The data for this impact report is derived from our online investee portal. In this portal, the financial institutions in our portfolio provide extensive data on social and environmental topics. The indicators that we publish are, when possible, aligned with the IRIS Metrics of the Global Impact Investing Network, designed to measure the social, environmental and financial performance of an investment, or the calculations are based on existing IRIS metrics. SFRE Fund has also embedded the Smart Campaign’s Client Protection Principles and the UN Principles for Responsible Investment in its due diligences.
Quantifying and managing impact
More specifically on an individual investee company level, SFRE Fund uses the Investment Scorecard developed by the Global Alliance for Banking on Values to measure commitments to financing the real economy and triple bottom line activities, scoring from 0-100:
- The Investment Scorecard captures the financial viability of the institution, its intermediation of money in the real economy and its intermediation of money supporting clients who deliver triple bottom line results for society. It then overlays an assessment of the institution’s core culture and capabilities across six dimensions, which are added to the base score for calibrating.
- If there is a need for improvement in specific areas, or the fund sees a deterioration in a score, this is discussed and monitored with the investee during regular visits and quarterly board meetings for equity investees.
SFRE Fund uses the Investment Scorecard to quantify and manage impact. This is an integral part of capital deployment and portfolio management. In accordance with the ‘Principles of Sustainable Banking’ investees must have a minimum score on the Investment Scorecard to be eligible for portfolio. Post-investment, the score is reassessed on an annual basis, making it a tool for proactive managed impact alignment between SFRE Fund and the investee.
Part of the whole story
Our role and efforts as an impact investor can only be captured in quantitative metrics and indicators to a limited extent. We do not see them as goals in themselves; they are pieces of information that are part of the broader picture. For that reason, we don’t set specific goals for indicators or compare them to last year figures, because a higher number doesn’t necessarily mean more impact. For instance, financing a small and innovative financial institution which drives financial inclusion in rural areas could create more impact than financing an established financial institution in a mature market. To understand our vision and the extent to which we’re delivering on it, we share stories that illustrate the whole picture. These stories provide the essential context and background for our activities and illustrate our ‘theory of change’.