Exclusive: GIIN launches performance benchmark for agriculture impact investment funds ‘living in a vacuum’

• The Global Impact Investing Network (GIIN) has launched a new tool for agriculture impact investment funds to measure the impact of their investments against others.
• Eighteen agriculture impact investment funds have contributed data about some 1,200 investments to the agriculture impact benchmark, 16 of them contributing to its design.
• The agriculture impact performance benchmark enables investors to measure their performance across seven key performance indicators (KPIs) such as change in farmer income, how sustainably land is managed, and the mitigation of greenhouse gas emissions.
• These KPIs draw on metrics that GIIN’s multi-sector impact measurement platform Iris+ has been tracking for many years, which are essentially more detailed KPIs.
• The agriculture benchmark enables investors to score their investments relative to each other and also against their contribution to the United Nations’ Sustainable Development Goals (SDGs).

Why it matters

Impact investing has been on the rise for many years as institutions and individuals seek to generate positive social and environmental impacts in various sectors of the world alongside a financial return. In agriculture, the potential for positive impact is very clear, be it reducing the industry’s impact on the environment, improving farmer livelihoods, or ensuring ethical working conditions along the supply chain.

But understanding and reporting on how impactful your investments are is a complex challenge; there are numerous results to take into account that are not as clear cut as financial performance, which is just one metric.

With the increasing use of environmental, social, and governance (ESG) credentials to market services, investments, and products by a broad range of organizations globally, data-driven and standardized reporting is essential to allay growing concerns about corporate and investor greenwashing.

While GIIN’s Iris+ impact measurement tool has enabled agriculture impact investors to track how their investments are faring across various key metrics related to agriculture, impact reporting has been very much an internal decision around which metrics to use and what weight to put on them. It also lacked the ability to measure funds’ impact performance against each other as there has been no standardized matrix of metrics to measure performance against.

“Given the challenge that we’ve seen recently, over the past three, four or five years, around investors not being able to make comparisons across investments on the basis of impact, we realized that there was an opportunity to help build some of that impact intelligence and infrastructure. And so we started asking the question: is it actually feasible for investors to make comparisons on the basis of impact? In financial markets, you’ve got a whole infrastructure built out with indicators like return on investment and return on assets, in order for investors to understand the financial performance of their investments. But on the impact side, it’s not really the same thing,” Sophia Sunderji, director of research at the GIIN, told AFN.

Filling the vacuum

For Swiss asset manager INOKS Capital, which has invested more than $7 billion across the agriculture supply chain globally, it’s a welcome development. Since it launched in 2006, the firm has developed its own impact goals and measurement system internally using various general frameworks such as the United Nation’s Principles of Responsible Investment and the UN SDGs as a guide.

“For us, it is important because you might try to do the best of your capacity… but you need to know what others are doing. And for us we were living in our vacuum so to speak and having these benchmarks is very important for us because it may lead to changes in the way we measure impact and report impact and think about impact. And it was also allows us to benchmark ourselves and see where there is room for improvement,” said Nabil Marc Abdul-Massih, CEO and Co-CIO of INOKS Capital, a Swiss asset manager with over $7 billion deployed across the agriculture supply chain globally.

With just 18 funds participating today, Abdul-Massih emphasized the importance of other funds joining the benchmark and contributing their data to ensure a bigger sample size that can be meaningful and beneficial for all investors. The benchmark plays a “pivotal role” in bringing definition and transparency to the sector, he added.

“It also gives the space not of the average but of the means. What I mean by that is that the benchmark will provide the best performance, the worst performance: not for the reasons of naming someone, but just to show and demonstrate the spectrum of refinements or precision of the various impact data gathering, data processing and data reporting from various managers and the mean, so I think it’s it’s a huge benefit for the investor community,” he told AFN.

Agriculture impact investment funds participating

• ABC Impact
• AgDevCo
• AXA Investment Managers
• Common Fund for Commodities
• Cordiant Capital
• EQT Partners
• FINCA International
• Fondaction
• GAWA Capital
• Goodwell Investments
• Incofin
• INOKS Capital
• Mennonite Economic Development Associates (MEDA)
• Okavango Capital
• Omnivore
• Open Value Foundation
• Patamar Capital
• Root Capital

What they’re saying

“As agriculture is one of our main sectors we’re investing in, we found it really important to be able to share our data and then also our insights into the challenges and opportunities we saw with being able to collect and aggregate and then also make use of of the data going forward. So for the data that we didn’t have metrics for, we now know that it’s something that we may want to be collecting from our companies going forward,” Melissa Tickle, investment manager at early-stage impact investor FINCA Ventures told AFN.

“For investors, benchmarking impact performance against their peers, prior periods, or the scale of the social and environmental challenge represents a seismic shift in their toolkit. By doing so, they gain a better understanding of their own performance and are better equipped to manage it effectively,” said Dean Hand, chief research officer at the GIIN in a statement. “Through benchmarking, investors can quickly identify what strong performance looks like and direct their capital towards more effective solutions.”

What are impact investments?

According to GIIN, “impact investments are investments made into companies, organizations, and funds with the intention to generate positive, measurable, social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets and target a range of returns from below market to market rate, depending upon investors’ objectives.”