Building scale in community impact investing through nonfinancial performance measurement

Colby Dailey and Ben Thornley

Community Development Innovation Review, 2010, issue 01, 01-46

Abstract: The measurement of nonfinancial performance is becoming increasingly important in the community impact investing industry, where individuals and institutions actively deploy capital in low-income domestic markets for both financial and social returns. Quality data ensure that the creation of jobs, construction of community facilities, financing of affordable housing, and other benefits that characterize the sector are delivered cost-effectively and transparently. This paper discusses the limited practice and future direction of nonfinancial performance measurement by revisiting four key questions: ; 1. Does nonfinancial performance measurement really matter for investors? ; 2. If it does matter, is nonfinancial performance measurement even possible? ; 3. If nonfinancial performance is possible to measure, what form should it take? ; 4. How will nonfinancial performance measurement increase community impact investing? ; The paper examines the barriers to a more robust regime of nonfinancial performance measurement and posits both that innovation in the sector ought to be driven by the discrete but explicit needs and demands of investors, and that greater accountability has a special role to play in making disclosure more attractive. The report concludes that nonfinancial performance measurement directly informs the investment process and is essential to growing community impact investing because it provides latent sources of capital with market-level information on the tradeoffs between financial and social return. Although the industry is unlikely to discover the ?silver bullet? of nonfinancial performance measurement in the near future, there is reason to be hopeful: measurement strategies can ? and will ? converge through private- and public-sector innovation.

Date: 2010
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