Notes on Impact Valuation Masterclass

Introduction

• Speaker: Sebastian Willo, Chief Policy Officer at GSG
• Purpose: To create an interactive session focused on impact valuation and accounting.
• Format: No slides initially, but allowed slides if necessary for clarity.

Panel Introduction

• Panelists:
  • Andrea Sah: Chief Market Development Officer, International Foundation for Valuing Impacts (IFBI)
  • Dan Oaski: Chief Research Officer, IFBI
  • Tovias Wilner: Global Head of Sustainable Finance and Standard Setting, Value Balancing Alliance (VBA)
• Background: Diverse geographical backgrounds of panelists, enhancing the global perspective on impact valuation.

Session Goals

• Understand four key outcomes:
  1. What is impact valuation?
  2. What is impact accounting?
  3. Why should we care about them?
  4. How to implement them and what next steps to take?

Impact Valuation and Accounting

• Definitions:
  • Impact Valuation: Measuring the outcomes of activities in monetary terms for better decision-making.
  • Impact Accounting: A comprehensive framework for assessing both financial and non-financial impacts, allowing for comparability across entities.
• Importance: Integrates social and environmental impacts into traditional financial accounting.

Historical Context

• Traditional financial accounting is well-established but focused only on financial performance.
• ESG metrics focus on inputs/outputs but struggle to measure actual outcomes and impacts.
• Research Insight: 87% of investors believe corporate reporting needs improvement to include impact insights.

Impact Accounting Methodology

• Aligns with existing sustainability reporting, assessing material topics and data collection.
• Impact Pathways: Data is transformed into quantifiable outcomes in monetary terms.
• Key Users: Internal managers, investors, lenders, and stakeholders use impact accounts for informed decision-making.
• Goal: To create an integrated impact profit and loss statement to assess overall social and environmental performance.

Practical Implementation

• Real-world examples of companies piloting impact accounting:
  • Holm: Evaluated a small project for impact.
  • Bosch: Compared impacts of different packaging materials.
  • Bayer: Adjusted product size based on environmental and social benefits.
• Challenges: Companies may initially resist negative findings but benefit from transparency for internal improvements.

Regulatory Landscape

• Impact accounting is becoming increasingly relevant due to changing regulations and mandatory reporting standards.
• Companies are encouraged to adopt impact accounting early to leverage resources effectively.

Public Sector Case Study

• Fresno County Economic Development Corporation applied impact accounting to align business incentives with community benefits.
• Outcome: Developed a corporate scorecard to evaluate businesses based on environmental and social impact.

Audience Engagement

• Questions from the audience included:
  1. Challenges of impact accounting in different sectors.
  2. How to scale impact accounting for SMEs.
  3. Setting standards for impact accounting across regions.

Conclusion

• Call to Action:
  • Engage in the methodology's development through public comment periods.
  • Companies should adopt impact accounting to enhance internal decision-making.
  • Collaboration with consultants and market builders to support the implementation of impact accounting.

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Key Takeaways

• Impact valuation and accounting are essential for integrating social/environmental aspects into business decisions.
• Transparency and improved decision-making can lead to a more sustainable economy.
• Stakeholders are encouraged to participate in shaping the future of impact accounting.