Federal Reserve Bank of San Francisco

Community Development

Social Metrics in Investing: The Future Depends on Financial Outperformance and Leadership

Author(s): Allison Duncan and Georgette Wong

December 2010

Community Development Investment Review

In order to truly unlock the potential of the impact investing industry, social/environmental metrics must be directly connected to financial outperformance. When above-market rate—or premium—financial returns are present, large fiduciaries such as public pension plans (who globally hold a total of $23 trillion in assets), are able to invest and the impact investing market will move beyond its current niche. Products and services that present solutions to the increasing constraints on natural resources and unmet basic human needs will be a major driving force for our economy. While there will be numerous investment opportunities that claim both premium financial returns and social/environmental benefit, non-financial metrics will enable us to distinguish the “pretenders” from the “real deal.”

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