A new era for social investing: GIIRS

I recently wrote about a new global rating system for social enterprises, called Global Impact Investment Rating Systm (GIIRS), that could really shake up the world of social investing. It’s on the agenda at the Social Capital Markets conference in San Francisco in early September.

It’s an important step and merits more discussion.

The goal is to allow major investors–institutions, family offices and so on–to determine whether they’re going to get their money’s worth.  That is,  they can use GIIRS to compare the potential social and environmental impact of various companies they’re considering as investments.  For example, if they want to create jobs and businesses in the developing world, they can compare the different opportunities various companies create.  As Kevin Jones  of Good Capital explains it:

A job on a fair trade farm, for example, may only be seasonal, compared to a job in the city. But on the other hand, that rural job can help hold a rural community together rather than forcing wage earners to move to unsanitary and unhealthy slums in a major city.

Using GIIRS, a funder can make the same kind of comparison in areas from healthcare, to slum upgrading, agriculture development, literacy and education or virtually any cause.

via A bridge at the intersection of money and meaning » SoCap09.

The lack of such a standardized, coherent global rating system has been one major factor preventing major investors from making commitments to social enterprises.  With GIIRS,  investors will be able to make rational decisions based on a well-reasoned,  clear set of comparative information. And that should help attract more capital to the area.

(The effort, led by Rockefeller Foundation, with the participation of B Lab, Acumen Fund, JP Morgan Chase Foundation and others, is tied to another important Rockefeller effort, Impact Investment Reporting Standards (IRIS), that creates a taxonomy of the many confusing terms used in the social enterprise world and a measurement tool for results).

According to Jones, not all potential investors–mostly foundations–have been clamoring for this type of thing.  But for many other players, GIIRS could mean the difference between participating in this world or not.