Staff members from Commonwealth attended the virtual Social Capital Markets (SOCAP) conference dedicated to increasing the flow of capital toward social good. As we have noted in previous blogs, interest in environmental, social, and governance (ESG) and evidence of its materiality—particularly the recognition of the “S” in ESG—have only increased during COVID-19. We engaged with leading asset managers and institutional investors, corporate leaders, impact investors, social entrepreneurs, fellow nonprofits, and others on the state of social capital and ESG investing in this extraordinary year. Key takeaways from the conference include:

1. Investors understand that ignoring ESG factors is a breach of fiduciary responsibility: Katie Schmitz Eulitt, director of investor outreach at SASB, pointed out that the “market is speaking” and “following the science” by demanding ESG investments. She noted that even after the DOL released its original rule limiting ESG investments in retirement plans, BlackRock saw a “huge uptick” in ESG funds, especially from pension funds. 
2. Collaboration between diverse players is key for effective impact measurement and management: When asked for their prediction for 2021 in a panel on how to build trust in the impact label, both Bart Houlahan, Co-Founder of B-Lab, and Andrew Lee, Head of Sustainable and Impact Investing for UBS’s Chief Investment Office, said that 2021 will be the year of collaboration, with diverse groups coming together to strive towards shared goals. Without it, ESG will have a “long road ahead.”
3. Social metrics have room to grow: Bob Dannhauser, senior advisor to the Investment Integration Project, noted that people “grab onto” metrics that are easy to report, quantifiable, and easy to track; environmental metrics have received more measurement and press because they happen to be easiest to collect data on. Social metrics are currently “more art than science,” and there needs to be greater consensus about how to design and implement social metrics.
4. ESG measurement system needs to be adaptive to the individual context of a firm: Onmeed Sathe, head of the Impact Investment unit in the Office of Corporate Social Responsibility at Prudential, pointed out that the current ESG metrics system measures outputs, not the quality of the impact or suitability of the impact to the company’s industry or work. For example, if an employer provides a defined contribution account to 50,000 employees, the questions remain: what percentage of its employees do those 50,000 constitute? Who is ineligible for the account? Does the employer provide a match? Placing the metric in its appropriate context is key to understanding the quality of the impact it measures. 
5. When it comes to measuring and analyzing metrics data, “turn an extractive exercise into an interactive one”: Moderator Erin Worsham, Executive Director of Duke University’s Center for the Advancement of Social Entrepreneurship (CASE), shared this quote from Welsh philanthropist Ann Cotton. The panelists also encouraged anyone interested in measuring social impact to involve the people they are measuring the impact for in the data process, and to design metrics with, not for, the target population.

Commonwealth is excited to continue to work with companies, investors, ESG ratings and data providers, and funders to enhance scale access to employee financial security. To learn more about the work that Commonwealth is doing with investors and the connection between investment materiality and worker financial security, contact Nick Maynard at info@buildcommonwealth.org.