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Measuring impact in impact investing: an analysis of the predominant strength that is also its greatest weakness

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  • Neil Reeder
  • Andrea Colantonio
  • John Loder
  • Gemma Rocyn Jones

Abstract

Compared to other forms of socially responsible investment, a prominent feature of impact investing is measurement of the social and environmental return (SER) that it aims to generate. Much effort has been undertaken to develop such measurements, but progress is patchy. This paper contains an overview of first principles, making explicit the subjective interpretation of SER by investors and outlining tensions around breadth of coverage; rigour in attribution of impact versus practicality and flexibility; and the very concept of 'a return'. Interviews with impact investors covering environmental issues, social enterprises, microfinance firms, and Social Impact Bond contracts highlight three distinctive sets of practice - 'System building', 'Case by case assessment', and 'Intermediate outcome perspectives' - as to whose gains should be counted, how to structure assessment, and what forms of assessment are viewed as legitimate. Of these, 'System building' approaches appear to be advancing most, but the challenges that it faces will be hard to overcome.

Suggested Citation

  • Neil Reeder & Andrea Colantonio & John Loder & Gemma Rocyn Jones, 2015. "Measuring impact in impact investing: an analysis of the predominant strength that is also its greatest weakness," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 5(3), pages 136-154, July.
    • Handle: RePEc:taf:jsustf:v:5:y:2015:i:3:p:136-154
    DOI: 10.1080/20430795.2015.1063977
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    Cited by:

    1. Syrus M. Islam & Asheq Rahman, 2023. "Impact investment deal flow and Sustainable Development Goals: “Mind the gap?”," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 3797-3813, December.
    2. Syrus M. Islam, 2022. "Impact investing in social sector organisations: a systematic review and research agenda," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 709-737, March.
    3. Benjamin S. Thompson, 2023. "Impact investing in biodiversity conservation with bonds: An analysis of financial and environmental risk," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 353-368, January.
    4. Susan D. Phillips & Bernadette Johnson, 2021. "Inching to Impact: The Demand Side of Social Impact Investing," Journal of Business Ethics, Springer, vol. 168(3), pages 615-629, January.
    5. Maria Carolina Rezende de Carvalho Ferreira & Vinicius Amorim Sobreiro & Herbert Kimura & Flavio Luiz de Moraes Barboza, 2016. "A systematic review of literature about finance and sustainability," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(2), pages 112-147, April.

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