Exploring the effectiveness of measuring social impact investment

Abstract

The growing inequality gap in South Africa demands a response from the South African business community. While poverty alleviation and service delivery have traditionally been the realm of governmental and non-governmental organisations, increasingly for-profit businesses are developing innovative solutions to lessen the growing inequality divide. The legitimacy of the business community requires it, however, simply building socially minded businesses is not enough. Although it is a relatively new concept, the Impact Investing market seeks to create intentional social impact, however without effective impact measurement, change will remain in the domains of story and assumption. This research used exploratory methods to examine the Impact Investing market in South Africa. In total, 12 professionals in South Africa were interviewed using semistructured interviews. While most interviews were conducted face-to-face, three were done telephonically. The interview pool, which included evaluation experts, managers and directors within intermediary businesses and owners of businesses who receive impact investment funds, provided new insights regarding stakeholder engagement and impact measurement. These findings both support and contradict existing literature. While the literature indicates that stakeholder engagement is used mainly for reporting at set times throughout the cycle of an investment, the research found that stakeholder engagement is perceived to be a continuous process that starts with the conceptualisation of a product or service and ends after the final evaluation is completed. The research found three key phases within an investment cycle and aligned important impact measurement and stakeholder engagement processes within each of the phases. Noting the different needs of intermediaries and investees, the key phases and corresponding processes are presented in the Stakeholder Integrated Impact Measurement Conceptual Framework. This research adds to existing stakeholder and impact measurement theory within the Impact Investing market.