Proof of Impact
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Proof of Impact

Effective Impact Data Reporting for Investment Fund Managers

This is the third article in a series on the use of exponential technologies to track and verify environmental and social outputs in energy transition. The first article presented the potential for non-financial KPIs packaged as impact data to attract mainstream investment capital for energy transition companies. The second article provided a practical use case of the value that impact data can unlock for companies and investors.

Case Study: Adiant Capital

Adiant Capital, an private market impact investment company based in Switzerland, invests in private assets and companies that mitigate climate change, protect natural resources, and preserve biodiversity. While Adiant Capital’s impact investments align with the Paris Agreement’s objective to limit warming potential to below two degrees Celsius by end of the century, Adiant Capital currently focuses on forward-thinking environmental investments in areas such as renewable energy infrastructure, low-carbon transport and digital infrastructure. Pierre-Loïc Caïjo, founder of Adiant Capital, says:

THE PROBLEM

Limited partners are under increased pressure — environmental, social (beneficiaries) and regulatory — to report on impact or sustainability in their investment portfolios. However, the market currently lacks a verified impact reporting infrastructure that can be applied efficiently across the entire capital stack. Since no standard impact data reporting methodology exists, every member of the capital stack relies on their own particular view, standard, or metric, resulting in non-standard reporting, a lack of transparency, and no single source of truth.

THE SOLUTION: VERIFICATION AT THE SOURCE

In response to the challenges faced by investment fund managers, Proof of Impact (“POI”) has developed a technology platform that allows for digital verification of product, operational, environmental and societal metrics at their source. Due to the integration of operating systems and IoT, the data is current and real-time, rather than driven by field visits and consultants. Every interested party in the investment chain can be provided with unrestricted access to the data and analytics, resulting in greater transparency and decreased duplicity. The benefits of this approach to fund managers and portfolio companies management include:

1. Harmonised Data Across the Capital Stack

Data is verified at the source, resulting in one centrally managed “source of truth” for all impact data required for reporting. Each stakeholder can derive their required metrics from the original verified data set, and investors can work collaboratively with portfolio companies to understand trends, track investment outcomes, and mitigate risks. Since all stakeholders — from investors to funders to regulators — have access to the same integrity-protected verified data, it leads to consistent and transparent information and communication about high-impact metrics that truly matter and are harmonised industry wide.

2. Protected Data Integrity for Immediate or Future Securitisation

POI has developed its own blockchain and integrates with other main chains to protect the integrity of the data as it is passed from one investor category to the next in the chain, and the data is visualised on a POI dashboard. This allows for simpler calculations of the contribution of each investor, funder, or client to the asset’s impact results, so that the attribution of each investor contribution is clear, defined, and not overlapping or double counting. This tokenised data will become the tokenised investment product with embedded ESG and impact data.

3. Enhanced Decision-Making Capabilities and Capital Efficiency

The real-time nature of impact data means that decision makers at each level of the capital stack can make an immediate investment or allocation decision based on the data, saving time and shortening the timeline to investment. Data may also have predictive capabilities. Over time, investors can identify which impact or sustainability data factors could be an indicator of future cash flow, resulting in higher cost efficiency, stronger market positioning of products and greater revenue streams. Next-generation investors are demanding assets that are transparent and that report on their holistic performance in real-time; this could let early adopters of verified impact reporting capture higher environmental and financial performance over time.

4. Increased Cost Effectiveness of Data Capture, Verification, Monitoring, and Reporting

The costs to capture, verify, monitor, and report on the data are one-off at the asset level. The access to decision-making data reduces expensive financial, intermediary and due diligence costs at the time of investment. Furthermore, analysis and reporting at different levels in the stack all become more cost effective. The POI platform is the most valuable impact and ESG measurement solution per dollar, due to its potential to make investment decisions ex-ante and track the performance of the asset or portfolio ex-post:

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Fleur Heyns

Impact investing. Finance. Entrepreneur. Co-founder @proofofimpact.