Corporate Innovation Strategies

4Value of Impact Investment for Societal Innovations

Having identified the difficulties of implementing societal innovations based on creating shared value (CSV), the value of the impact of these innovations for the company and society is crucial. Addy et al. (2019) point out that “problems of scarcity and inequality are becoming increasingly pressing, but many investors want to earn economic and societal returns for ‘doing good by doing good’”. Impact investment can provide capital for projects that will generate social and environmental benefits as well as corporate benefits (CSV). However, opportunities cannot be properly measured from a company’s past social and environmental impact data. In addition, estimating the financial returns on a potential investment and the internal rate of return are known valuation tools, but none of them relate to social and environmental benefits in monetary terms, as predicting societal gains is largely a matter of conjecture. This analytical problem has been taken into account by major economic players, including Root Capital, the MacArthur Foundation, Omidyar Network, Skopos Impact Fund, Bridges Impact+, the World Economic Forum and the Rockefeller Foundation, among others. Their collaborative work has produced interesting indicators for impact assessment and management, including social return on investment (SROI). Subsequently, the Impact Management Project (IMP), a collaboration initiated in 2016 by foundations and major investment managers, ...