There are several ongoing questions and challenges that will need to be addressed as this work evolves. These include:
• Clarifying purposes and audiences: For a new system of impact classes to be effective as a tool to help the field, it must ultimately be accepted and adopted by multiple parties in the impact investing ecosystem, including asset owners and managers, advisers, investment managers, standards and network organizations, and ultimately entrepreneurs. Broad adoption is the endgame – although engaging all stakeholders at once is unlikely to be successful. Actors in impact investing have different goals, different political economies, different stakeholders, and different identities in the marketplace. Now that the concept of impact classes has been introduced, the optimal approach is likely working through smaller groups to allow different players to give feedback with their peers – beginning with asset owners, advisers, and investment managers, and expanding from there.
• Determining the right variables: While a key decision emerging from the February meeting was the general acknowledgement the concept of impact classes could fill a gap in the marketplace, attendees did not agree on the exact framework that will define impact classes. Identifying boundaries between each impact class, as established by the core variables that are universal and create differentiation, will be essential. The prototypes presented and tested in February 2016 will need to be further iterated.
• Weighing the benefits of one or more frameworks: One hypothesis is that impact classes would be most effective as one universally accepted framework that allows many different parties to identify their impact class and those of others. However, this assumption will need to be tested further. More than one major classification may be needed.
• Balancing the pursuit of consensus with moving to action: It will be important to have a threshold level of support for any prospective impact class framework before taking it to the market at large, in order to ensure broad adoption. As impact classes continue to develop, there may be a tension between building additional support and moving to action. Full consensus is surely beyond reach, and thus a balance must be struck in determining the appropriate timing for broad dissemination and adoption, once sufficient support has been indicated through testing.
• Governance, and finding the right home in order to drive adoption: As of writing, the research is led by a purpose-built project team. For the longer term, it will be important to consider the best home for this effort, which could form part of another organization’s work. To be sure, there will need to be a sufficiently robust governance process in place to engage natural constituents in the process of refining the impact classes over time, to provide a level of transparency that will evince credibility in the effort, and to empower an entity to be responsible for improvements. Prior work on standards shows there are a number of choices of structure that should be considered carefully.
The market is at a unique and critical moment in its development, where thanks to the efforts of many pioneers and leaders, the type of scale and impact that many envisioned is beginning to be realized. With that progress comes new challenges. Impact classes are but one potential contribution to the market’s development, aimed at moving the needle on some of these important challenges.
While impact classes are not a silver bullet and more work remains, research and outreach have made it clear there is an opportunity in impact classes. Now is the time for building a more navigable roadmap for impact investing, and a stronger market as a result.