While it’s possible to see data on many individual impact initiatives, what about statistics on the entire sector? Because not all the relevant data is published, those looking to learn exactly who impact investors are, what types of companies they invest in, and what objectives they target may only come up with incomplete answers.
Jean Case, CEO of the Case Foundation, is urging investors and entrepreneurs to change that. In an article in the Stanford Social Innovation Review, she calls on participants in the sector to #ShareYourData in order to make the impact investing movement more transparent. This kind of transparency can help potential investors learn about the space, a crucial step for impact investing to grow.
Investors have an opportunity to make a real difference for the future of the sector—and their initiatives have a lot to gain, too.
Available Data Is Limited
Data disclosure is uneven in impact investing, with some companies and investors making more information available and others remaining more opaque. And because data disclosure practices are not standardized across the impact investing space, it’s difficult for would-be investors to compare investments or aggregate data to form a broader view of the industry.
Case draws a parallel between the growing impact investing industry today and the emergence of venture capital. At first, many investors were wary of venture capital, with only a few risk takers initially embracing it. But after data on the field was publicized, institutions joined in and began to invest. As a result, venture capitalism became mainstream. A similar development could see impact investing scale. Thus, each investor who publishes data is helping to bring impact investing further into the spotlight. When enough investors participate in #ShareYourData, their efforts could be the catalyst for a new era of growth in the sector.
How the Lack of Data Hampers Growth
Insufficient data is likely holding back impact investing in several ways. First, otherwise-interested investors may be reluctant to back impact initiatives without first seeing detailed information about the field, its participants, and the success of completed investments. Without thorough data, investors may make decisions based on their guesses or assumptions about impact investing as a whole. People who aren’t involved in the space might suppose that impact investing can only yield subpar returns, for example, or that it’s simply an inconsequential fad. Others might equate it solely with divestment, stopping short of discovering the spectrum of options actually available. Without data, it’s difficult to test such assumptions and form a more accurate picture.
When data isn’t widely available, investors also lack access to a comprehensive view. Currently, participants in impact investing have information about their own investments or socially responsible businesses, and they may share some of that information with close contacts who are interested in entering the space. But someone who doesn’t have experience in the field and doesn’t know anyone active in it is locked out of those flows of information. Sharing data publicly would offer more equal access to potential investors and social entrepreneurs, including those who don’t yet have impact investors in their network.
Finally, the dearth of data makes it harder for even initiated investors to spot opportunities. Anecdotal data and isolated case studies don’t clearly indicate whether the impact investing sector is neglecting specific geographic regions or whether certain types of initiatives are underfunded. Comprehensive data would allow investors to discover patterns and to focus on previously overlooked areas.
The harmful effects of this lack of transparency don’t have to be permanent. If more investors decide to share information, the impact investing movement can overcome these obstacles and reach more people. And disclosure doesn’t just hold promise for the sector as a whole—it’s also beneficial for the investors themselves.
How Disclosure Benefits Investors
Sharing data can create new opportunities for investors and initiatives. When more people learn about successes and ongoing projects and decide they’d like to be a part of them, new capital is likely to find its way to those projects. And when investing peers see data, they may respond by sharing their own information about potential investments or by offering to collaborate to meet common goals. Sharing data can also lead to greater recognition from peers, organizations, and the press. Currently, some initiatives don’t get the attention they deserve simply because information about them isn’t widely available. Sharing data strengthens the entire impact investing sector, while also promoting specific initiatives.
Working to Create Transparency
The Case Foundation is asking investors and companies to contribute to its #ShareYourData campaign by submitting information about their investments and fundraising. Contributions are added to the Impact Investing Network Map, which displays information on investors and businesses as well as the transactions between them. The information can be sorted by fundraising round, impact objective, and company legal structure, among other factors. Together, the data points illuminate allow participants and interested investors to visualize the big picture.
From there, it’s up to investors and asset managers to decide whether or not to enter the impact investing space. But sharing data is a crucial step toward opening the door.