University Research Institutes and Questrom School of Business team up to equip investors with more meaningful Environmental, Social, and Governance (ESG) metrics to measure corporate impact.
In response to the rapid growth of impact investing as a mainstream asset management strategy, Boston University (BU) today announced the launch of the Impact Measurement and Allocation Program (IMAP). The new socially responsible investing research initiative will support real change in corporate behavior and asset management—and accelerate the transition to a sustainable economy. The BU Institute for Sustainable Energy and the Susilo Institute for Ethics in the Global Economy within BU’s Questrom School of Business are jointly spearheading this multi-year effort. The program is made possible by generous support from alumni donors.
“Real progress toward social change for the good requires investment, and smart investors need ways to evaluate their alternatives and gauge their relative impacts. Climate change, socio-economic inequality, non-sustainable manufacturing practices: these thorny grand challenges require multi-pronged interdisciplinary collaborations for their resolution,” said Susan Fournier, Allen Questrom Professor and Dean of the Questrom School of Business at Boston University. “The project-based business model built for this initiative connects the best of what Questrom and Boston University have to offer. We are very excited by the intellectual leadership of our co-founders and the generous support of our alumni. I am confident that this effort will positively influence investment behaviors and create true societal and environmental change.”
In recent years, the environmental and social impact of investments have become increasingly important to investors. Since 2006, over 3,000 investor signatories representing more than $100 trillion in assets under management have committed to advancing the United Nations Principles for Responsible Investment. As momentum for change in asset management grows, so does the need for quality data to inform investment decisions. Yet there is widespread concern about the reliability and integrity of sustainable investment data, how it is used to create meaningful metrics, the use of competing frameworks and standards, and the costly analysis required by investment firms to sift through a variety of data sources—all challenges that threaten to slow the adoption of Environmental, Social, and Governance (ESG) principles in investment decision-making and ownership at a critical time.
The goal of BU’s IMAP is to provide practical solutions to these challenges and accelerate the transition to an environmentally sustainable and socially just economy. The program sets out to improve the framework used to measure a company’s impact on ESG factors—and then to facilitate rapid adoption of improved measures by money managers and other practitioners.
“Boston University’s Impact Measurement and Allocation Program will attack the current pain points for ESG practitioners, with the goal of giving both corporates and asset managers a new gold standard for capturing their environmental and social impact with reliable and meaningful investor metrics,” said Nalin Kulatilaka, IMAP Co-Founder and Co-Director of the Susilo Institute at the BU Questrom School of Business. “Boston University also brings academic independence and scientific rigor to its analysis, offering full transparency to encourage broad adoption.”
In the program’s first phase, slated for fall 2020 through the end of 2021, it will examine two specific areas where ESG metrics have been particularly challenging:
- Greenhouse gas emissions that are related to a company’s business activities but outside its direct control (called Scope 3 emissions), such as leased assets, commuting, how sold products are processed or used, and investments
- Compliance with labor laws and adherence to good labor practices throughout the value chain
“We have selected two components of ESG that are widely regarded as the most in need of attention—so-called “Scope 3” or value chain emission sources, which can represent the majority of a company’s greenhouse gas emissions, and labor issues,” said Peter Fox-Penner, IMAP Co-Founder and Director of the BU Institute for Sustainable Energy. “These are not only drawing investor attention but also can provide early insights into hidden risks.”
The overall IMAP work plan will be guided by an advisory committee comprised of distinguished practitioners.
Boston University is a leader in actionable research at the intersection of sustainability and business. The BU Institute for Sustainable Energy (ISE) is a university-wide center dedicated to accelerating the global transition to energy systems that will provide abundant, universally accessible, and sustainable energy sources for emerging and advanced economies. The Susilo Institute within BU’s Questrom School of Business seeks to explore and influence the role of ethics in a changing global economy through thought leadership, data analytics, and qualitative research, with a commitment to producing scalable results.
IMAP will be jointly led by Peter Fox-Penner, director of the BU ISE, and Nalin Kulatilaka, co-director of the Susilo Institute. Both are on the faculty of BU’s Questrom School of Business.
Dr. Fox-Penner’s research focuses on sustainable finance; the relationships between public and private economic activity; electric power strategy, regulation, and governance; and energy and climate policy. He is currently Partner and Chief Strategy Officer of Energy Impact Partners, one of the largest dedicated clean energy private equity fund groups in the world. Prior to BU, he served as Principal and Chairman of the Brattle Group and as a senior official at the U.S. Department of Energy and the White House Office of Science and Technology Policy. He is the author of numerous published articles and books, including the highly acclaimed Smart Power and its sequel Power after Carbon.
Dr. Kulatilaka is Wing Tat Lee Family Professor of Management and Professor of Finance at Boston University’s Questrom School of Business. Kulatilaka’s current research interests include impact investing and financing distributed energy resources. He has co-founded several companies, most recently NineDot Energy, and serves on the Board of Directors of Assette. Kulatilaka holds a Ph.D. from MIT.
The program welcomes inquiries from interested collaborators and practitioners. Inquiries may be made through the program website at bu.edu/ise/imap.
