Marsha Vande Berg's Sustainability Stars: Sarah Gelfand and the quest for impact

posted by Marsha Vande Berg on March 23, 2023 - 7:44am

(Marsha Vande Berg is director of MJGlobal Insights, a resource for corporate and fund decision-makers when shaping their dynamic sustainability stakeholder narratives. The former CEO of the Pacific Pension & Investment Institute, Marsha has worked with pension executives worldwide. A Stanford University Distinguished Careers Fellow and author of MJGI Briefs, you can reach her at and follow her @MarshaJVB.)

By Marsha Vande Berg


“As our industry navigates skepticism about the ability of investors to contribute to a more just society and planet, it is imperative that sustainable and impact investors can credibly demonstrate the social and environmental results of their investment activities.” — Sarah Gelfand, co-author, Raising the Bar/2.


SAN FRANCISCO — Putting proof to the pudding is Sarah Gelfand’s professional imprimatur. For this pioneer in the impact investment movement, the pudding is the investor’s sustainability claim; the proof is credible communication of the claim’s intended social impact; and the imprimatur verifies its integrity and that it intends what the investor says.


For Gelfand, there’s a lot more than good will and good intentions involved. To be credible, impact investing and fiduciary reporting require professional discipline.

Gelfand’s early contributions to the notion of investing for profit plus corporate social responsibility date to the beginnings of the contemporary impact investing movement in 2007. Even though the notion of doing well by doing good is historical, impact investment got its name and took shape in the mid-2000s at the Rockefeller Foundation when public awareness of climate change was increasing.

It was 2007 when an unprecedented global accord was reached on targets for protecting the earth’s ozone layer (Montreal Protocol). Al Gore’s “An Inconvenient Truth” won an Oscar for best documentary, and the former vice president shared the Nobel Peace Prize with the Intergovernmental Panel on Climate Change.

There was also a growing uneasiness in the economy with steep jumps in food and fuel prices, coinciding with a spreading financial crisis that started with the 2008 collapse of Lehman Brothers and spread throughout the global financial system. Four years later, the Occupy movement, first in Berlin and then on Wall Street coalesced albeit briefly while the year before, in 2010, the world looked on in utter disbelief at the environmental devastation caused by the BP Deepwater Horizon oil rig explosion in the Gulf of Mexico.

When the Rockefeller Foundation convened a group of philanthropists, investors and entrepreneurs, the world of finance and investment was beginning to shift gears. Their focus was initiating a “new capitalism initiative” with institutional trappings to sustain it. First, they established the Global Impact Investing Network (GIIN) as a membership organization guided by a council of leading global investors. They announced its formation in 2009 during the Clinton Foundation’s Global Initiative. They went to work on a disclosure framework that would serve as voluntary standards against which funds could disclose exposure and impact regarding ESG factors.

Gelfand was on board as a principal with GIIN, working closely with teams organized by the Foundation to create systems for reporting what investors intend as impact, how they propose to achieve alignment with goals, their due diligence, risk management and achieving ultimate outcomes. The framework that resulted is known by the acronym, IRIS, later updated to be IRIS+.

IRIS or Impact Reporting and Investing Standards is a catalog of more than 4000 generally accepted performance metrics which are used by impact investors to measure social, environmental and financial results. In other words, getting the metric right is critical ultimately to the integrity of the intended impact.

The tricky part — then and now — is credibly translating impact when the factors are non-financial but contextual as they relate to ESG-type factors. There’s simply no easy way to translate these factors using the same terms as financial statements rely on and communicate impact to the bottom line.

That is unless there’s a framework that meets with widespread acceptance, is credible, accessible and provides the basis for comparable findings over time. This in turn has served to invite the next level of evolution in the impact movement — third-party verifications.

It’s here that Gelfand is today applying her professional skill sets cultivated out of a penchant for applied math and systems, metrics and relationships that inform their successful application. With fanfare, she joined BlueMark in 2021, where she has since co-authored two seminal reports, Raising the Bar, No. 1 and No. 2.

Her comment at the time her appointment at BlueMark was announced sums up her professional commitment: “I have consistently seen first-hand the need for independent verification to ensure the industry grows with integrity and accountability to the impact investing market.”

Rest assured. She is not finished. For Gelfand, impact measurement is the key to credible impact investing and growing the amount of capital that can truly trigger necessary social change. This measurement only will become more sophisticated as behavior changes across the investment value change.

Here’s our video interview which took place late last year:

Question: How did you get interested in sustainability with its multiple facets involving economic viability, environmental protection and social equity?

Gelfand: I wanted to be a problem solver from my earliest days as an applied math major. I wanted to be that person who brings quantitative tools to social problems.

I first worked in cancer research at Memorial Sloan Kettering Cancer Center, and from there went to Tanzania where I worked on tropical global health issues. It was after I returned and earned my degree, that I had the chance to work with startups. Things began taking shape.

I fell in love with startups — and working in spaces with no playbooks. We had to figure out what worked and then how we could measure that. I wasn’t aware of the term ‘patient capital’ then but looking back, I realize I was beginning then to develop an appreciation for the importance of long-term thinking and sustainability.

It was 2009 when I found myself in what I consider the right place at the right time. I met the team at the Rockefeller Foundation who was focused on launching the GIIN. I liked what they were doing, and they saw in me someone who liked data and startups - and who thought a lot about metrics. They had in mind a blueprint for the evolution of the impact industry, and data and metrics were a critical piece.

Question: Was there a catalyst to your thinking at the time? Was it a natural bent toward solving social problems or simply being at the right place at the right time? Or both?

Gelfand: Maybe both. But then I also knew that I wanted to work with people who think differently about capital and its purposes than people in more traditional finance.

Question: You joined the GIIN right after its formation was announced at the Clinton Global Initiative. How would you describe the macro context at the time?

Gelfand: It really all started for me at the Rockefeller Foundation. Antony Budd Levine was a managing director at the Foundation, and he together with consultants from the Monitor Group – now part of Deloitte as of 2013 – were trying to figure out how to grow the pot of money it takes to fix critical social problems. Their approach was something like philanthropy, at least initially. Their focus in those early days also was emerging markets.

Together with Anthony and the team that he had assembled, we met with family offices and social investors. We were trying to figure out how to increase the available capital for impact investing. While our early approach was similar to philanthropy, we were beginning to move in the direction of the blueprint the Monitor consultants ultimately recommended, that of a “do tank”. That do-tank became the GIIN.

We decided the GIIN should be a membership community and something like a trade association. We also set out to create building blocks that could be used to identify, monitor and report impact in terms the market would understand. This part was difficult. We knew we had to distinguish what we wanted to measure from that which gets measured by traditional finance. Yet we knew we still had to draw on similar categories, like the need to engage ratings processes, promote audits and use intermediaries. We needed to create the equivalent of IFRS accounting rules but with specific application in the impact industry.

Question: Did the Monitor Group play a major role then?

Gelfand: They were strategy consultants who helped the Foundation orchestrate the creation of GIIN. It was their blueprint that informed the organization that the Foundation launched at the Clinton Global Initiative…I started right after that launch. It was a crazy time!

Question: Those were very heady times! Was there a visionary, a leader at the Foundation equivalent perhaps to John Muir in the environmental movement in the 20th century?

Gelfand: It’s difficult to single out any one person.

Also, it was a crazy time. The economy was not doing well. Occupy Wall Street was in the wings. And here we were actually addressing what we saw that was not working in capitalism as practiced then.And here We were, part of a growing, larger sensibility that capitalism needed to be reimagined around more responsible stewardship. Capitalism as it was being practiced was all about benefiting a select few. We felt that needed to change.

Question: How did your emphasis on monitoring and measuring figure in?

Gelfand. Yes, this was an amazing part of the process. Here we were, a group of us meeting in retreats, and everyone was delighted to be talking with others. All were basically like-minded on the issues that mattered. But we were the choir talking to the choir. So we began asking a critically important question: How do we prove that this approach of consistent and comparable measurement and monitoring works?

This was critical because during those early days, many investors were struggling to demonstrate to their internal stakeholders that their impact strategies actually could generate financial returns. These were investors who were good at impact and so they naturally set up financial proof points which in turn were to serve as the means to remain aligned with the commitment to impact. the

It was then we decided to take our approach a step further. We developed IRIS - later revised as IRIS+ to standardize the measuring processes of non-financial factors and in turn facilitate credible and comparable monitoring and reporting. This was important because these impact factors get at the heart of the impact strategy. If findings are sound and credible, this information will be critical to the return on investment.

IRIS became the hallmark for impact measurement — at a time when the impact industry was growing. We believed in our strategy, and it turned out we were right. The strategy began to attract more and more people. In the process it also became clear that as the industry was evolving it also was moving away from simply being about good will to being about successfully measuring key factors that would reflect the quality of the investment and hence its capacity to make a difference. The IRIS systems instilled discipline and rigor in the process.

Question: Were you the person who drove the IRIS initiative?

Gelfand: Yes, I headed the initiative. But I have to say that I had the support of very thoughtful advisors. I couldn’t - and didn’t do it alone.

Question: But is impact investing still on the fringe of mainstream investing?

Gelfand: It’s hard to say. The remarkable aspect about any movement is things happen over time. I can recall that one of our board members at the GINN would frequently remind us that we need to think in terms of decades rather than in two-to-five-year increments. I think that’s right!

I also believe that rapidly growing awareness that business shares in the responsibility for that. Many of us see business as needing to step up and be part of the solution, which will require more money than either government or philanthropy can muster on their own.

People also are more receptive now to thinking about capitalism differently than say before the 2008 financial crisis. Part of that is younger people who really want radical transparency. They want to know where their money is going, and what it’s accomplishing. They expect – and rightfully so – the movement to grow faster to address the increasing scope of problems like climate change.

Consider where we were when the impact industry got underway. We were talking about non-profit impact funds financing basket-weaving in Kenya. All too often, we’d end up shaking our heads about what was meant by impact. It was a messy chapter.

Today, we are doing a lot more and, in the process, proving that we are on the right track. We spent the first few years trying to validate our approach. Today we are asking how we can get to a critical mass. Do we have the right messaging and branding? How do we rationalize the impact community?

Question: Was there an aha moment when your efforts truly aligned?

Gelfand: It was probably when we realized there was enough of a flywheel happening. More and more large institutions started to say they wanted this product on their shelves. This was especially true with the bigger shops we were working with. They wanted and needed an impact investing solution and they needed to demonstrate they had capacity to scale the investment.

It was around this time that the landscape for ESG data also was maturing. This presented its own set of complications because it meant funds started putting more and more of their stuff into the impact bucket.

Question: Was that one of the triggers of today’s greenwashing concerns?

Gelfand: Yes, concerns about greenwashing really emerged around this time. Increasingly, people were more educated about this space. They were asking if I’m doing impact, then why is that different from what you are doing. Why are we both calling it impact? Investors in entrepreneurs in small companies viewed themselves as impact investors but so did investors in Tesla. The field was getting more and more complicated.

So the issue became how can we ensure there’s integrity in the investment category. How could we help the industry rationalize and establish greater clarity around impact? We felt we could help – and we did. There was also a lot of research happening at the time into what is impact and what is borderline impact. Expectations also were growing that regulators would ask funds to explain their green labeling and be able to defend that.

Question: How do you define impact?

Gelfand: That’s a great question. There are three things that people who refer to themselves as impact investors should do consistently and with discipline. First, they have to demonstrate intention. This is equivalent to having a strategy. They have to be able to say this is the reason I’m doing what I’m doing and be able to support the same. This is my focus; these are the problems I’m spending my capital on; this is how I intend to create change.

Second, there has to be accountability. An investor has to be willing and have capacity to be transparent in measuring impact. If a strategy calls for reducing emissions or increasing access to housing, then there has to be systems in place to measure that.

Third, there has to be demonstrated capacity for adding value. If an investment intends to increase access to housing, then the strategy has to involve a financial structure that allows for greater flexibility in the loan process, for example. There has to be mechanisms that advance the impact proposition.

Question: Revisiting the question of who is and who isn’t an impact investor, can you address whether investors in Tesla, for example, are in fact impact investors?

Gelfand: It’s really hard to draw bright lines. On the one hand, electric cars like Tesla provide environmental benefits. Tesla employees also get paid higher wages than most other automakers. But the other side of that coin is Tesla doesn’t permit unions. Its governance is challenged. So it comes down to making up one’s own mind about whether or not an investment in Tesla drives impact.

It’s a difficult question because one person’s definition of impact is not necessarily better or worse than mine. It may simply be different. For example, I may look at a company and see it as having value and high impact, but you may disagree. I may care more about job creation in rural America and you may care more about job creation in Africa. So I do struggle a lot with how we compare apples and oranges in a space that’s all about having impact and driving value.

Question: Is this struggle over blurred lines in the background as long as capital is making a difference?

Gelfand: It’s a good question. But I feel like these circumstances might be easier to deal with in the environmental arena because there we have some amount of clarity. We are all pretty much working toward common goals, and these goals can be measured as they relate to reducing climate emissions. We also have better tools and skills today for modeling a whole host of lifecycle analyses of the environmental footprints of multiple products and companies.

So it’s easier to be more discerning when identifying clear, quantifiable goals in the environmental arena. But we still are struggling to make similar calls in other areas of social change. There’s a lot of debate ahead as to what makes for a quality job, for example. It’s especially challenging when an issue is multi-dimensional.

Question: What might be a quality job in Alabama is not necessarily a quality job in California?

Gelfand: Exactly. Context matters.

What is crystal clear is that an impact investor has to genuinely lay claim to the impact title and then be willing to be accountable through reporting on measurable go. It’s about transparency which in turn facilitates buyers of impact funds in making evidence-based, objective decisions.

You and I can look at two funds and make very different value calls on which each of us thinks is the better for the world. That’s good but in making that decision, we have to depend on the fund’s transparency, its discipline and the impact it intends to achieve and demonstrate.

Question: You’re now at BlueMark where you’re all about validating disclosure. Do you bring the same rigor to the third-party validation process that you brought to developing standards for disclosing impact?

Gelfand: Yes. We think about verification in two ways at BlueMark. We will work with a firm or those who are responsible for an investment product to set up policies, systems, management and oversight to ensure impact is being taken into account throughout. Our objective is to ensure there is clarity around the strategy and then how results get tracked and monitored. We look at both the policies in place and the operating systems. We check for tools and their consistent application as well as the quality and depth of the purpose of each of the tools. We also assess fund managers and give each a grade.

Question: Your clients are funds — not companies.

Gelfand: Exactly. The fund manager is typically our client.

Then we look at their reporting processes. We want to check if it’s complete and reliable. Is communication from managers to investors and all critical stakeholders a fair, balanced and accurate picture of what results are being generated?

In general, we look for coherence. If the fund says it’s about affordable housing, then we try to understand the extent to which the fund is about just that. If financial inclusion is a consideration, we example how decisions are made when it comes to who receives loans. We look at the metrics used for tracking and reporting. We ask whether they are relevant and consistent with the strategy. We also want to be sure true results are being reported and not cherry-picking.

Question: How often do you provide feedback?

Gelfand: The market still is determining what is the right cadence when it comes to impact verification. By comparison, financial auditing typically happens quarterly. In the foreseeable future, impact verification reporting is probably once a year for reports and every two to three years for policies which don’t change quite as much.

The market also is trying to decide how to justify the costs of impact verification and then who should pay for that.

Question: Do you track what your clients do with their assessments?

Gelfand: Yes, we do. This has been incredibly exciting. While it’s true that those who get good grades tend to publish their reports, those who opt not to are also embracing their assessments as a measure of their authenticity as impact investors. There are many managers who learned from us about gaps and deficiencies and who are taking these assessments to heart.

It’s incredibly validating especially when a client decides to invest in the process by leveling up their work. It means that we are providing a service that is built on a process that is not just about driving external accountability but also is helping managers improve.

Question: Do they use your reports to tell their impact stories?

Gelfand: Yes. The reports help funds differentiate themselves in what has become a very crowded area. Verification says that a fund has been evaluated by an external, objective process and these are the findings. It also is a way for the fund to say it has been willing to be scrutinized in what is otherwise largely a self-directed marketplace.

Reports also reflect the impact of the available voluntary standards like IRIS are having. This is important as regulatory regimes begin to put in place disclosure rules and regulations that will ultimately affect the impact industry.

Question: Will private markets welcome these additional disclosure requirements in your opinion?

Gelfand: There’s welcoming additional disclosure and then there’s facing mandates and/or stakeholder pressure to incorporate best disclosure practices! For the time being, there’s still a lot of noise around this topic as it affects public markets.

There’s no clear winner yet as to which set of standards will dominate — the Europeans’ efforts, the SEC and/or the IFRS Foundation’s ISSB’s work. But whatever the outcome, there will be spillover effects for the private markets, including the impact industry.

There are now best practices in private markets which carry weight. For example, if I’m an asset allocator and invested in a fund with a net-zero carbon commitment, then I’d like assurances that the fund is signed up for TCFD protocols to identify climate risk. Or if I’m invested in a fund with a deep commitment to impact practices generally, I’d welcome knowing managers have signed on to the IFC Sustainability Framework.

Question: Then there’s the ESG Convergence Initiative which is getting attention in private equity and venture capital circles as a framework for ESG-factor disclosure.

Gelfand: Yes, Initiative has a handful of metrics. But it’s a limited menu, and the information the framework produces is not all that complete especially when it comes to understanding context. In other words, it establishes the floor but provides little information about the ceiling. Still, it’s positive that so many investors are opting to track ESG factors. It also means that investors will be getting data at least on a few high-level topics like gender equity, emissions, salary, etc.

Question: What do you mean by it’s a floor, not a ceiling?

Gelfand: As an impact investor, I want to know more about a company than the basic information such as level of emissions or composition of employees especially if, for example, the mission of the fund is to close the wealth gap in a lower income community. I want to know more about how the fund intends to accomplish that mission; whether salaries are fair and comparable; what is the relative value delivered to the community. These kinds of questions reflect what investors want to know. They want that additional layer of contextualization that in turn helps them gauge whether value genuinely is being created.

Question: Might the Initiative serve its purpose if it triggers a deeper dive into data collection?

Gelfand: That’s a good way to think about it. I think about ESG factors as table stakes — or the minimum offering acceptable to compete in the market. A company can’t really call itself responsible without talking about the quality of its governance, its employment practices and its environmental management practices. If a fund says it’s committed to creating quality jobs then it has to be able to report more in depth about that goal. That’s what accountability is all about.

Question: Finally, where do you see the industry headed given the perspective you describe of the market wanting and needing more credible disclosure?

Gelfand: There are both positive and negative drivers in today’s marketplace. For example, I worry that as regulation moves into place, it brings with it the power to drive and shape accountability in our industry. At the same time, the emphasis could be too heavy on quantitative metrics at the expense of contextual information that is also critical. While having standardized, quantitative ways to disclose material ESG factors is incredibly valuable and important to bringing more discipline and decision-usefulness to impact-related data, it’s also important not to lose sight of the fact that we also need to learn how to flex our qualitative and data-interpretation muscles.

We need also to be learning how to think in terms of networks and interconnected systems through which social change typically plays out. It’s also likely that we will have to be thinking along different time horizons than we have up to now. These are areas where the financial industry is not so well developed. It may be that it falls to the impact industry to lead the way.