Moving Beyond Trade-offs : Exploring the linkage between Financial Return and Social Impact

Abstract: Background:  A growing momentum around the potential of impact investing to contribute to development in both environmental and social sustainability has challenged the way business is operating, offering solutions for both the people and planet. Previous studies have claimed that trade-offs between purpose and profit are inevitable in order to successfully achieve sustainability goals, which requires practitioners in the financial discipline to invent new investment approaches to manage dual outcomes. Here, it becomes evident to move beyond trade-offs to avoid that one goal outperforms the other, considered as a vital question to address towards a new investment paradigm.  Purpose:  This study aims to explore the nexus between social impact and financial return, and thus understand the different factors that enable managers in the impact investing industry to successfully manage the trade-offs between pursuing dual values.     Method:  An interpretivist approach is followed throughout the study with an exploratory nature that is used to analyze two company cases. In total, two participants were interviewed through qualitative and semi-structured questions; two managers in the impact investing field.   Conclusion:  The findings reveal the interconnection of impact measurement, values and impact management. The authors have derived a model that graphically represents the Impact-Return Nexus Model (IRNM) which enhances the impact awareness and long-term value creation. The result of this study shows how the synergy between social impact and financial return will improve the performance on both sides. Accordingly, the cases present that a nuanced impact-approach tends to scale both impact and profits.