The report assesses the need for impact measurement and reporting standards by benchmarking the existing quality of environmental, social, and governance (ESG) and impact reporting of 30 non-financial firms and 30 impact investors for comprehensiveness, transparency, materiality/intentionality, and other criteria.

Karen Wilson, founder of GV Partners, a research and consulting firm focused on entrepreneurship, innovation, and finance for sustainable development, moderated the event.

The  Director of the Graduate Institute, Marie Laure Salles, stated in her introductory remarked that “impact is the new frontier”. She further underlined that, by engaging in impact investing one would be “contributing to measurable positive, social, and environmental outcomes that are potentially highly transformative."

The research team presented a benchmarking study that relied on a sample of non-financial firms to assess the quality of their ESG reporting practices along seven predefined criteria such as comprehensiveness, transparency, materiality and intentionality, among others. The sample consisted of 30 firms from 13 countries, selected from those that signed the World Economic Forum’s Stakeholder Capitalism Metrics (WEF, 2022). 

While there were positive trends that emerged from the SL4SF study such as the fact that all firms comply with at least one existing ESG reporting framework and that most firms report comprehensively on the three E, S, and G pillars as well as tie their sustainability reporting to one or several SDGs, it was also  observed that there is a lot of room for improvement on the transparency and materiality front (single as well as double materiality) of their ESG disclosures.

Second, regarding impact investors, the team selected the top 30 Operating Principles for Impact Management signatories (based on AUM) and looked at 16 DFIs and 14 private investors, with 416 billion in AUM and spread over 11 countries. The analysis showed that all impact investors considered ESG standards and specified strategic impact objectives for their investments. However, improvement is needed, first,  in the area of having and reporting back on a structured impact measurement and monitoring framework (in terms of process, time, scoring, and criteria) and, second,  the reporting on the indirect effects of their investments. 

In his comments, panelist Professor Patrick Bolton of Imperial College London commended its clear differentiation between impact and ESG standards. “You don’t see such a distinction being made elsewhere: that impact is creating positive externalities, while ESG is minimising negative externalities.”

As a next step for research, panelist Maria Teresa Zappia of BlueOrchard suggested that one could focus increasingly on impact reporting. From a practitioner’s perspective, it would be interesting to see “not just how investors report on impact KPIs, but also their impact reporting. This would allow us to see if the impact intention can really be measured, and if impact KPIs are effectively satisfying investors’ requests in terms of expected outcomes.”