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Investment firms offering social impact funds often claim that incorporating social impact goals into investment decisions will lead firms to adopt more socially responsible practices, including reducing carbon emissions, increasing protections for biodiversity and other natural resources, and improving working conditions. These claims imply that investors will receive “social returns” from investing in these funds, in addition to financial returns.

Yet measuring “social returns” is much more difficult than measuring financial returns. Existing industry-wide standards for documenting the social impacts of impact investing fall far short of conventional standards of inference in the research community. The absence of rigor in current industry approaches to estimating the social impacts of impact funds leaves both investors and investment managers at risk. 

In the research community, concerns are beginning to be raised that the lack of rigorous standards in the impact investing sector may be leading to overstatements of the positive social impacts of impact investing. Berk and van Binsbergen (2021), for example, find that inclusion or exclusion of firms from the FTSE4Good Index has no detectable effect on firm share price or cost of capital, raising questions about the impacts of the fund on firm practices. Some have raised concerns that impact investing may even lead marginal firms to adopt less socially responsible practices, if divestment by socially responsible investors leads to greater investment by socially irresponsible investors (Broccardo, Hart, and Zingales 2022, Atta-Darkua et al 2022). 

This initiative convenes leading social and behavioral scientists and funders to discuss: 

  • what we know about the social impacts of social impact investment strategies;
  • opportunities to develop more reliable approaches to estimating the social returns from impact investing; 
  • the potential return on investment from expanding this knowledge base.



Estimating the Social Returns from ESG Impact Investing

Defining an Agenda for Social and Behavioral Science R&D