Seven years ago, one of The CAPROCK Group’s co-founders, Matthew Weatherley-White, participated on a committee formed to evaluate a wide variety of impact investment funds. A difficult task, as there existed no framework that could harmonize the diversity (of change theories, investment strategies, and target populations) intrinsic to a pool of impact investments. Struck with an inability to coherently evaluate such dissimilar funds, and working from a series of objective criteria, Matthew developed an algorithm that could quantify an "impact score" for any investment. It was embraced by the committee.
This was the germination of the idea that eventually become iPAR.
Since then, The CAPROCK Group has deployed over $1 billion of impact-oriented capital. Following in the wake of this growing number of allocations has flowed a stream of impact reports. Some are good. A few are great. Others are basically useless. But anyone who has read more than a handful of these publications has likely been struck by two things: first, their narrow applicability to the related impact strategy; and second, a discouraging mix of quantitative and qualitative information that, together, defy aggregation across a portfolio. We sifted the impact ecosystem for a solution to this significant communication pain point. And while there were some tools that provided useful impact insights, and others promised equally useful investment insights, none of them met our needs for client reporting.
So we revisited and iterated, repeatedly, on the original algorithm. We spent hundreds of hours talking to impact fund managers, incorporating their useful feedback to the ongoing development of the tool. We included the pioneering work done by the GIIN and B Lab. We asked our clients not only what they wanted to see, but also what they required. We researched the impressive (sometimes intimidating) work being done by foundations, non-profits, and community development financial institutions, each of which have been reporting on impact long before it became the latest buzzword. With our background in traditional investment management process, we incorporated impact risk analysis.
iPAR is the culmination of this multidisciplinary research, and, we hope, representative of the best thinking in impact reporting.
Our work is not done. We do not consider ourselves the final arbiter of impact. iPAR will continue to evolve along with the industry it seeks to analyze. We welcome your feedback, and appreciate your interest.
iPAR sits at the intersection of those with capital and those seeking it. Our experience suggests that these two sides struggle to exchange impact information in a consistent, cogent manner. The unfortunate result? Impact intentions AND their related returns are commonly misunderstood. Given that impact creation sits at the core of these investments, this is an unacceptable outcome that threatens the continued growth of the discipline.
To address this threat, we built iPAR, a patent pending platform that facilitates better reporting and intuitive analysis of impact investments.
Better Reporting starts with a bottom-up classification of any impact strategy along two axes: Theme and Geography. Despite the centrality of these two axes, there exists no standardized taxonomy to categorize them. Compared to traditional investments, which have Morningstar style boxes, GICS codes, and Russell Indexes, no similar, widely accepted framework exists in the impact arena. This not only challenges entrepreneurs and fund managers, who crave a concise way to convey their impact intentions. It also frustrates asset owners, who want a top-down, portfolio-level, impact perspective.
Who knew classification was so critical?
Intuitive Analysis ought to be a required byproduct of any platform built to evaluate such a diverse array of capital deployments. “Ought to be” being the critical phrase.
Thus, iPAR reflects any investment’s impact intent, as well as threats to its successful implementation, via two figures: the Impact Strategy and Execution Risk scores. These two numbers are then dynamically updated as impact metrics are reported by the investee, thereby generating easy-to-understand, ongoing measures of impact performance and risk. By narrowing the focus solely to impact, these scores have universal applicability to any asset class or investment structure. By divorcing the return expectation from the impact analysis, commercial and philanthropic capital deployments can be evaluated equally.
Who said apples couldn’t be compared to oranges?