Social Impact Investing

that are often excluded from markets in the same terms as used in markets, that is
money, in order to give people a voice in resource allocation decisions.
Some SROI users employ a version of the method that does not require that all impacts
be assigned a financial proxy. Instead the "numerator" includes monetized, quantitative
but not monetized, qualitative, and narrative types of information about value.
Development
While the term SROI exists in Cost–benefit analysis, a methodology for calculating
social return on investment in the context of social enterprise was first documented in
2000 by REDF (formerly the Roberts Enterprise Development Fund), a San Franciscobased
philanthropic fund that makes long-term grants to organizations that run
businesses for social benefit. Since then the approach has evolved to take into account
developments in corporate sustainability reporting as well as development in the field of
accounting for social and environmental impact. Interest has been fuelled by the
increasing recognition of the importance of metrics to manage impacts that are not
included in traditional profit and loss accounts, and the need for these metrics to focus
on outcomes over outputs. While SROI builds upon the logic of cost-benefit analysis, it
is different in that it is explicitly designed to inform the practical decision-making of
enterprise managers and investors focused on optimizing their social and environmental
impacts. By contrast, cost-benefit analysis is a technique rooted in social science that is
most often used by funders outside an organization to determine whether their
investment or grant is economically efficient, although economic efficiency also
encompasses social and environmental considerations.
In 2002, the Hewlett Foundation's Blended was brought forward by a group of
practitioners from the US, Canada, UK and Netherlands who had been implementing
SROI analyses together to draft an update to the methodology. A larger group met
again in 2006 to do another revision which was published in 2006 in the book Social
Return on Investment: a Guide to SROI. New Economics Foundation in the UK began
exploring ways in which SROI could be tested and developed in a UK context,
publishing a DIY Guide to Social Return on Investment in 2007.
The UK government's Office of the Third Sector and the Scottish Government
commissioned a project beginning in 2007 that continues to develop guidelines that
allow social businesses seeking government grants to account for their impact using a
consistent, verifiable method. This resulted in another formal revision to the method,
produced by a consortium led by the Social Value UK, published in the 2009 Guide to
SROI.
Developments in the UK led to agreement between the Social Value International and
the Social Value UK on core principles. As of 2009 all but one of the seven identified
principles are now common to the two frameworks. These are:
Involve stakeholders.
Understand what changes.
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