On September 25, over 200 leading investors, business leaders, academics, and environmental organizations gathered during Climate Week NYC to explore IFVI’s unprecedented release of environmental factors that lay the foundation for impact accounting, allowing environmental impact metrics to be expressed in monetary terms

This global release of 100,000+ environmental value factors covers 430 different environmental impacts across 268 geographic locations.

Watch a full replay of the event and highlights:

The era of impact accounting has arrived

Speakers:

  • Sir Ronald Cohen, Chair, IFVI and President, GSG Impact
  • George Serafeim, Charles M. Williams Professor of Business Administration, Harvard Business School; former faculty lead of the Impact-Weighted Accounts Project; Chair, IFVI Valuation Technical & Practitioner Committee

Highlights:

  • In the aftermath of the 1929 crash, investors realised that they had been investing without understanding what profits companies were making. Each company could pick its own accounting principles and there were no auditors. In 1933 and 1934, GAAP accounting and auditing were introduced and the SEC was established to regulate the provision of financial information.
  • Today, we’re in a similar position. $30TN+ is invested in companies with the aim of achieving improved impact but without a reliable measurement system.
  • IFVI’s release marks the arrival of impact accounting based on the standardised measurement and valuation of impacts.
  • Those who say impact accounting makes value judgements do not realize we are already making value judgements; the current system values impacts at $0. If we think impacts are important or material to social and planetary long-term health, we should actually value them.
  • We found that for companies within resource intensive industries that were producing more negative environmental impacts were trading at a discount relative to the industry leaders in terms of environmental multiples.
  • If you can construct data sets from which you can understand leaders and laggards within industries and can compare them to understand how their business models are evolving, you gain insights about the risk and the growth.

“In the same way as 1933 and ‘34 when investors realized they needed GAAP Accounting and auditors, we believe that we will begin to persuade [investors] that they need impact accounting and auditors of impact.”

Sir Ronald Cohen

A huge leap forward in impact accounting: Highlighting methodology developments

Speakers:

  • T. Robert Zochowski, President and CEO, IFVI
  • Dan Osusky, Chief Research Officer, IFVI

Highlights:

  • Over the last two weeks, IFVI has released a final version of its GHG Emissions Methodology, as well as exposure drafts of General Methodology 2: Impact Measurement and Valuation Techniques, Water Consumption Topic Methodology, and Occupational Health and Safety.
  • In October, IFVI will release a set of interim environmental methodologies covering Air Pollution, Water Pollution, Waste, and Land Use – making available a set of methodologies for the most significant environmental impacts of an entity, contextualized by specific location and pollutant to cover virtually all use cases of companies and investors.
  • By building off existing and developing expectations of sustainability data from companies, impact accounting methodologies do the important work of contextualizing that data in terms of the actual impact being created by them, quantified in a monetary form. This makes the information more valuable while not substantially adding to the burden of organizations existing sustainability data collection requirements.  
  • At the core of IFVI’s mission is the creation of impact accounting as a public good – collaborating with other actors in the ecosystem while making its methodologies fully transparent – along with accompanying resources that help bring the methodologies to life, make them easy to understand, apply, and expand on.  

Download the materials here.

“The work that we have accomplished this fall has eliminated a significant barrier to impact accounting, lack of open access to impact accounting methodology and value factors. We are closer than ever to a just and sustainable global economy based on the full contribution of business to people and the planet, build upon the practice of impact accounting to promote decision-making based on risk, return, and impact.”

T. Robert Zochowski

Views from leadership: The importance of impact accounting in decision-making, risk management, and compliance

Speakers:

  • Tracy Palandjian, CEO and Co-Founder, Social Finance (Moderator)
  • David Blood, Founding Partner, Generation Investment Management (Panelist)
  • Nidhi Chadda, Chief Impact Officer, RGS; Founder and CEO, Enzo Advisors (Panelist)
  • Elizabeth Rubin, ESG Controller, Pure Storage (Panelist)
  • Quyen Tran, Head of Sustainable & Impact Investing Integration, Cambridge Associates (Panelist)

Highlights:

  • Impact accounting is a critical tool to companies and investors alike in allocating capital, managing risk, and regulatory compliance.
  • It provides a huge competitive advantage to companies by allowing them to better articulate the value they are bringing, and helps discover new business lines.
  • Risk, return, and impact is relevant in all investment time horizons, even in the short term.
  • Sustainability and impact is a part of fiduciary duty; impact accounting allows investors to demonstrate that. 
  • The data is there but connecting it to impact accounting enables far better actionable insights; the companies that are going to win are the companies that are the most sustainable and are able to articulate their story to investors.
  • Calls to action: 
    • Put impact accounting on the radar for investors and execs, jump on the opportunity to be a part of something disruptive.
    • Finance evolves and this is where you need to go.
    • Let the data guide you.

“If you spend all your time toiling and focusing on risk, you are going to miss it. It’s those companies that realize that this is the opportunity… [they] are going to gap away from their competitors.”

Elizabeth Rubin

Ushering in a new era

Speaker:

  • Gordon Brown, former Prime Minister, the United Kingdom

Highlights:

  • The work of the IFVI and announced advancements represent a remarkable evolution and breaking of new ground.
  • This open source, globally applicable system of measurement will expose greenwashing and put an end to it.
  • For the first time, investors that want to channel funds into addressing climate change will be able to measure, in monetary terms the impacts created by their actual and prospective investment.

“Soon investors, consumers, employees, and all stakeholders will press for the social impact account to sit side by side with a company’s financial accounts.”

Gordon Brown

Achieving global adoption of impact accounting

Speakers:

  • Sebastian Welisiejko, Chief Policy Officer, GSG Impact (Moderator)
  • Ibukun Awosika, Former Chair, First Bank of Nigeria; Vice-Chair, GSG Impact; Member, ITF (Panelist)
  • Allison Herren Lee, Senior Research Fellow, NYU Law; Member, ITF (Panelist)
  • Ken Shibusawa, CEO, Shibusawa & Company; Member, ITF (Panelist)
  • Vincent Siegerink, Economist, Centre on Well-Being, Inclusion, Sustainability and Equal Opportunity (WISE) of the OECD (Panelist)

Highlights:

  • IFVI is addressing the lack of uniform standards and frameworks for impact accounting and the importance of alignment and leadership in impact accounting. 
  • In the Global South, it is hard for investors to account for their investments and the need is far greater than the current supply, being able to encourage others through data is revolutionary.
  • Impact accounts cut through the noise and controversy over ESG by making it clear that the term “non-financial metrics” is a misnomer; when you put a dollar value on corporate impacts, it is transformative.
  • In Japan, Eisai has been a leader in applying impact accounting (Case Study on Human Capital Impacts and Case Study on Medications for Neglected Diseases). Today, everyone at large companies now knows about it. 
  • Impact accounting is complementary to all of the other frameworks in the impact management system. It is an enhancing methodology and impact accounting has a crucial place in that system.

“If we do achieve some accurate impact accounting…it is set up to ensure that those who want to make an impact will make an impact where it matters most.”

Allison Herren Lee

Driving impact accounting to achieve the green transition

Speaker:

  • Rt. Honorable Nick Hurd, Chair, GSG Impact and the Impact Task Force

Highlights:

  • GSG Impact is here to support by working across its 40+ National Partners to implement and understand. 
  • We are failing on climate and the SDGs; we need to change systems, most importantly, the system of how we allocate resources. 
  • The system has inertia; it needs to get faster to the ultimate destination and monetary value is that way. 

“The context requires us to look further down the road and get faster to the destination. The destination is a world in which companies and governments account for their impact in a meaningful way by putting a monetary value on impact and building it into their financial statements so that climate and nature are on the balance sheet.”

Rt. Honorable Nick Hurd

Wrap-up

Speaker:

  • Sir Ronald Cohen, Chair, IFVI and President, GSG Impact

Highlights:

  • We are the vanguard of a revolution.
  • Capital is the driver of change and investors need the tools to effect it.
  • Governments will follow and enable. In the meantime, we need investors and companies to start using this information to make decisions. There is nothing to spur change like the change in the stock price of a company because its impact performance is lagging behind its financial performance.
  • If we are successful by 2027, every board room will be making decisions based on risk return and impact.

“We need to bring this information to the screens of investors. If Bloomberg, S&P, MSCI, Moody’s, and Factset all begin to provide this information… we find the valuations of companies change and their behavior will change.”

Sir Ronald Cohen

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