Measuring impact beyond financial return

The aftermath of the financial crisis has left governments throughout Europe with difficult social problems to face – from massive numbers of young people unemployed, to social unrest at austerity measures. Meanwhile, high and rising public debt restricts governments’ ability to expand or introduce measures to tackle such problems. 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 – which, though agendas as varied as community cohesion, and educational and employment opportunity, play an important role in the vitality and future of cities.

LSE Cities partnered with the Young Foundation to promote better understanding of common features and solutions to simplify and assist the growth of this field. This research project, which is funded by the European Investment Bank University Research Sponsorship programme (EIBURS),  reviewed and developed theory, policy and practice on better assessments of wider outcomes from impact investment.

Our goals were 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.