Obama gives big boost to global rating system for social enterprises

A new global system for rating not-only-for-profit companies  got a major push yesterday, when it was endorsed by the Obama administration at the Presidential Summit on Entrepreneurship.

It’s the product of a consortium of government, private sector and nonprofit groups that includes the Rockefeller Foundation, USAID,  Deloitte, and Prudential. They’re partnering with B Lab, the nonprofit that developed a rating system for evaluating triple-bottom line companies according to five categories.

Called Global Impact Investing Rating System (GIIRS), the system provides a way to compare and contrast the environmental and social performance of companies looking for investment capital .  It’s based on B Lab’s system. The underlying goal is all about raising money –encouraging significant institutional investment in entrepreneurial social enterprises. The theory is that many social enterprises have a hard time attracting serious money because they have no consistent, systematic way to show that they’re really making an environmental or social impact.  It’s one thing to say you’re triple bottom line; it’s quite another matter to prove it. GIIRS is meant to address this problem.

Also, 12 GIIRS fund managers are pilot testing the system with their portfolio companies in the developing world this year. Plus, there will be an announcement in the next two months about fund managers in developed economies in North America and Europe testing out the system, which will be launched as a publicly available investment product in 2011.

Aside from anything else, this endorsement underscores a real interest by the Obama administration in social entrepreneurship, both for profit and nonprofit. The timing is interesting, since it comes on the heels of Maryland’s being the first state to allow a new corporate form for triple-bottom-line companies.

It’s a significant development.