Social Performance Standards in the Impact Investing Industry : Potential Consequences for Impact Investors

Abstract: In the recent years, a new type of investments called Impact Investing has been growing rapidly. Those investments are made with the intention to improve social and/or environmental conditions in the world while generating financial returns. In this case, financial metrics are not enough to measure whether the investor objective was reached, and tools for measuring the social performance of the investments are needed. From that need, various measurement approaches were created, but the fragmentation of methods leads to a huge inefficiency in the impact investing industry. Efforts towards creating standards for measuring and reporting social performance are emerging, but there is still little  understanding among impact investors about the real benefits and possible challenges the standardization would bring. In this context, an important question arises, which is the subject of study in this research: What are the potential consequences of establishing social performance standards for the impact investing industry? The purpose of this research is to analyze the possible consequences of establishing social performance standards on the impact investing industry. Qualitative approach and interpretive paradigm were chosen to be followed in this research. Primary data was collected in the form of interviews with impact investors and specialists in social performance measurement. Secondary data comes from books, articles, journals and websites. The data was analyzed using the consequences of innovations framework presented by Rogers (2003). The results suggest that obviously there are potential desirable and undesirable direct consequences, but also indirect consequences that are not perceived without a thorough analysis.