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The Evolution of Impact Data: Trends and Innovations

The Impaakt Team

15 min Read Time | June 11th 2023

Responsible investing, which refers to investment strategies that take into account environmental, social, and governance (ESG) factors, has been around for several decades. However, it gained significant popularity in the early 2000s, following a series of high-profile corporate scandals and environmental disasters.

One of the most notable events that helped to popularize responsible investing was the Enron scandal in 2001. Enron, a major energy company, was found to have engaged in widespread financial fraud and accounting irregularities, leading to the company's collapse and significant losses for investors. This scandal brought attention to the importance of ethical and responsible corporate behavior and helped to spur interest in ESG factors in investment decision-making.

Another significant event that contributed to the popularity of responsible investing was the Dieselgate scandal in 2015. The scandal involved Volkswagen, which had been cheating on emissions tests for diesel engines. The scandal highlighted the risks associated with investing in companies that engage in unethical practices or fail to disclose important information to investors. The fallout from the scandal, which included billions of dollars in fines and a significant drop in Volkswagen's stock price, demonstrated the importance of considering social and environmental factors in investment decision-making.

In addition to these events, there has been a growing awareness among investors of the importance of sustainability and social responsibility in business. This has been driven by a number of factors, including increasing public concern about climate change, social justice issues, and inequality.

As investors began to incorporate ESG factors into their investment decision-making, they began to look for ways to measure and evaluate the impact of these factors on investment performance. Several major reports and agreements in the early 21st century, such as the Paris Agreement and the UN Sustainable Development Goals, helped to increase awareness of the need for sustainable investment and impact data. This led to the development of new tools and methodologies for assessing the social and environmental impact of investments, such as impact assessments and social and environmental impact reporting.

Impact data has become an increasingly important tool for measuring the social and environmental impact of listed companies. As the demand for impact data has grown, so too has the need for more sophisticated and innovative approaches to collecting, analyzing, and reporting on impact data. Impact data can help to guide decision-making by providing insights into which companies are achieving positive social and environmental impacts. As such, impact data is a key tool in driving positive change and ensuring that businesses are held accountable for their impact on society and the environment.

In this article, we will explore some of the key trends and innovations in the evolution of impact data, and consider the implications for organizations seeking to maximize their social and environmental impact.

Trends in Sustainability Data

Shifting the focus from practices to impacts

One of the major improvements in sustainability data is a growing focus on impact. Rather than simply tracking practices and promises, organizations are increasingly interested in understanding the actual impact of their actions and investments. This involves setting clear goals and objectives and collecting data that enables them to measure progress toward those goals. By focusing on outcomes, organizations can ensure that their efforts are actually making a difference and that they are delivering positive social and environmental outcomes.

Greater emphasis on stakeholder engagement

Stakeholder engagement is also becoming increasingly important in the impact assessment space that is quickly growing. This involves engaging with a wide range of stakeholders, including customers, employees, investors, and local communities, to understand their perspectives on social and environmental issues and to involve them. By engaging with stakeholders, organizations can ensure that their efforts are aligned with the needs and priorities of the communities they serve, and can build support for their initiatives.

This is also true for stakeholder engagement between investors and investees, where investors are increasingly taking part in discussions around the most material environmental and social matters.

Collaboration and standardization

Collaboration and standardization are also important trends in impact data. As the demand for impact data has grown, institutions have recognized the need to work together to develop common standards and methodologies for measuring and reporting impact. This has led to the development of a range of frameworks and standards, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), which provide guidelines for measuring and reporting on sustainability factors.

Further, the evolving regulatory landscape has pushed this need too. The EU's Sustainable Finance Disclosure Regulation (SFDR) is one example of an effort to standardize impact data. The SFDR requires financial market participants to disclose how they integrate sustainability into their investment decision-making and to report on the impact of their investments on environmental, social, and governance factors. This is intended to provide investors with more standardized and comparable information on the sustainability performance of different investments.

By working together to develop these standards, organizations can ensure that their impact data is consistent and comparable, and can improve transparency and accountability

Next generation of data for the next generation of investors

Millennials and Gen Z investors have been identified as a driving force behind the increasing interest in sustainable and responsible investing, and impact data plays a key role in this trend. These generations are often referred to as "impact investors" because they prioritize investing in companies that are making a positive impact on social and environmental issues.

These investors are more likely to prioritize values and purpose in their investment decisions, and they want to know that their investments are making a positive impact on the world. Impact data provides them with a way to evaluate the social and environmental impact of their investments, and to align their investments with their values.

Making impact measurement mainstream

In the past, impact measurement was often seen as the domain of specialized firms investing in social enterprises. However, today there is a growing recognition that impact measurement is important for all companies, regardless of their mission. Rather than being confined to a niche area of the investment industry, impact measurement is becoming a standard practice that companies evaluate their performance and their contribution to society and the environment. Impact data is increasingly being used to evaluate the entire value chain of a company, from its supply chain to its products and services.

Innovations in Impact Data

Use of technology to collect and analyze impact data

One of the most significant innovations in impact data is the use of technology to collect and analyse data. This includes the use of tools such as sensors, satellites, and drones to collect data on environmental factors, as well as the use of big data and machine learning techniques to analyze large datasets. These technologies can help organizations to collect more accurate and comprehensive impact data, and to identify patterns and trends that might otherwise go unnoticed.

A Multi-Stakeholder Approach for Impact Data

Impact measurement is evolving from a traditional single-expert approach to a more multi-stakeholder-driven process. This approach involves the active participation of stakeholders in the actual collection and interpretation of data, resulting in a more accurate and comprehensive assessment of impact.

The case of smallholder farmers is a great example of how companies are shifting their approach to monitoring progress and measuring impact. Instead of relying on third-party audits, they are now involving farmers directly in the reporting process by utilizing technology like mobile phones.

This not only streamlines the process but also empowers farmers by giving them a voice in the impact measurement process. This multi-stakeholder approach ensures that impact data is not only accurate and reliable but also inclusive of diverse perspectives, leading to a more holistic understanding of a company's impact on society and the environment. This shift towards a collaborative and participatory approach to impact measurement is an exciting development that promises to further enhance the effectiveness of responsible investing.

The Data-Driven Approach

Impact measurement is becoming more data-driven, with a focus on timely and accurate data collection. In the past, impact evaluation relied heavily on qualitative measurements. However, with the development of new tools, impact data can now be collected more efficiently and in real time. Traditional impact evaluation often involved collecting data after-the-fact, which limited the ability to make necessary corrections for more effective interventions. Shifting towards more data-driven impact measurement, we can improve the accuracy and efficiency of our impact assessments and provide valuable feedback to stakeholders in real time.

Democratising Impact Investing through Technology

Democratising impact investing through technology has made it more accessible to the masses. Previously, investing in impact was reserved for those who had enough capital to have banks or portfolio managers manage their investments. However, with the emergence of online investment platforms, people can now invest with purpose, relying on stock picking, investing in ETFs, or thematic certificates. This has opened up a whole new world of impact investing to a broader audience, enabling more people to invest their money in alignment with their values and create positive change in the world.

Another dimension involved in democratizing impact investing requires training and skills in understanding key principles, impact measurement methodologies, and how to interpret the impact data provided. By equipping individuals with these capabilities, impact investing becomes more accessible, enabling a broader audience to understand and align their investments with their values and create positive change.

Collective Intelligence for Impact Assessment

Finally, collective intelligence is a groundbreaking innovation for impact data. Unlike the traditional single-expert approach, collective intelligence pools together the knowledge and expertise of a diverse group of individuals, ensuring that impact assessments are more objective and unbiased. This is because individual biases and limitations are offset by the collective wisdom of the group.

Additionally, collective intelligence platforms can engage a larger and more diverse range of stakeholders, ensuring that a variety of perspectives are considered. One of the unique aspects of collective intelligence is the ability to conduct materiality assessments, which involve assessing the most important environmental and social impacts of a company or project. These assessments are crucial for identifying and prioritizing areas for improvement, and cannot be conducted by AI alone. Therefore, collective intelligence is a powerful tool for driving positive social and environmental change.

Final Thoughts

Impact data has the power to drive positive social and environmental change by providing valuable insights into the most material impact topics of a company. As we have discussed, there are many innovations and tools emerging that are making impact data more accessible, accurate, and timely than ever before. These innovations are democratizing impact investing and empowering a wider range of investors to take part in building a more sustainable and just world. However, there is still much work to be done in standardizing impact data and ensuring that it is widely adopted across the financial industry.

Looking to the future, we see impact data playing an increasingly important role in driving positive change. With the growing focus on sustainability and social responsibility, we expect to see greater demand for impact data from investors, regulators, and other stakeholders. We also anticipate that the use of technology and new tools for collecting and analyzing impact data will continue to evolve, making it easier for organizations to measure and report on their impact. As impact data becomes more widespread and trusted, we believe that it will drive a shift towards more sustainable and socially responsible investing, leading to a more equitable and sustainable future.

We urge all organizations, from financial institutions to retail investors, to embrace impact data as a key driver of positive change. By adopting impact data as a central part of their decision-making process, organizations can better understand the social and environmental impact of their investments, and make more informed choices that drive positive outcomes. This will require a commitment to standardization, collaboration, and transparency across the financial industry, as well as investment in new tools and technologies that enable more accurate and timely impact measurement. Together, we can harness the power of impact data to build a more sustainable and just world for all.


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