We can’t create social impact until we learn how to measure its success

Monday, June 13, 2022 6:15 a.m.

eBay provides Love Island reality show contestants with second-hand outfits to showcase sustainable clothing.

Today, it’s more common than before for young people to think about a company’s ethics before whipping out their contactless cards. Companies are therefore under pressure to show their positive impact on society – to attract customers and talent.

Morgan Stanley recently reported that millennials are twice as likely to invest in companies targeting social or environmental goals. That change was also picked up last week when Love Island changed its sponsor from a fast fashion brand to eBay, which now dresses the show’s contestants in second-hand outfits to showcase sustainable clothing.

Simply put, people are increasingly likely to invest in organizations that have a positive impact on society – whether it’s the coffee they buy, the food they eat or the bank they choose. to have a savings account.

As a result, companies are not only creating more environmentally and socially conscious products and services, but also considering their broader footprint.

COP26 showed that mobilizing private capital will be a crucial factor in solving the environmental challenges we face. I am very proud of the UK’s role as a global leader in funding the net zero transition – but we can always go further.

We know that creating the right conditions for financial markets to increasingly deliver positive social impacts will be key to making this a reality. Yet ESG measures have primarily focused on environmental impact.

So if we are serious about creating a ‘just transition’ – ensuring that net-zeroing is inclusive, so that communities in the UK and overseas are not left behind – we need to consider account of the social impact of companies.

However, understanding the impact of a business is difficult for two main reasons. First, defining what constitutes a positive social impact can be tricky. Second, data on social impact measurement differs widely from organization to organization.

We need to fix this so that investors can recognize where companies are generating positive and measurable social and environmental impact, alongside financial return.

The City of London Corporation, in partnership with the Impact Investing Institute and KPMG, will host the Finance for Impact Summit at The Mansion House on July 18. Leaders from finance, business, government and other institutions from around the world will discuss how we can better harness investments for the good of people and the planet.

The summit will build on commitments made at COP26 and the work of the G7 Impact Task Force to improve the transparency and accountability of impact finance.

We will hear recommendations on how the financial and professional services industry can be more ambitious when integrating social considerations into sustainable finance strategies alongside environmental considerations.

The summit will also kick off a “Just Transition Finance Challenge” for asset managers and asset owners. It will be a new coalition of investors, all committed to raising capital for impact investing.

Every financial decision we make has an impact. Through this work, not only will the UK continue to be a global leader on the ESG agenda, but we will help ensure that any impact of our financial decisions is positive.

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