Call for more rigorous evidence of the impact of “social investment”

Social investment has generated great hopes among many investors but it is going to have to demonstrate measurable returns, comparable to financial yardsticks, if it is to retain investor confidence, according to analysis from New Philanthropy Capital (NPC).

Tris Lumley, head of NPC’s development and fundraising, said the sector faces a “huge challenge” if it is to fulfil its promise to make social impact as important, and concrete, as financial returns.

He pointed out that financial returns are well understood, easy to communicate, and standardised. “Social returns are none of these things. The measurement of social impact remains fragmented, poorly understood, rarely implemented robustly-and standardisation is an elusive goal.”

“If the story sounds compelling about the impact of a model, then the investor can move on and focus on the important stuff – the financial return,” he added. “There’s a danger…that social impact becomes a tokenistic part of the equation. We must seek to avoid this at all costs, and NPC is rightly in the thick of the action in this area.

London-based NPC is about to launch a partnership on impact and social investment, called Evidencing Social Value, alongside Big Society Capital and Deutsche Bank, creating and delivering models to measure the effectiveness of delivery.

“There will be those who violently object to the simplification required to capture the social sector in 65 outcomes,” noted Lumley. “But if we are to make progress on measuring, managing, and investing in social impact, some simplification is essential to ensure we’re speaking the same language.”

More information about the outcomes matrix can be found here along with 13 outcomes maps, and more about Big Society Capital’s approach to social impact and the best practice guidance here and at http://www.thinknpc.org/blog/making-social-investment-deliver/.

 

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