Social Return on Investment (SROI) provides investors with a consistent framework for making more informed decisions. Social investors are interested in the change that their investments create and SROI is designed to help identify and manage this change.
Investments in different organisations create many different types of social value and SROI can provide different measures of social value that arise from applying a standard method.
For investors, SROI provides a means to: -
- Map the full range of impacts a potential investee will create across wider social, environmental and economic outcomes, recognising positive and negative impacts and taking account of deadweight and attribution.
- Value those impacts in order to make a comprehensive and informed assessment about value for money.
- Build capacity that aims to help organisations improve as well as prove their effectiveness.
- Frame the discussion on where these outcomes are relevant to the investor.
Challenges for Social Investors
SROI can help social investors overcome several challenges: -
- How the social value being created in a wide range of diverse activities can be related to measures of social value used by the investor.
- How investees can be encouraged to manage outcomes in ways which do not affect the viability of their businesses.
- How outcomes can be attributed to the delivery of goods or services financed by the investment.
The challenges are not the same for all sources of finance. For example, for social lending, it would be difficult to enforce repayment if outcomes were not achieved and any additional transaction costs of monitoring social value could make the loan uncompetitive with other sources of loan finance.
A practical guide for funders and social investors on using SROI can be found at the Publications page.