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PGGM says impact measurement key for Sustainable Development Goal investing

Leading investor warns against “SDG-washing”

Dutch pension fund manager PGGM Investments has said it uses impact measurement as a way to avoid “SDG washing” – a reference to the
UN’s new Sustainable Development Goals.

Speaking to Responsible Investor, Piet Klop, Senior Advisor, Responsible Investment at PGGM, said while the Zeist, Netherlands-based investor is not ‘impact first’ — that’s to say seeking to make a positive social impact over a financial return — it is interested in impact measurement for a number of reasons tied to reputation building, credibility and integrity.

“Impact measurement keeps us from green washing what we do. It’s a real risk. There is especially excitement about the SDGs but ‘SDG-washing’ is a real risk.”

The SDGs were adopted at the United Nations Sustainable Development Summit in September last year. The SDGs are a set of 17 targets to end poverty, fight inequality and injustice, and tackle climate change by 2030.

Klop said there was already evidence of investment funds just labelling existing products with an SDG. “Unless it is measured, supporting impacts is a little too easy,” he said.

PGGM has ambitious impact investment targets – a quadrupling of ‘investments in solutions’ – to a total of €20bn by 2020.

But while Klop said impact measurement is important for PGGM, he did highlight limitations, especially in public markets. “If the investment is in billions not millions there is a limit to how granular you can be in impact measurement. Investors will try to measure impact in public markets but it’s very dicey.

“You are three steps removed from where the action is. It’s more difficult to measure impact if you want to go big.”It comes as the €188.7bn investor has endorsed a new report from the Global Impact Investment Network (GIIN) entitled The Business Value of Impact Measurement.

The report, funded by JPMorgan Chase & Co. and the DOEN Foundation, a social funder established from proceeds of the Dutch postcode lottery, investigates how impact measurement and management can generate business value for impact investors and their investee companies.

SDG-washing is a real risk.”

It identifies five business values that can be derived from impact measurement: revenue growth through a better understanding of customers; improving operational effectiveness and efficiency, improved deal sourcing; marketing and reputation building; and strategic alignment and risk mitigation.

Klop sat on the advisory body of the GIIN report, along with the Global Reporting Initiative, B Lab, Goldman Sachs Urban Investment Group, impact investor Elevar Equity and The Fletcher School at Tufts University.

Kelly McCarthy, senior manager of impact measurement and management at the GIIN, said: “An impact measurement strategy is most beneficial to the investor when it moves beyond counting outputs and is used to inform investment decisions and portfolio management.”

“We are witnessing a growing acknowledgement in the impact investing community that impact measurement and management is an incredibly useful strategic management tool.”

The findings in the report are drawn from interviews with 30 impact investors, including Goldman Sachs, Deutsche Bank and TIAA Global Asset Management.