Due Diligence In Social Impact Deals -- Podcast Released In Uncertain Times
As Social Ventures Mature, Entrepreneurs and Investors Explore Options to Measure Impact
“Due Diligence in Social Impact Deals,” a podcast recorded from its panel at the Social Venture Circle Conference, is now available, released by accomplished attorneys, Allen Bromberger, Bromberger Law, and Teresa Pahl, Hanson Bridgett. While due diligence is part of many financings, mergers and acquisitions, joint ventures, and exits, traditional diligence does not evaluate social or environmental impact, Bromberger and Pahl led the discussion to support impact investors to make clear, confident investment decisions and help social entrepreneurs prepare for this phase of growth, especially relevant in uncertain times.
“What is the company doing to generate impact now, and what will it be doing in the future?” asks Bromberger. “Can the company capture this information, and if so, how do they do it? Is there a third-party standard, or are there internal metrics? Who collects and analyses the information? For social entrepreneurs and impact investors, these issues are critical as strong trust must be built in times of crisis.”
In the podcast, Pahl and Bromberger reviewed the process of impact due diligence on a potential investee or, a social venture, for a merger or acquisition. They walked through the various tools used for the due diligence process:
Narratives of Expected Impact, allowing investors to develop an understanding of the types of information that should be collected using impact due-diligence questionnaires and quantitative impact due-diligence tools
ESG Diligence Questionnaires, addressing and reporting environmental concerns, from supply chain to climate change; social issues, such as labor laws, and health and safety; and governance factors, like business integrity and transparency
Quantitative Tools, from IRIS (Impact Reporting and Investment Standards) to the integration of the UN Sustainable Development goals—investors select relevant indicators based on strategy and impact themes, using IRIS metrics and SDG subjects
Environmental Due Diligence, evaluating environmental permits and licenses, EPA correspondence, disposal methods, environmental liabilities, indemnification obligations, and more
Screening for Impact, collecting impact data, ensuring accountability to a fund’s impact-oriented mission—some create an “impact committee” to minimize the impact risk of the fund’s pipeline and help allocate time and resources
“Think of due diligence as the comprehensive investigation for an investment opportunity to assess the risk, return, and impact,” said Pahl. “There are many measurement tools available, so decide which standards and benchmarks you want to measure the impact-related outcomes important to you. These guides create a scorecard to process information and compare investment options. Overall, focus on your impact risk vs. impact return and financial risk vs. financial return, during times of crisis and beyond.”
Bromberger Law works at the intersection of business and philanthropy, representing clients in a broad range of activities that range from non-profit to commercial. The firm’s focus is social enterprise, advising entities that seek to do good while doing well, often using market-based business strategies, whether non-profit, for-profit, or hybrid, advising such organizations on all matters from inception to exit. The firm represents entrepreneurs and their advisors, charities, private foundations, funders, investors, intermediaries, DAFs and fiscal sponsors in a wide variety of legal matters. Learn more about its leadership and attorneys, and engage on LinkedIn or Twitter.
Founded in 1958, Hanson Bridgett has more than 175 attorneys located in offices in San Francisco, Sacramento, the North Bay, the East Bay, and Los Angeles. The firm’s clients range from multinational Fortune 500 corporations to individuals, and also include a number of public agencies in California. Hanson Bridgett is a dedicated supporter of diversity and inclusion. Its commitment to diversity begins with the recruitment of our workforce. Currently, the firm's attorneys consist of 47% women, 27% people of color, and 4% self-identified LGBTQI+people. Moreover, its firm's partners are 40% women, 21% people of color, and 6% self-identified LGBTQI+. More information on Hanson Bridgett can be found at www.hansonbridgett.com.