Measuring Impact and Non-financial Returns in Impact Investing

Impact investing is a form of investment that has risen to prominence in recent years. Compared to other forms of socially responsible investment, the most prominent feature of impact investing is a focus on measuring the social and environmental return that it generates. In response, much effort has been undertaken to develop effective measurement systems, but significant confusion remains around the notions of ‘non-financial return’ and ‘impact’, and their assessment in practice.

Funded by the European Investment Bank Institue.

Thus this paper draws on a range of relevant literature as well as the authors’ previous practical experience to provide a preliminary overview of underlying concepts. Further it begins to cast a critical eye on the roles and responsibilities within measurement, making more explicit the subjective interpretation of social and environmental return (SER) by investors, and the clash of suppositions taken from other older measurement traditions. In doing so, the paper investigates some of the tensions around breadth of coverage, participation and objectivity, rigour and flexibility, attribution of impact, and the very concept of ‘a return’ itself which currently surround practical measurement.

In this context, the paper shows how measurement does not yet appear to have found a pragmatic, participative, systematic way forward, and concludes by identifying key research areas that need to be addressed to advance knowledge in this field. Further empirical data collection and analysis will be undertaken in a subsequent series of papers to be published.