New Frontiers | Our WorkInvestor Contribution 2.0: Developing Metrics & Addressing Systemic Risks

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IN PARTNERSHIP WITH:pre the distribution initiative The Predistribution Initiative is a multi-stakeholder initiative that supports investors in co-creating new approaches that align their internal investment governance and financial analysis practices with the principles of system-level investing and Universal Ownership.
STATE: Active
DATE: May 9, 2022
STATUS: Open for public comment
Supporting documents:
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pre the distribution initiative The Predistribution Initiative is a multi-stakeholder initiative that supports investors in co-creating new approaches that align their internal investment governance and financial analysis practices with the principles of system-level investing and Universal Ownership.
STATE: Active
DATE: May 9, 2022
STATUS: Open for public comment

Share your feedback to improve measurement and management of investor contribution

Everyone knows that companies have both positive and negative impacts on people and on the environment. Investors are also increasingly recognizing that the way they invest does too. But, consensus on how to manage the contribution of investors, both positive and negative, is lacking.

In 2022 – 2023, Impact Frontiers and The Predistribution Initiative (PDI), with the support of Omidyar Network, will jointly facilitate the creation of a prototype set of metrics for investor contribution. We will publish these as an open-access resource to support practitioners with measuring, managing, and reporting their positive and negative contributions to impact and systemic risk.

We invite you to get involved in three ways:

  • Please email the investor contribution metrics your organization currently uses (or ideas for potential metrics) to info@impactfrontiers.org. We will anonymize, de-duplicate, and organize these into an initial metric set for industry stakeholders to review and provide feedback on. We welcome any and all submission formats (e.g. Excel, Word, email text, etc.).
  • Review and respond to the questions highlighted in our discussion board on the topic.
  • To be notified about open-invite Zoom huddles in which we will update the community on progress and invite discussions on key questions, please sign up for Impact Frontiers’ newsletter and PDI’s newsletter.

For context, numerous metric sets exist to support companies’ measurement and management of their impacts, but not many support investors’ measurement and management of their own contributions to that impact (positive and negative) and to systemic risks.

In 2019, the Impact Management Project (IMP) synthesized the consensus at that time – and identified questions still outstanding – on investor contribution in the discussion document Investor contribution in public and private markets. In 2020, the IMP and PDI collaborated in engaging their communities of practitioners to consider and debate how investors – separately from the enterprises they finance – contribute to social/environmental outcomes, systemic risks, and systematic risks to investors’ portfolios. These discussions were synthesized in a discussion document (Negative Investor Contribution), which includes a collection of example metrics that map onto the IMP’s existing investor contribution strategies.

However, the proposed metrics have not yet received market and stakeholder feedback. This has left many practitioners interested in measuring and managing their investor contribution the task of creating bespoke metrics and determining how best to integrate them into their impact management processes.

To respond to the challenges posed by this absence of clear guidance on how to measure and manage investor contribution, our goal is to build industry consensus around a set of best practices. Examples of topics covered include how investors influence companies’ capital structures, the structure of funds and investment vehicles, responsible tax practices, incentives and compensation, engagement and field building, in addition to bringing additional granularity to the existing four investor contribution strategies from the consensus facilitated by the IMP, and evolving them accordingly.

In mid-2023 we will hand off the resulting prototype metric set to one or more standard-setters to incorporate into their standards. We will also share our findings with policy-makers and regulators so that they will have it available as a voluntary practice that can inform mandatory standards in the future.

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