Evaluating Impact Investments: Frameworks and Applications for Social Ventures

Social Impact Investing (SII) aims for positive social and environmental impact alongside financial returns. However, within SII research, there is an opacity around the extent to which non-economic externalities are incorporated, managed, and assessed in the SII field, especially in ex-ante evaluations adopting Social Impact Assessments (SIAs) and measurement systems. Approaches to SIA can be qualitative, quantitative, or both (mixed methods), while its application within the field of SII remains loose—financial actors interpret it differently. This gives rise to a multitude of approaches that measure impact across the sector. By addressing this gap in the research, this paper investigates impact measurements as well as methods of ex-ante that are useful to impact investment and presents an experimental approach adopted for an Italian social venture. Starting with the review of different approaches categorized in the SII literature, this study answers the following research questions: (a) How is an ex-ante qualitative impact assessment built in the case of impact investment in social ventures? (b) Is it possible to identify a “one-size-fits-all” model applied within SII in impact-oriented start-ups? (c) How is this qualitative step integrated with quantitative metrics that inform investment decisions? To answer these questions, we undertake an exploratory analysis by presenting a case study application in a social venture. Our results are useful in understanding how theoretical perspectives, with respect to the creation of social value in the financial system, converge in the definition of impact evaluation schemes in the field of SII.