Impact investing: analysis of different measurement metrics for fund managers in South Africa
Date
2017
Authors
George, James
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Abstract
Purpose
Social investors are driven to sustainable investing for many different reasons: impact investors are concerned about the environment, social impact on the communities, as well as the sustainability and growth of their funds. Measuring that social impact can assist these organisations and fund managers to prove to their investors that their initiatives are benefiting the communities in which they operate. Measuring impact also helps social enterprises to evaluate their needs, aspirations, resources and incentives for their customers. It leads to improvement in performance, which often leads to job creation, survival and growth. This research evaluated and discussed impact investing industry in South Africa and focused on the effects or outcomes of the selected four major measurement metrics, namely: social impact, innovativeness, replicability and sustainability – for the fund managers. These measurement metrics were evaluated to ascertain if they would result in organisational performance/growth.
Design, methodology and approach
This is a survey based empirical study with 159 respondents who are players in the impact investing industries. A descriptive quantitative method was used to address the proposed relationships between measuring metrics and growth of the organisations. The instrument was checked for validity and for reliability: the variables were operationalised and measured against multi-dimensional scales. Analyses for the proposed relationships were measured using multiple regression and correlation analysis.
Findings
Results showed that impact organisations tend to grow more when they are transparent and accountable for their endeavours. Investors will increase funding to the fund managers who show in their reports how their objectives have been achieved. The study selected only four measurement metrics and tested how they affect growth of an organisation through increased funding. The results show that
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two metrics (social impact and sustainability) had a positive relationship with the growth of the organisation, meaning that the more the organisations report on the impact they are making in communities and the more they show how self-sustainable they are, the more the organisations showed signs of growth. The results also showed that when social organisations are innovative, they are able to replicate their projects into more communities.
Research limitations and implications
Main implications of this research are that fund managers will source more funds to grow their initiatives if they show transparency and accountability. If they report on how much social impact they are causing, how their initiatives have been innovative, how replicable they are and how self-sustaining the initiatives are, then impact investors will consider increasing their funding, resulting in growth.
Contribution of study
Impact investing industry is still new and requires more research to be conducted, especially in the South African context. Previous research has concentrated on definitions and on how to measure impact but not many have zoomed into the measurement metrics and analysed what they mean to the fund managers as well as to the investors. This research was conducted in order to cover that research gap.
Description
A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management specialising in Entrepreneurship and New Venture Creation, Johannesburg, 2016
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Citation
George, James (2017) Impact investing : analysis of different measurement metrics for fund managers in South Africa, University of the Witwatersrand, Johannesburg, <https://hdl.handle.net/10539/23787>