Social Impact Investing

Some organisations that have used SROI have found it to be a useful tool for
organizational learning.
Primary Purpose
While in financial management the term ROI refers to a single ratio, unlike Social
Earnings Ratio (S/E Ratio), SROI analysis does not refer not to one single ratio but
more to a way of reporting on value creation. It bases the assessment of value in part
on the perception and experience of stakeholders, finds indicators of what has changed
and tells the story of this change and, where possible, uses monetary values for these
indicators. It is an emerging management discipline: a skill set for the measurement and
communication of non-financial value. Therefore, the approach distinguishes between
"SROI" and "SROI Analysis." The latter implies: a) a specific process by which the
number was calculated, b) context information to enable accurate interpretation of the
number itself, and c) additional non-monetized social value and information about the
number's substance and context.
The Principles
There are seven principles of SROI. These are:
1. Involve stakeholders (i.e. everyone who has a 'stake' or an interest in the subject of
the SROI)
Inform what gets measured and how this is measured and valued in an account
of social value by involving stakeholders
2. Understand what changes (for those stakeholders)
Articulate how change is created and evaluate this through evidence gathered,
recognising positive and negative changes as well as those that are intended and
unintended
3. Value what matters (also known as the 'monetisation principle' – see below)
Making decisions about allocating resources between different options needs to
recognise the values of stakeholders. Value refers to the relative importance of
different outcomes. It is informed by stakeholders' preferences
4. Only include what is material
Determine what information and evidence must be included in the accounts to
give a true and fair picture, such that stakeholders can draw reasonable
conclusions about impact
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