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Project funded by

European Investment Bank Institute|

Project partner

The Young Foundation|

Measuring impact beyond financial return

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The aftermath of the financial crisis of the first decade of the 2000s has left governments throughout Europe with difficult social problems to face. New forms of socially aware investment, such as ‘Impact Investing’, provide one answer to these problems. With these forms of investment, investors actively seek measurable benefits for society and/or the environment, as well as an adequate financial return. 

Impact investing is already a major factor in sectors as varied as micro-finance, social housing, ‘clean technology’, and water purification – and huge government, third sector and finance sector interest suggests that impact investment could go much further in tackling social issues. 

Yet at the present moment impact investment is often unformed and uncoordinated. One of the main barriers to growth is the sheer difficulty inherent in measuring and assessing the non-financial returns that are gained from impact investing. 

LSE Cities have partnered with the Young Foundation to promote better understanding of common features and solutions to simplify and assist the growth of this field. This project, which has been funded by the European Investment Bank University Research Sponsorship (EIBURS), develops a coherent and rigorous assessment of theory, policy and practice on better assessments of wider outcomes from impact investment, with a particular emphasis on

  • Activities that provide products or services to individuals in low-income communities and populations;
  • Geographic focus on neighbourhoods and communities in urban areas. 

Our goals are to highlight innovative and effective practice, identify ways to fill or strengthen measurement tools and techniques, and draw up recommendations for policy-makers and institutions.


Research Reports

Measuring impact and non-financial returns in impact investing: A critical overview of concepts and practice

The project's first research paper, available in full length| and summary versions|, draws on a range of relevant literature as well as the authors’ previous practical experience to provide an overview of underlying concepts, and casts 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. 

It 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. It explores how measurement does not yet appear to have found a pragmatic, participative, systematic way forward, and identifies key research areas that need to be addressed to advance knowledge in this field. 

These reports are part of a series: further empirical data collection and analysis will be undertaken in subsequent reports.

Measuring Impact: preliminary insights from interviews with impact investors

The project’s second research paper, set out here in full length version|, draws out points of convergence and divergence in approaches to impact measurement.

Testing out hypotheses set out in the first research paper described above, it is based on information derived from a series of interviews with established impact investors in the fields of the environment; social enterprise; microfinance; and social impact bonds.

We see emerging signs of three types of impact investors - those that are focused on system building, those that assess each investment on a case by case basis, and those that follow the evidence of what works.

Other key themes emerging are that there seems to be a relatively low level of engagement between impact investors and the ultimate beneficiaries of their social impact; and that the connections, actual or perceived, between non-financial and financial returns are a key factor in determining what impact gets measured, and the effort put into measurement.


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