The International Foundation for Valuing Impacts releases initial framework in partnership with the Value Balance Alliance.
The International Foundation for Valuing Impacts (IFVI) has started consulting on its vision to create “truly decision-useful” information on a company’s sustainability, Dan Osusky, IFVI Chief Research Officer, told ESG Investor.
The IFVI, which in June received grant funding from the Ford and MacArthur foundations totalling US$450,000, is seeking to create a globally applicable methodology for corporates and investors to monetise their environmental and social impacts.
Speaking to ESG Investor, Osusky said while the IFVI “sees incredible value” in current sustainability standards, including the International Sustainability Standards Board (ISSB), Global Reporting Initiative (GRI), and European Sustainability Reporting Standards (ESRS) for use by all companies subject to the Corporate Sustainability Reporting Directive (CSRD), it felt they had “inherent limitations”.
“There needs to be a system where’s there is an opportunity to actually convert that [sustainability] information into outcomes, but also units of measurement that will allow investors, companies, and any real decision-makers to make comparable, meaningful decisions, that can actually lead to more impactful outcomes,” he said.
IFVI has released its first consultation, in partnership with the Value Balance Alliance (VBA), which is intended to develop the theoretical foundation for a general methodology that will allow corporates and investors to translate social and environmental impacts into the language of currency and make them comparable to financial performance, explained Osusky.
The document, the Exposure Draft for General Methodology 1: Conceptual Framework for Impact Accounting is seeking to establish key concepts, principles, and definitions for the planned methodologies.
Along with general methodologies to establish the system of and conceptual elements for impact accounts, including the purpose, users of impact information, qualitative characteristics, fundamental concepts, impact materiality, and measurement and valuation methods. the IFVI will seek to create topic-level methodologies and industry-specific methodologies. “In the overall architecture, we’ve acknowledged that there are a number of core topics that we expect to develop a methodology for which is universal across industries such as greenhouse gases or wages,” said Osusky, adding that industry-specific methodologies would focus on the impact of an individual product on society or consumers.
Companies such as German apparel brand Puma and French food and beverage maker Danone have already been piloting monetising their impacts, according to Osusky.
VBA, which is an alliance of multinational companies testing ways to translate environmental and social impacts into comparable financial data, includes Anglo-American, BASF, Bayer, BMW Group, BNP Paribas, Bosch, Deutsche Bank, DHL Group, Kering, L’Oreal, Michelin, Posco and Volkswagen.
Both VBA and IFVI have also done test pilots on monetising impacts with companies, including Blackrock, Calvert Investments, Novartis and Summa Equity.
IFVI grew out of the Impact-Weighted Accounts Project at Harvard Business School.