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The ESG Interview: Loud and Clear

Sasha Dichter, CEO of 60 Decibels, outlines the need to talk about social impact measurement.

The UN Sustainable Development Goals (SDGs) related to human rights and social issues are far less likely to inform investment strategies than those pertaining to climate change and the environment.

A 2021 survey of 356 institutional investors from BNP Paribas found that 58% align with SDGs linked to social factors, compared with 89% who prioritise the environmental considerations.

The survey suggests that challenges in finding, collating and analysing social data is the main reason investors favour E over S in sustainable investment strategies.

Just over half (51%) of respondents say social is the most challenging component of ESG to assess and incorporate into investment analysis, compared to 39% for environmental and 27% for corporate governance.

Net zero to net impact

Writing in the Stanford Social Innovation Review this February, Jason Saul, Executive Director of the Center for Impact Sciences at The University of Chicago and Founder and CEO of The Impact Genome Project, said: “Reducing carbon emissions and mitigating the risks of climate change for investors is a major accomplishment. But to achieve true sustainability, we must also improve the quality of life for the people who live on this planet.

“We can’t manage what we can’t measure. It’s time we raise the bar on social impact measurement, create better S data and give the market something to price into their models. It’s time to go from net zero to net impact.”

This view is shared by Sasha Dichter, CEO of 60 Decibels, a tech organisation he co-founded which measures social impact, allowing investors companies to set benchmarks and performance targets.

60 Decibels – the volume at which humans typically converse – employs a network of more than 830 researchers who interview individuals across 70 countries to hear first-hand accounts of the impact of companies, their products and services, on their lives.

To date 60 Decibels has worked with more than 800 of the world’s impact investors, companies, foundations, corporations, NGOs, and public sector organisations.

Dichter says: “We need better data regarding social impact to understand what’s actually going on in the world. The qualitative nature of data and the recollection from human beings is key to gathering social data.”

He adds: “We have built an infrastructure that allows us to listen to five billion out of the seven billion people in the world. Our network of people connect to our software backbone and conduct short interviews with folks to understand, from their perspective, what is happening in their lives.”

Interviewers ask questions covering wealth, happiness, life experience, and the answers are fed into a database which can then be quantified and analysed.

“We are trying to bring an ease of execution as well as rigour and comparability to the social impact data we collect,” he says.

Focus on outcomes

A survey of 356 institutional investors from PwC published last October reveals that only one third think companies have good ESG reports, from an investment decision-making perspective, while 79% say they place more trust in ESG information that has been assured; 75% think it’s important that reported ESG-related metrics are independently assured.

Dichter says too often investors rely on companies demonstrating they have human rights policies in place or that they have specific practices that focus on social issues, yet there is typically no way to determine whether such approaches are carried out in practice.

“Social impact standards have so far focused much more on policies, procedures and processes. But what investors really want to know is whether these are followed and if they make a difference to customers. The challenge is there are so many steps between you as an investor and the end-customer and to society.”

He continues: “We’ve tried to get through all those steps. The customer or the employee knows the answer for him or herself about whether they’re surviving and thriving or struggling. We have developed a way to really raise up their voices and have them inform company behaviour and investment decision making.”

Dichter says that while it takes time for the data to translate into action by companies and investors, 60 Decibels has received positive feedback. PowerGen – a renewable energy provider working in Africa; CDC Group – a development finance institution; and the UK’s Carbon Trust have all endorsed the research and used it to inform future strategies.

Hearing the most vulnerable

Last year, 60 Decibels published research into the impact of Covid-19 on the world’s most vulnerable people, arguing that the majority of data about the virus’ impact centred on the wealthiest nations.

The survey covered 50,000 individuals across sub-Saharan Africa, Latin America, and Asia, asking about the impact on income, food consumption, ability to make payments, and overall household financial health.

The report focuses on gig economy workers; those reliant on off-grid energy; the agriculture sector; and microfinance.

Unsurprisingly, those living in the least developed nations without bank accounts, or those employed on zero-hours contracts and people with limited access to reliable energy supplies were most impacted by the virus.

60 Decibels calls on policymakers, investors and companies to respond to the findings and take steps to help the most vulnerable to recover from impact of Covid-19, and to ensure they are better protected in the event of further pandemics.

Dichter says that the survey data makes it easier for companies and investors to implement more effective impact strategies.

“People have been trying to deploy capital for impact based on proxies and estimates. We can give them a much more accurate instrument panel and let you see very specifically what’s really happening.”

He adds: “If they [investors and companies] commit to annual surveys, they can see what difference they make on an ongoing basis and adjust their plans accordingly.”

Embracing subjectivity

Dichter concedes that the information collected is subjective but rather than undermining the validity of the data, he argues it is critical.

“We place a lot of stock in what people have to say about their lives and we embrace that subjectivity. People should decide for themselves what it means to thrive.”

He adds: “We not only ask questions of people all over the world, but we also ask the same questions. So regardless of subjectivity in people’s responses, we’re still getting very objective comparison responses.”

Being able to compare how different people living in various countries responded to the question ‘how did lockdown affect your life?’ means companies and investors can make decisions about where best to deploy capital to make the biggest impact.

“All of a sudden you have the people who are running companies and directing capital to those companies equipped with comparable, reliable data to help them make decisions,” Dichter says.

This June, 60 Decibels is set to release a financial inclusion index based on interviews with 15,000 recipients of micro finance, and the organisation has plans to research the food supply chain.

“Virtually all the food we eat is grown by a farmer, many of whom are working on small holdings. The world is beginning to wake up to the fact that we need to understand how that farmer is doing and ensure they have their fair share of the work they do.”

He says: “A lot of the major food suppliers are trying to upgrade their processes, and many of them are doing great work with farmers, making commitments to abolishing child and slave labour in their supply chains. But we also find that they’re looking for better data sources that allow them to really understand where they are making progress on those commitments.”

The advent of measurable comparable social data is an important step towards ending the argument that the S in ESG is ‘too difficult’ to quantify.

Dichter says: “Understanding social issues is not complex but so far it has been made to look that way. We can go directly to people who are impacted, hear their story and turn that into data which will hopefully be used to create a positive impact.”

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