Bridging Profit and Purpose: Tensions in Impact Measurement and Management in Impact Investing

This doctoral dissertation aims to analyze the development and implementation of impact measurement and management (IMM) practice, as well as the main tensions practitioners face in the impact investing field. It aligns with the transformative vision of impact investing, which, although nascent, has already seen pioneering organizations blend financial returns with positive social and environmental outcomes. However, both practitioners and scholars have identified several risks in the field, such as beneficiaries’ marginalization, the domination of financial logics, opportunistic behaviors, impact washing, and inappropriate IMM systems. By adopting a practice-centered approach, this dissertation reviews current literature and engages in qualitative empirical studies to explore critical areas, including impact materiality, power dynamics, stakeholder engagement, and the commensuration process within impact investments. The focus on tensions is crucial to delve into the unease experienced by practitioners in measuring impact and to highlight the importance of concentrating on the impact management dimension beyond mere measurement. Specifically, this dissertation examines the empirical phenomenon of IMM in impact investing through four articles. The first article is a literature review that aims to understand the intersections of impact measurement literature with contestations in impact materiality. It acknowledges the inherent challenges of conducting a materiality assessment in the context of impact, given that various stakeholders have their own perspectives on impact. Hence, it highlights the subjective nature of impact, particularly the social aspect, which aligns with the interpretivist philosophy guiding the overall doctoral research. The second article addresses the embeddedness of power in developing measurement infrastructure in impact investing and sets the stage for the subsequent two articles. Recognizing measurement devices as the fulcrum of interactions among actors in the field, the research delineates how power is intertwined in the co-evolution of actors, devices, and practices toward an increasingly standardized and integrated measurement system. Motivated by the increased demand for standardization and quantification to address transparency issues in the field, the third article explores the tensions experienced by practitioners in quantifying impact. It specifically examines practitioners’ journey in navigating the challenges of the IMM process while integrating ethical considerations of quantification. The last article is inspired by the marginalization or exclusion of beneficiaries’ voices in the field. In examining beneficiaries’ engagement in IMM decision-making, which remains more of an ideal than a practice, this study aims to highlight how tensions related to engaging beneficiaries limit inclusivity in the IMM process. Findings explain why the inclusiveness standard of deliberation often fails in this context. Overall, this research contributes to bridge the gap between theoretical constructs and practical applications, employing the Engaged Scholarship method to contribute valuable insights into the nascent field of impact investing. This in-depth analysis from the perspective of field actors seeks to advance the understanding of IMM in impact investing, offering a comprehensive perspective on the complexities faced by professionals in the field. This endeavor resonates with the necessity, emphasized by pioneering academic and industry actors, of integrating impact considerations into core business decision-making processes, advocating for a transition from the outdated model of shareholder capitalism to one that serves the broader interests of all stakeholders. All in all, this doctoral dissertation, while focusing on tensions, is intended to provide hope and aspiration for improving the impact investing field that is still young and can grow with integrity.