A growing number of investors are allocating capital towards organizations that aim to address social or environmental problems, while also generating financial returns. ‘Impact investing’ includes sectors like microfinance, clean technology, sustainable agriculture, affordable housing and others. As investment activity in these sectors grows, the need for standardization and transparency in reporting in order to allow investors to consider performance across financial and non-financial dimensions has become increasingly evident. Microfinance is perhaps the most developed sector under the impact investing umbrella, and the Microfinance Information Exchange (MIX) has been working for over a decade to develop industry standards and to provide data and analysis on the microfinance sector.
The Global Impact Investing Network (GIIN) is a young organization which has a broad mandate to support the overall growth of impact investing as an asset class. The GIIN’s Impact Reporting and Investment Standards (IRIS) initiative is modeled after the work of the MIX and is intended to create reporting standards and metric definitions to allow for the aggregation and benchmarking of social and environmental performance data across the asset class.
Both IRIS and the MIX have developed reporting frameworks that integrate financial and non-financial data. It also happens that both organizations speak the same data-modeling language - XBRL. We both independently settled on XBRL because it seemed clear that XBRL was the direction in which the financial reporting world was moving, and we saw the opportunity to extend this to non-financial reporting. MIX and IRIS have aligned reporting standards and have spent the last year building a pathway to ensure our two platforms can share information on an ongoing basis, a project made easier because we speak a common language. Here is a little more about how this project works:
On the data sharing front, we have developed a mechanism to allow our platforms to communicate with one another on an ongoing basis. Here’s how the process works:
- Microfinance institutions (MFIs) maintain information related to their services in audited financial statements, regulatory reports, ratings reports, poverty assessment tools, and other documents.
- MIX staff collects these data, standardizes and publishes the information on the MIX Market website. During this process, we convert the data to XBRL and tag it based on our taxonomy (an extension of the International Financial Reporting Standards (IFRS), tailored to microfinance reporting standards).
- Once data from an XBRL document is published on the MIX site, an RSS feed automatically sends the document to subscribers, including the GIIN.
- Once the GIIN is notified of a new XBRL document, it is pulled into their system and the MIX XBRL is converted into IRIS XBRL so that it can be compiled and analyzed within the IRIS data analysis tool.
This data exchange allows the GIIN to incorporate a comprehensive standardized set of microfinance data into its broader data set that includes information from a range of other impact investing sectors.
It also allows the MIX to provide data on microfinance to the world. Anyone who learns to ‘speak XBRL’ can have a direct line to access and understand that data.
Now that the data is publicly available we look forward to pursuing opportunities to see what else can be done with this data by fluent speakers of XBRL. We know that XBRL has helped to open data and streamline reporting flows within other fields, and we hope this channel begins that process for double bottom-line sectors like microfinance and impact investing.
by Scott Gaul & CJ Fonzi