The social side of impact investing: measurement and the interconnections

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This qualitative study investigated the social side of social impact investing, its measurement and interconnections. The study delved into the motivations, measurement and challenges confronting organizations in the social impact investing environment. Semi-structured computer-aided interviews along with publicly available information on the measurement of social impact have been employed to collect data from eleven NPOs and one NGO. The thematic qualitative analysis revealed that the motivations for measuring social impact are to make some social difference, understanding performance of their own organisation and economic factors like funding. It was also shown that the measurement of social impact is critical to these organisations. Familiarity with measurement tools and having the right expertise to perform measurement and reporting are vital to success. The challenges associated with social impact investing were many, however, they could be aggregated to lack of funding, deficiency of measuring skills and the impact of Covid-19 which resulted in funds being diverted from the NPOs and NGOs to Covid relief efforts. The findings highlight the importance of collaboration or interconnections amongst the various role players (Government, Donor Organizations, Communities and Beneficiaries) in the social impact investing space in order to maximize their impact and optimize synergies. The study shows that not all social impact investors measure their impact and the international measurement tools are seldom utilised. Some develop their own simple measures or followed metrics imposed on them by donors. Research underscores the importance of measuring social impact. Measurement can aid those working in the social impact to identify the changes in society. It can benefit investors to identify whether their investments are having the intended outcome. The study elucidates the myriad of challenges facing social impact investors such as inadequate funding, lack of extra revenue streams for their sustainability, stringent donor requirements, and lack of uniform measuring tools and policy guidelines amongst others. The research gives new insights on the motivations of NPOs; underscores the criticality of measurement, highlights challenges and makes recommendations that will have positive effect on the social impact industry in South Africa.