Creating a Common Language for Impact Assessment

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Summary: Impact investors often need to deal with a complex list of impact metrics. We review different methods of harmonizing the impact metrics by monetization to provide a standardized assessment of sustainable investments.


Given the rising climate challenges and social development issues, investors are looking beyond financial returns by focusing more on green and sustainable investments. This suggests that investors are interested in the environmental and social impact of their investment evaluation processes. One example is the impact bonds, a contract for better non-financial outcomes first launched in 2010. In contrast to the traditional bonds that operate over a fixed period, impact bonds are repaid once the pre-specified outcome metrics have been achieved. 

However, unlike financial returns, which are universally accepted, and easily traceable, social and environmental outcomes lack a specific valuation framework. Bridgespan Group and The Rise Fund in the Harvard Business Review states, “Forecasting gains is too often a matter of guesswork.” The absence of a common assessment framework presents a significant challenge for green and sustainable investments to quickly scale up. For instance, impact bonds cannot effectively operate without proper measurement practices. Investors often prioritize more readily achievable goals while overlooking areas where sustainability performance targets are limited, or impact indicators are absent. Furthermore, the accuracy of these measurements is crucial, as it directly affects the cost-effectiveness of impact bonds. 

Therefore, creating an integrated framework with a traceable record of environmental and social impact is crucial, enabling investors to evaluate their investment performance. Quantitative frameworks, common terminology, and abundant information are vital for stakeholders to precisely assess their actual impact. Both academia and industry have recognized this necessity and constructed frameworks to address the challenges in impact assessment. For example, on the environmental indicators, the recent development of sustainability-linked bonds has surfaced to connect the environmental targets with specific financial returns since 2019. In recent years, there has been a significant increase in impact bonds connecting social and environmental indicators to financial returns in Asia.

Existing Methods for Impact Valuation

Social Return on Investment (SROI), a systematic method of accounting social value, was initially introduced by the Roberts Enterprise Development Fund (REDF) in 1996. It aims to evaluate an intervention from social and economic perspectives, ensuring that each investment generates corresponding returns to create blended value. This is achieved by quantifying social outcomes in monetary terms through the development of a return index, expressed as the ratio of the estimated impact value of benefits to the estimated investment required to produce those benefits.

Conducting an SROI analysis comprises six key stages: (1) Establishing scope and identifying key stakeholders; (2) Mapping outcomes; (3) Evidencing outcomes and giving them monetary value; (4) Establishing impact; (5) Calculating the SROI; and (6) Reporting, using, and embedding. Across these stages, SROI requires practitioner judgment, from delineating the scope’s boundaries and selecting involved stakeholders to determine what information is deemed material. Because of the use of judgment, a well-executed SROI analysis should clearly document the rationale for including or excluding specific information. In order to establish impact, four parameters are introduced in the SROI framework: deadweight, displacement, attribution, and drop-off. Deadweight refers to the impact value that would happen without the intervention program. Displacement refers to how much the impact value has replaced other outcomes. Attribution refers to the actual impact value arising from the investment and intervention. Drop-off rates indicate how much impact value might decline over time as the duration of the impact may be taken into consideration.     

SROI can be employed by a wide spectrum of organizations, including not-for-profits, social enterprises, and across both the private and public sectors. SROI can be used as both an evaluative and forecast tool. For the evaluative type of SROI, practitioners conduct analyses retrospectively based on actual outcomes. For the forecast type of SROI, practitioners need to predict the potential social value to be created once the intervention achieves its intended outcomes, utilizing SROI as a planning tool.

SROI is not perfect, as it faces two sets of limitations: (1) lack of standardized common data and (2)      lack of resources. Given these challenges, one of the primary objectives is to expedite the sharing of impact metrics and financial proxies of the impact indicators to bolster a comprehensive accounting system that maintains consistent information about economic and social values. The establishment of dependable integrated accounting and reporting systems is imperative, and more efforts need to be directed towards achieving precise measurements of the economic returns and the impact indicators. 

Impact Multiple of Money (IMM) is a forward-looking metric developed by Bridgespan Group and The Rise Fund. This methodology is used to estimate the financial value of the social and environmental benefits generated from each dollar invested. IMM is suitable for “companies with a social purpose and a potentially measurable impact.”     

The IMM methodology consists of six key steps: (1) Assess relevance and scale; (2) Identify evidence-based outcomes; (3) Estimate the economic value of those outcomes to society; (4) Adjust for risks; (5) Estimate terminal value; and (6) Calculate the return on every dollar invested. IMM attributes the impact value proportionally to the investment amount by different investors. In contrast to SROI, IMM does not yield a definitive return-on-investment ratio. Rather, it estimates the potential scale of social or environmental change. Moreover, IMM takes into consideration the risk factor in the evaluation process, which is not a feature of the SROI framework. However, IMM employs an “impact realization” formula that determines the likelihood of achieving the projected impact value. As a result, it is quite challenging to compress the causality of different impacts generated to a single risk factor in retrospective performance evaluation. 

Impact-Weighted Accounts (IWA) aim to create financial accounts that reflect a firm’s financial, social, and environmental performance. IWA consists of line items on financial statements such as balance sheets or income statements. It supplements the statements with additional information on financial health and performance by reflecting a company’s positive and negative impacts pertaining to their employees, customers, environment, and society. The methodology computes the impact value under five capital frameworks, such as: 1) manufactured capital; 2) financial capital; 3) social capital; 4) human capital; and 5) natural capital.

IWA serves a valuable purpose for a diverse range of stakeholders, including investors, asset owners, and rating agencies. Investors can leverage IWA data to classify their investment products as ESG-compliant, incorporating a company’s impact-weighted accounting figures into their due diligence, underwriting, engagement, and reporting procedures. Asset owners can utilize these IWA as a crucial tool for monitoring and selecting asset managers, ensuring their investment allocations align with their desired impact objectives. Additionally, rating agencies can integrate IWA evaluations into their data products, enriching their assessments with a broader perspective on a company’s performance and impact. 

In the paper by Chua et al. (2022), the Impact-Weighted Account Framework (IWAF) method is introduced as an improved version of IWA by considering the marginal impact partially attributable to the intervention activities or programs. In their white paper, Chua et al. (2022) enhanced the Five Capital Model by introducing the sixth capital, intellectual capital, to formulate the new IWAF.

We summarized the comparison of the four methods of impact valuation mentioned above in Table 1.

ConceptImpact Value
Impact Value
Impact ValuationImpact Valuation
Terminal valueYes Yes NoNo
Risk measureYesYes NoNo
Establish causality: StrongWeakIntermediateIntermediate
1) DeadweightYes NoNoYes
2) Displacement Yes NoNoNo
3) AttributionYes YesYesYes
4) Drop-off Yes NoNoNo
UsageForecast and EvaluationForecastEvaluationEvaluation
ApplicationProjects and FirmsProjectsFirmsFirms
Table 1. Summarization of four existing methods for impact valuation

Application of SROI Analysis: A Case Study on Samsui

We have applied SROI analysis on the impact generated by a Singapore-based small and medium-sized enterprise – Samsui Supplies & Services. This organization was established by the Soup Restaurant Group Limited to spearhead Soup Kitchen’s CSR efforts as part of its “drive to do good.” The management team tried to build two central kitchens that hired disadvantaged people to produce high-quality food for nursing homes. The effort of central kitchens has been widely known through the news and across social media. To convince management teams and investors to further expand their production capacity, it would take a more rigorous evaluation process of the impact Samsui had generated. A team of NUS (National University of Singapore) researchers took up the challenge to evaluate the value created by the CSR projects. They employed SROI methodology to compute the total social and economic value created. The innovative way of impact assessment has made it much easier for Samsui to communicate the value proposal to its stakeholders and contributed to winning the Presidential Enterprise Award 2019 in Singapore.


Despite the availability of impact valuation tools, there is still limited adoption for sustainable investment and financing decisions related to social and environmental impacts. We at Sustainable and Green Finance Institute (SGFIN) in National University of Singapore would continue to generate further research evidence to support sound investment decisions in sustainable development. The monetization of social and environmental impact metrics is one of the key gaps to be filled in order for financial capital to flow more efficiently to the right projects and investments. This is also consistent with the development of sustainable finance in its more advanced typology where social and environmental values are estimated and optimized.


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To cite this article, please use:

Zhang, W., Kang, M. (2023). Creating a Common Language for Impact Assessment. Asian Impact Management Review, Volume 2 (2), Winter 2023.

About the Author

Kang Mengyao

Mengyao Kang is a Research Fellow of the Sustainable and Green Finance Institute (SGFIN) at National University of Singapore (NUS). Her research interests are focused on mergers and acquisitions (M&As), board connections, and corporate social responsibility (CSR) reporting. She obtained her Ph.D. in Finance from Singapore Management University.

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Weina Zhang

Weina Zhang is an Associate Professor with the Department of Finance in NUS Business School and Deputy Director of the Sustainable and Green Finance Institute (SGFIN) at National University of Singapore (NUS). She has published more than 50 academic publications including journal articles, textbook chapters, and case studies. Her research interests focus on investment and sustainable finance. She is also teaching sustainable finance courses at undergraduate and graduate levels and executive training. Weina is the recipient of many best paper awards and teaching excellence awards at various levels. She obtained her Ph.D. in Finance from the Kellogg School of Management at Northwestern University, USA.

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