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PublicPurposeBusinessLaw: BCorps/ FourthSector - Social Enterprise, Non-profit & Corporate Social Responsibility (CSR) Updates
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Updates and commentary on topics relating to businesses serving social or public benefit purposes, including the non-profit sector and corporate social responsibility (CSR) developments, as well as the emerging "Fourth Sector" of the economy - added to the for-profit, non-profit, and public/ governmental sectors - comprised of "Benefit Corporations" (also called "B Corps" or "Social Enterprise") and Social Entrepreneurs. These are private, for-profit businesses that serve primarily social or public benefit purposes. The emerging "Fourth Sector" of "B Corps" or "Benefit Corporations" and Social Enterprises is a newly developing field of the law, and we cover legal issues, legislative developments, as well as broader news & developments in this Social Enterprise/ Fourth Sector, in addition to news and updates relating to non-profit entities and corporate social responsibility (CSR).

Global Impact Investing Rating System (GIIRS) Promotes Impact Investing in Socially Responsible Companies

Corporate Social Responsibility (CSR) Attracts Impact Investment CapitalB-Lab, an organization in Pennsylvania and New York that promotes the establishment of for-profit “Benefit Corporations” which serve social and public benefit purposes, has established a Global Impact Investing Rating System (GIIRS), which B-Lab says, “aims to drive investment capital toward impactful businesses.”

“GIIRS ratings provide investors with standardized impact metrics for an emerging asset class, helping fund the world’s leading social entrepreneurs. GIIRS ratings are like S&P ratings but for [social] impact instead of risk,” B-Lab stated in its 2011 Annual Report.

The GIIRS Rating System is expected to help drive capital to socially responsible businesses, including Social Enterprises and newly formed Benefit Corporations, which are for-profit corporations formed for social or public benefit corporate purposes. See our previous post about New York’s and other states’ new laws authorizing Benefit Corporations, a new form of corporate entity. See also our post about the Social Enterprise/ Benefit Corporation Movement in the U.S. and internationally.

Some of the expected benefits of GIIRS for social enterprises are described on B-Lab’s website:

“GIIRS: A project of B Lab, GIIRS provides comparable and transparent social and environmental performance ratings for companies and funds. Companies and funds seeking impact capital can use their ratings as a part of their capital raising process with impact investors. GIIRS is powered by the B Impact Ratings System, the same ratings system that is used to certify B Corporations. All Certified B Corporations are eligible to receive a free initial GIIRS rating and all B Certified venture capital and private equity funds qualify for a 50% discount on a GIIRS Fund Rating. To request your GIIRS ratings, please contact someone at B Lab. To learn more about GIIRS, visit www.giirs.org.”

After a successful Beta launch in the Spring of 2011 with approximately 200 companies and 25 funds, according to the B-Lab Annual Report, the GIIRS Rating System was officially launched at the 2011 Clinton Global Initiative meeting in New York.

As described by the Clinton Global Initiative, “GIIRS Impact Ratings provides an assessment of companies’ and funds’ social and environmental impact, while GIIRS Analytics provides a subscription-based analytics tool that enables industry-wide benchmarking, portfolio management, and due diligence screening.”

Impact Investing

The history and growth of “Impact Investing” was explained in a recent article by the CS Monitor:

“The notion that investors can benefit from financing socially oriented businesses – a mix of philanthropy and finance known as “impact investing” – has evolved since the 1950s, when public- and private-sector groups began investing in emerging-market enterprises to fight poverty. Today, it’s an established offshoot of “socially-responsible investing” and includes 300-plus social-venture funds, according to a GIIRS team estimate. The field is expected to grow at least 10-fold by 2020, drawing more than $400 billion in investments to five sectors alone (housing, water, health, education, and financial services), with potential for at least $183 billion in profits, according to J.P. Morgan.”

Expected Impact of GIIRS

The committed goals of GIIRS, as pledged to and reported by the Clinton Global Initiative (CGI), include:

“Through this commitment, GIIRS Pioneer Investors are declaring an investment preference for GIIRS rated companies and funds, and they commit to utilizing GIIRS Ratings & Analytics across their existing and new impact investment portfolios, totaling $1.3 billion in impact assets under management. GIIRS Pioneer Funders have pledged $4 million in philanthropic funds to accelerate industry adoption and development of a robust analytics technology platform. In five years, GIIRS aims to provide Impact Ratings for more than 2,500 companies and over 350 funds, providing over 150 institutional and high net worth investors, for the first time, with the ability to benchmark social and environmental impact in the same way financial performance is benchmarked today.”

At Launch GIIRS was capitalized with an estimated $19,000,000, according to CGI.

As announced by CGI at its launch, among the sponsors of the GIIRS are:

The Rockefeller Foundation
Inter-American Development Bank
J.P. Morgan

Calvert Foundation
Deloitte & Touche LLP
Capricorn Management LLC
Prudential Financial
FARM Capital Services
RSF Social Finance
The Skoll Foundation
The Gatsby Charitable Foundation
B Lab
KL Felicitas Foundation
Annie E. Casey Foundation
Armonia LLC
The Tony Elumelu Foundation

More Information

For more information about the GIIRS Rating System, see its website.

See also information about GIIRS provided by the Clinton Global Initiative

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Constance R. Barnhart
Attorney At Law, Managing Member
Barnhart Law PLC

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