April 25, 2023 (Inaugural Meeting)

Minutes & Agenda

Meeting type: Inaugural Meeting
Date: April 25, 2023
Location: Virtual
Contact: Dan Osusky (dosusky@ifvi.org)

This has been prepared for discussion of the Valuation Technical and Practitioner Committee (VTPC).

The mandate of the VTPC is to direct, validate, and approve the impact-weighted accounts research and methodology produced by the cooperation of International Foundation for Valuing Impacts (IFVI) and the Value Balancing Alliance (VBA). The VTPC has been established under Terms of Reference to ensure independence and multi-stakeholder perspectives.

This paper does not represent the views of IFVI, VBA, or any individual member of the VTPC. Any comments in the paper do not purport to set out what would be an acceptable or unacceptable application of impact valuation methodology.

Objective

The first official meeting of the VTPC.
The objective was to allow members of the VTPC to introduce themselves and share their backgrounds, to provide an overview of the VTPC’s mandate and due process, to discuss and approve the 2023 workplan, and hold an initial discussion on the development of the general methodology.

Meeting Agenda

Time (Eastern Time)	Topic
9:00-9:30	Welcome and Introductions
9:30-10:30	Collective Vision and Role of the VTPC
10:30-10:40	Break
10:40-11.25	2023 Work Plan
11:25-11:50	Introduction to General Methodology Statement
11:50-12:00	Next Steps / Wrap Up

Inaugural Meeting 3 hours; Anticipate Quarterly Moving Forward at 2 Hours

Welcome and Introduction

All members of the VTPC (“member” or “members” hereinafter) present introduced themselves and shared with the group what motivates them to engage in setting standards for impact measurement and valuation.

Collective Vision and Role of the VTPC

The Chair and Vice-chair of the VTPC provided introductory remarks to recognize the official launch of the committee. The remarks reflected on the broad range of experience of the VTPC members. All members were asked to utilize their diverse set of skills to advance the mission of IFVI in order to build a global impact economy. Members of the VTPC were encouraged to as part of their participation on the VTPC:
- bring solutions to problems when they arise as opposed to roadblocks;
- raise concern if a member believes that any methodology being developed is not practical or useful for business decision-making because the measure of success for the VTPC will be adoption and uptake by businesses;
- assist IFVI and the Value Balancing Alliance (VBA) to seize the growing momentum focused on measuring corporate impacts to non-financial types of capital in order to improve business performance.
It was reiterated that the timing is conducive to formalize a methodology for impact valuation as many of the initial concerns for the field have not materialized and because non-financial considerations are now at the forefront of management thinking. It was mentioned that growing islands of excellence in impact measurement and valuation have been created within companies and an opportunity exists to link those nodes together into a standard.
A concluding introductory remark recognized the gender diversity and geographic distribution of the VTPC members and how a range of perspectives will be integral to developing a globally applicable impact valuation methodology.
The technical staffs of IFVI and VBA (“technical staff”) presented an overview of the mandate and role of the VTPC.
- The collective vision of the VTPC was described as overseeing the development of an impact measurement and valuation methodology that:
  - advances impact to become integral to corporate and investor decision-making by default;
  - improves corporate decision-making related to sustainability matters;
  - enhances the disclosure of impacts valued in monetary terms in sustainability-related disclosures; and
  - results in uptake across global markets.
The technical staff further stated that the mandate of the VTPC is to direct, validate, and approve the methodology produced by the cooperation of the IFVI and VBA. The technical staff further stated that the VTPC strives to represent diverse perspectives in terms of professional background, geographical region, and demographics, ensuring holistic feedback on methodology.
- It was raised by a member and reiterated by another member that the methodology should be framed as a solution for financial market actors, should include language that is commonplace amongst investors, and should help to identify value creation opportunities.
- It was raised by a member that consistency of language will be critical for the methodology, including defining the users of the methodology, specifically whether users are corporate entities or investors, and defining with precision what is meant by the term “sustainability.”
- It was raised by a member that to the extent that sustainability is used in the methodology, the scope of the term should include environmental and social topics. Further, it was suggested that transparency should serve as a guiding purpose of the methodology.
- It was raised by a member that comparability is critical for uptake across global markets and the methodology should consider comparability of the data used to measure impacts.
- It was raised by a member that use cases for impact information vary between investors and corporate entities, and it remains an open question whether a single, one-size-fits-all methodology can reasonably be designed to address the needs of both groups.
The technical staff presented an overview of the principles of the research collaboration between IFVI and VBA, including the following: (a) for the public good; (b) business relevance; (c) pragmatism; (d) scalability; (e) transferability.
- It was asked by a member what is meant by the public good principle. The technical staff responded by stating that the methodology will be publicly available as to make it inclusive for all potential users.
- It was raised by a member that IFVI should make clear its spirit of collaboration and signal its intention to work alongside, and not in competition with, standard setters and other organizations.
- It was raised by a member to organize the development of the methodology into two categories, a category for the framework and a category for methodology, with methodology referring to “how to value,” and framework referring to “what to value.” Further conversation was held on the merits of using the term framework, particularly in relation to methodologies already published by other organizations, including the Capitals Coalition protocols.
The technical staff presented an overview of the interlinkages between the technical staff and the VTPC, including the composition of the technical staff, the composition of the VTPC, and the threshold required for votes to pass the VTPC.
The technical staff presented an overview of the due process for methodological development and the principles for due process, which included impact focused, stakeholder informed, collaboration, and transparency.
- It was raised by a member that the technical staff should consider two categories of principles as it relates to due process, the first being directive principles, such as materiality and standardization, and the second category referring to development principles that describe how research is conducted.
The technical staff presented an overview of the (i) development, (ii) exposure, and (iii) approval process for methodology. Further, the piloting and testing of methodology was introduced as the stage that takes place after the approval of methodology.
- Development was described as occurring in several subcomponent stages: research to understand the topic, engagement to clarify the scope and roadmap, and drafting to prepare documents for exposure and/or piloting.
  - Engagement with the VTPC was described as occurring 1 to 2 times at scheduled VTPC meetings with additional touch points with VTPC members that have background or skills pertinent to a particular subject.
- Exposure was described as VTPC approval to hold a public comment period for draft methodology.
- Approval was described as final assent by the VTPC for the publication of methodology.
  - It was asked by a member whether the VTPC is to provide feedback on methodology prior to piloting or after the methodology has been tested in a corporate context, or both before and after piloting. It was further raised, and reiterated by another member, that the methodology should consider methodological considerations for small and medium-sized enterprises (SMEs) across various geographies.
- It was suggested by a member that VBA has a process for piloting of methodology with SMEs and that the existing arrangement may be an important avenue for development of methodology for smaller corporate entities.

2023 Workplan Agenda

The technical staff presented an overview of the building block approach to developing a comprehensive methodology, including establishing a general methodology as a first step before developing topic and industry-specific papers.
The technical staff presented stages for the research agenda over the next three years, including goals for 2023.
- The stages for the next three years were described as follows.
  - Establish and integrate (2023): establish governance, due process, build the foundations of a general methodology that aligns with standards, and take steps to develop topical methodologies.
  - Expand and accelerate (2024): expand methodology towards “comprehensive impact” with topical methodological development and continue to refine general methodology foundations.
  - Refine and expand (2025 and beyond): refine alignment with new market developments and needs.
- The goals for 2023 were established as:
  - establish robust, credible foundations;
  - generate momentum with stakeholders;
  - align with reporting standards; and
  - iterate, evolve, and expand methodologies.
The technical staff presented the 2023 workplan for approval by the VTPC (below).
- It was raised by a member that while IFVI and VBA are not standard setters, it is an ambition of the VTPC to contribute to development of sustainability-related disclosure standards by 2025. It was further raised that the development timeline for consumer impacts was ambitious and unlikely achievable for all consumer or end-user applications. It was further asked how the technical staff will consider the measurement and valuation stages in the methodology, as the two are distinct steps. The technical staff responded by clarifying that the intention is not to develop all consumer impacts in 2023 but instead a prototype for a single end- user.
- It was asked by a member how much of the Harvard Business School Impact-weighted Accounts Initiative (IWA) research and methods will be transferred to the collaboration between IFVI and VBA and whether industry-specific methods will be developed. Two additional members reiterated the question related to industry-specific methods and stressed the importance of developing an industry-specific methodology to accurately capture the varied contexts of corporate entities and their impacts. The technical staff responded by stating that all prior methodologies developed by IWA and VBA will inform methodological development and that industry-specific methodology will be developed.
- It was asked how the methodology under development relates to The Value Commission of the Capitals Coalition. The technical staff responded by stating that a possible connection is that The Value Commission complements the methodology under development by organizing resources related to impact coefficients and identifying criteria for valuation coefficients. It was noted that some overlap may exist between the two initiatives. It was added by a member that The Global Value Commission aims to provide a database of value factors that will be available as a public good.
- It was raised by a member that the overall workplan is reasonable and well-structured and that it will be important to balance ambition with resources. The member asked what capacity exists to add more indicators to the workplan this year and whether VBA indicators are still considered active and in-scope. The technical staff responded by stating that adding new indicators to the workplan will need to considered with existing priorities and that any indicators in the VBA methodology are still be considered in-scope for any application of the methodology.
- It was raised by a member that it is critical to consider methodological development after 2025 because the methodology will require updating for economic conditions and evolution in impact management practice.
- It was asked by a member whether the methodology will value impacts from the perspective of the business or the perspective of society. The technical staff responded by stating that the methodology will consider impacts from the perspective of stakeholders and impact materiality will serve as the basis for impact identification, measurement, and valuation.
The 2023 workplan was APPROVED unanimously by the VTPC.

General Methodology

The technical staff presented an overview of the general methodology project and the literature review that was conducted to inform the project, including the following details.
- The general methodology project started in June 2022 and is being developed following a comprehensive literature review of frameworks in the impact measurement and valuation ecosystem, sustainability reporting disclosure systems, and financial accounting conceptual frameworks. The technical staff is currently in the drafting phase of a general methodology statement.
- The general methodology serves as the foundation for all methodological content of the IFVI and VBA partnership, including topic and industry- specific standardized impact pathways. The general methodology is sustainability topic and industry-agnostic. The general methodology may be comprised of several documents, each developing a unique element of the methodology.
- The purpose of the General Methodology is to:
  - establish a system of impact accounting and enable IFVI to publish methodology based on consistent concepts, definitions, methods, and principles;
  - assist corporate entities and investors to develop impact accounts based on consistent approaches and practical feasibility; and
  - enable corporate managers, investors, and stakeholders to understand impact information that is derived from impact accounts.
- It was suggested by a member to review the Inclusive Wealth Report 2018 to ensure connectivity between methodological development at the entity level and macro-economic indicators.
The technical staff presented a preview of the general methodology statement, including the table of contents, key themes from each section of the draft document, and a limited number of topics for discussion.
- It was raised by a member that externalities are becoming internalized as part of financial statements, and that a simple sum of impacts to society and financial net income may result in double counting of impact. The technical staff responded by describing the need for inter-stakeholder eliminations between financial accounting and impact accounting.
- It was raised by a member that the use of consistent terminology is critical as it relates to terms such as monetary impact accounts, impact accounting, impact measurement and valuation, and impact-weighted accounts, all of which are often used interchangeably.
- It was raised by a member that the G7 Impact Task Force called for a transition to “impact accounting” as it relates to terminology. Further, the member noted that impacts affect non-financial and financial capital types in the long run.
The Chair and Vice-chair concluded the meeting.