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New social impact tool to aid investing

May 2, 2010; Financial Times; New social impact tool to aid investing; by Sophia Grene.

Investors wanting to use their money to have a positive social impact will soon have a new tool to help their investment process.

A group of US public and private organisations will give $6.5m (Ā4.2m, Ā4.9m) to fund the development of the Global Impact Investment Rating System, broadening its geographical reach and creating a fund rating system on top of its extant company ratings. The group includes USAID, Prudential Financial, Deloitte and the Rockefeller Foundation.

The concept of GIIRS goes beyond the idea of sustainable investment to ask whether investee companies are having a positive environmental and social impact. The impact investing sector is tiny, with around $50bn in assets, but proponents are optimistic the development of formal ratings will help it grow rapidly.

“A lot of capital is being kept on the sidelines by the lack of a useful tool,” said Andrew Kassoy, co-founder of B-Lab, which has been building GIIRS.

The new funding will support 12 private equity and venture capital funds investing in the developing world in encouraging their investee companies to apply for the ratings. A further 12 funds in developed markets are expected to join them.

There are currently no plans to extend GIIRS to publicly listed equities, said Mr Kassoy, even though “a lot of investors have said to us ‘how can we apply this to public portfolios?’”

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