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Transparent Deal Data for Impact Investors

Everybody is in favor of open data, it seems, except when it comes to their own.

So it is in impact investing, where many investors say limited information about financial results and social and environmental impacts is keeping significant capital on the sidelines. But that doesn’t mean they’ll disclose their own results or deal terms.

“Privately owned enterprises have not been legally required to share any impact performance data. And their investors are not required to do so either,” Cathy Clark, Jed Emerson and Ben Thornley write in The Impact Investor, the background document for a collaborative research project that is documenting the practices of impact investing funds. “The resulting lack of clarity about financial performance goals and results across the field’s players, big and small, is a barrier to the field’s development.”

Impact IQ is gearing up to tackle that information deficit

But Impact IQ itself faced the same inherent contradiction as other companies when it came time to push the button early this morning and make our financing proposal to the Knight News Challenge public on their website. Did we really want to telegraph all of our moves? Knight favors open scrutiny and review, so we took the plunge and put our strategy online.

Because the application rewarded brevity, the document serves as a decent primer for Impact IQ. Here are the highlights:

What do you propose to do?

Impact IQ will provide data and analysis of deal financing and impact metrics to open the marketplace for investments that combine social, environmental and financial returns.

How will your project make data more useful?

Real-time deal data will catalyze private capital for social impact by providing proof points — beyond anecdotes! — of the emerging market for “impact investments.” Impact IQ will dig out and aggregate data and add editorial context to help investors account for social and environmental returns in their capital-allocation decisions.

How is your project different from what already exists?

Private data about impact deals is not broadly available. Data from intermediaries is partial and proprietary. Static impact directories don’t capture real-time deals. Data on other “alternative investments” ignores social and environmental impacts. Impact IQ is an openly licensed, inclusive, dynamic resource for all stakeholders.

Why will it work?

Impact IQ will pioneer a new kind of business reporting. Investors increasingly are seeking an information edge through nonfinancial social and environmental indicators. Combined with aggressive reporting, open data provides the transparency buyers and sellers need (even as they guard their own information). Disclosure of social-impact data allows investors and companies to distinguish themselves; non-disclosure can signal trouble. Impact IQ’s founding partners include investor networks, industry leaders, and financial intermediaries seeking to accelerate dealflow and expand the circle of impact investors through increased transparency. The broad business news audience wants richer detail and more rigorous analysis of companies’ social and environmental impacts.

About the author: David Bank

1 comment

  1. David Bank says:

    I’ve just read the excellent report on the African Agricultural investments made by Pearl Capital Partners, which makes this same point:

    “The challenge for impact investors, if they are to continue to capture increased and varied sources of liquidity, is to demonstrate that the investment model is sustainable, that it creates strong businesses, it provides positive social impact and that the returns to investors are
    competitive.

    “On the face of it, this seems understandable and perfectly reasonable. However, gaining the necessary information is easier said than done. Impact investors, like other alternative asset classes, work in an environment where returns are guarded secretly and only revealed to current and potential investors, at a point in time, usually during fund raisings. Therefore this paucity of information creates, from an outsider’s perspective, an incomplete picture of the asset class as a whole.

    “By comparison to other alternative asset classes, the impact investment model is still immature and financial return claims not yet proven. Investments are made gradually and investee companies take time to realize value. It will require some shaking out yet to prove that the model is sustainable.”

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