Impact Evaluation Lab, a new impact rating and assessment firm, is tackling a gap in trust that it sees as an obstacle to impact fund raising.
“Impact management has become closer to mainstream than it ever has been,” Impact Evaluation Lab’s Rob Brown tells ImpactAlpha. Looming dangers include the rampant greenwashing and misleading metrics that has helped create a backlash to ESG investing.
“To get us over the line into mainstream investing, it’s critical that we not face the same criticisms and make the same mistakes that have been made in the past,” Brown says.
The New York-based firm, which is officially launching at the GIIN Impact Forum in Berlin this week, has secured backing from Jim Sorenson, the entrepreneur-turned-impact investor and founder of Sorenson Impact Group. (Disclosure: Sorenson is an investor in, and Rob Brown is a contributor to, ImpactAlpha).
The lab’s offerings include a fund assessment for fund managers, or GPs, looking to validate their impact strategies, and a database of assessed funds, called Impact Navigator, that is available on a subscription basis to asset allocators, or LPs, seeking authentic impact.
IEL worked closely with the Sorenson Impact Institute at the University of Utah to develop its fund assessment framework. Its “Impact Authenticity Score” measures the potential impact and financial outcomes of an impact strategy. The score will be shared privately with the fund managers; IEL will issue a public-facing badge with three levels reflecting the maturity of the funds’ impact management and measurement strategies, or IMM in industry parlance.
The assessment is particularly tuned to the needs of emerging managers, who may have high impact aspirations but don’t yet have a track record or deploying capital to satisfy most IMM frameworks.
“Earlier stage fund managers shouldn’t be held accountable for performance on [key performance metrics] that don’t exist yet,” says Brown. Impact Eval’s third badge level is a “prospective” rating for early stage fund managers that acknowledges where they are in their journey. It measures a fund’s intentionality, governance, impact framework design, and integration of impact into investment strategy, rather than on achieved outcomes.
The fund assessment, says Brown, is also priced favorably for new fund managers. “We want to drive capital towards deserving managers,” he says.
Mainstream appeal
Brown and his cofounder, Terrence Keeley, bring to the task decades of capital markets experience. Keeley, who is also CEO of impact advisory firm 1PointSix LLC, spent much of his career at UBS and BlackRock. Brown has held Wall Street roles as economist, research director and portfolio manager, including heading research for Paul Tudor Jones’s JUST Capital.
“Impact investment assets are misallocated relative to owner intents,” Keeley says. “We need greater transparency and rigor in both financial and non-financial metrics to insure the impact investment ecosystem matures optimally.”
Impact Evaluation Lab is beta testing its impact fund assessment with fund managers before it rolls out the Impact Navigator database. It expects to have several hundred funds assessed by next month.
The idea was to make the framework and language feel familiar to investors even outside of the impact field, and to encompass multiple asset classes.
“We understand the investment process, and that is reflected in our offering,” says Brown. “We designed this specifically so that the methodology would apply consistently across asset classes and across the maturity spectrum of asset management firms. This is not a one size fits all evaluation.”
