type of product/service  Number of units sold/dist.  New households provided w/ energy  Clean energy production capacity  Average utilization  GHG Offset/Mitigated

example

Ongoing Usage

 Ensuring Adoption: EnerTech’s portfolio specialist responsible for Jua sets up a call with Jua management and walks through the proposed changes to definitions and the new metrics that EnerTech would like to collect  Modifying their system: EnerTech’s technical specialist updates their Excel workbooks to incorporate the new metrics and modified definitions and units of measure IRIS Adapted Indicators

Previously Used Indicators

Investment Name

Jua Solar

Company Focus Investment Amount Location of Investment Date of Investment

Renewable Energy $125,000 Tanzania April 8th, 2008

Revenues COGS OPEX

Investment Amount Sector activities Sector Organization mission Location of Investment HQ Primary Region Served Primary Country (ies) Served Date of Investment

OPEX Net Income Full-time employees Job Growth (claculated)

Lives impacted

Benefits Provided for FT employees

Profit Margin

Wages and Salaries

Total energy being produced

Tanzania Africa Tanzania April 8th, 2008

COGS

Units Sold

Avg generator capacity utilization

$125,000 Renewable Energy

Revenues

Net Income

Estimated # of solar units operating

Jua Solar

Wage growth (calculated) Number of training hours Type of product or service Units Sold

# new households with electricity

Lives impacted

Employees

New households provided with energy

# indirect employees

Estimated # of solar units operating Avg generator capacity utilization Total energy production capacity GHG Offset/mitigated

Feedback

IRIS Website: Overview Overview  The IRIS website –www.iris-standards.org – was launched in April ‘09  This site provides an interactive forum for comment and discussion on impact measurement  During the 1st public comment period in April/May ’09, the site received 200+ comments from over 50 organizations proposing updates to the IRIS indicators + definitions and suggesting new metrics

Background and Content  The IRIS site provides an overview of the project and the layout of the framework  The site also explains how to use the framework to locate the proposed indicators that would be applicable to your organization

IRIS Website: Commenting on Indicators Within each category, there is a list of all of the current indicators for your input and feedback; there is also the opportunity to propose new indicators

Clicking on the indicator title or the comment box will take you to the Indicators description page where you can view previous comments and engage in discussion.

The discussion can be displayed as a thread so that participants can see the feedback from others and add their comments or begin a new thread. All comments require organization and email identification.

ÂŠ Global Impact Investing Network, 2009

IRIS Website: Public Comment Period  Stakeholder participation and feedback is critical  Comments submitted by November 13th will be reviewed for inclusion in IRIS version 2, comments received subsequent to that date will be recorded and reviewed for inclusion in later versions  A report will be generated summarizing the IRIS Website feedback  Please plan on committing 2-3 hours over the course of the next 1 - 2 weeks to review and provide feedback on the IRIS taxonomy, indicators and definitions  Instructions: 1

Visit the IRIS website at www.iris-standards.org

Review the IRIS framework, in the context of your organizations operations, and provide input  Are the right indicators represented? Are they valuable for your organization?  Are the definitions clear and concise? If not exactly similar, do they make sense for your data?  Does the proposed governance process make sense? What issues do you see?  Additional comments or thoughts?