Finance

Investing with an eye for social value

March 22, 2016

How can the social effects of investments be included in the process of investment selection? Social Return on Investment (SROI) is a powerful technique for this but requires improvement on a number of points. This is posed by Mayra Ortega Maldonado, participant at the TIAS Executive MBA, and Prof. Michael Corbey, Academic Director of the TIAS Executive Master of Finance & Control / Register Controller, in an article in the academic "Monthly Journal for Accountancy and Business Economy".

Social Return on Investment (SROI) is a special method of investment analysis. The technique explicitly attempts to include in the analysis the difficult to quantify social effects of investments. Mayra Ortega Maldonado explains: "Traditionally, financial institutions have tended not to include these effects in the calculations, simply because they are so difficult to quantify. So the key question with SROI is: How can difficult to quantify social value be included in investment analysis?"

A powerful technique

Following a study of the literature and interviews with four SROI experts, the researchers gave positive conclusions about SROI. According to them, it is a powerful and holistic technique which can provide support with project management and in defining strategy. Ortega Maldonado: "In financially challenging times, SROI can help organizations to make more efficient use of sources, take better decisions and focus themselves on important social challenges. These are strong points."

However, Ortega Maldonado and Corbey also show that the technique can and must be improved on a number of points. For instance, too little is done about post-verification and experiences are not systematically collected, although there certainly are SROI networks in existence. So they could play an increasingly important role.

Read the full article: M. Ortega Maldonado and M. Corbey (2016): Social Return on Investment: a review of the technique, Monthly Journal for Accountancy and Business Economy, vol. 90, no. 3, pp. 80-87.

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