New Frontiers | Our WorkThe ABC of Impact
STATE: Active
DATE: July 19, 2023
STATUS: Open for public comment
The ABC of Impact: Current Usage and Paths Forward
In 2023, Impact Frontiers is reviewing the current usage and potential paths forward for the “ABC” of impact (i.e., Act to avoid harm, Benefit stakeholders, and Contribute to solutions).
The goals of this exercise are to:
- Take stock of how investors are using the ABC of impact at present;
- Assess the extent to which existing users all understand the definitions the same way;
- Explore whether changes to the definitions are necessary to increase adoption and consistency of usage;
- Explore how the ABC of impact is used or can be used in complementary fashion with other standards, tools, and frameworks.
To date, we have reviewed 30 publicly available examples of investors using the ABC of impact in reports and investor guides. We have also interviewed approximately 10 investors and impact management consultants who are actively using this system.
Based on these inputs, we have synthesized a summary of investor use of the ABC of impact at present. We found that, while only a minority of impact investors are using the ABC of impact, those that do find it useful for expressing high-level intentions of investors and companies, and for making sense of legacy and/or heterogeneous portfolios that include both “impact” and “non-impact” segments. We also found promising signs of uptake by the Financial Conduct Authority of the U.K. in its Sustainability Disclosure Requirements (but less so with the EU’s Sustainable Finance Disclosure Regulations).
We are proposing modest changes to the criteria that we believe will help investors to distinguish which companies should be classified as “Contributing to Solutions” versus “Benefiting Stakeholders” more consistently and objectively. In particular, we propose to remove “How Much – Scale” and “How Much – Duration” as criteria for Contributing to Solutions, to add criteria for the proportion of stakeholders that are underserved, and to add criteria for the proportion of an enterprise that is generating “C” outcomes. We propose to re-emphasize (but not change) aspects of the framework related to thresholds. Additionally, we propose to re-emphasize that it is recommended that users of this system undertake periodic revision of classification based on performance.
As a result of these proposed changes, the ABC of impact would more clearly represent qualities rather than quantities. They describe types, not magnitudes. There could be a small Contribute to solutions company operating at the level of a small community, or a large Contribute to solutions company operating at a national or global scale. We propose that impact valuation techniques such as impact rating and scoring are better suited to assess and compare magnitudes of impact.
In this phase of the project, we are inviting feedback on the current usage and proposed next steps described in the discussion document via public consultation from July 31 through September 30, 2023, and will publish the final products as a public resource in late 2023. Responses are welcome via whichever medium listed below is most convenient for you. You may also choose to engage through all three options:
- Zoom Huddles: Join one of our open-invite interactive Zoom “huddles.” Please register in advance for the huddle(s) you would like to participate in by clicking the hyperlinked date(s) below. If you run into any tech issues during this process please email: info@impactfrontiers.org
- Contribute to our online discussion forum
- Email us responses to this document directly at info@impactfrontiers.org
We invite your thoughts on the following discussion questions, and on any aspect of the discussion document:
- Does your organization use the ABC of impact? If so, how? If not, why not?
- What are your reactions to the proposed changes?
- Do you agree that impact classification and valuation are complementary techniques, with the former best suited to ensuring that a set of companies or investments have the desired impact characteristics, and the latter best suited to making comparisons of magnitudes of impact among various companies or investments?
Share your views below!
