News & Insights

Bridging the Diligence Gap in Impact Investing

Our study of the impact investing diligence space revealed scores of complex and unresolved questions about measuring the tangible, and not-so-tangible, concepts that make up the ethical investing picture. And it inspired us to create IntegrityRisk ImpactCheck.

The Environmental, Social, and Governance (ESG) investment space struggles with how to measure success, reconcile competing assessment tools, and keep up with the flurry of surveys from organizations seeking data on their adherence to sustainability standards. The initial deluge of competing metrics around ethical investing is showing signs of giving way to some consolidation. This is all unfolding at the same time that appetites are growing for investors seeking more responsible ways of doing business.

— In early June 2019, the Financial Times reported that ESG investment interest has attracted some $30 trillion in assets to sustainable investment vehicles. The UK paper described recent initiatives to pare down and potentially standardize the ESG measurement surveys generated by organizations that some companies say are overwhelming them with requests for information.

— The Wall Street Journal observed in late June that the expansion of tools that judge companies based on their values “may be obscuring, instead of illuminating, the path to righteous investing.”

Attentiveness to sustainability issues created an array of methodologies and techniques for gauging success, many of which miss an essential component of evaluating risks and outcomes.

— The existing measuring tools supply useful insights but there is yet to emerge a single taxonomy shared across the industry. More importantly, the majority of investors, asset managers, and fiduciaries rely on self-reporting.

— Verification is rarely provided by independent or neutral third parties and there is a scarcity of consistent and replicable due diligence processes to cover multiple sectors, asset types, investments, and portfolios.

In short, vital issues around validating and verifying self-reported claims that feed those metrics are under-appreciated and unaddressed — and that’s why we developed IntegrityRisk ImpactCheck. It combines risk and compliance expertise with commercial due diligence plus advanced analytics to offer sound impact investing verification.

Contact us if you want to learn more about how we are focusing the risk, compliance and due diligence lens on the world of ESG investing.