Fostering transparency
Ground-breaking initiatives are blooming in the sector to foster disclosure of non-financial data on the effects of economic activities on people and the planet. However...
While this increase in transparency is a positive sign in general, there is a concrete risk that it will turn into a compliance exercise that places a burden on organisations, especially with fewer resources, without necessarily generating any useful learning. Transparency should include an 'impact management’ component – that is, investors should display how decisions are made, what trade-offs are identified, how negative impacts are mitigated and how positive impacts are maximised.
Transparency and impact measurement and management (IMM) are two sides of the same coin. A robust IMM system helps an organisation be more transparent about its activities and outcomes, while a mandate for transparency prompts the organisation to strengthen its IMM practices.
The demand for transparency is now spreading, thanks to initiatives such as the EU Social Taxonomy and the Impact-Weighted Accounts Initiative (IWAI). However, current transparency efforts too often only focus on the measurement component, which risks becoming a compliance exercise with limited added value, rather than driving concrete improvements. Investors for impact stress the importance of the impact management component by showing how impact data enables better informed decision-making.
Transparency is a means to validation, but can also have added benefits for the ecosystem, as an organisation can share their learnings widely and enhance progresses in the ecosystem. Investors for impact believe in the benefits of furthering transparency to improve their own practices and knowledge – as well