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What Is an Investment Thesis?

• Understanding the Thesis

Special Considerations

• What's Included?

The Bottom Line

• Portfolio Management

Investment Thesis: An Argument in Support of Investing Decisions

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

The term investment thesis refers to a reasoned argument for a particular investment strategy, backed up by research and analysis. Investment theses are commonly prepared by (and for) individual investors and businesses. These formal written documents may be prepared by analysts or other financial professionals for presentation to their clients.

Key Takeaways

• An investment thesis is a written document that recommends a new investment, based on research and analysis of its potential for profit.
• Individual investors can use this technique to investigate and select investments that meet their goals.
• Financial professionals use the investment thesis to pitch their ideas.

Understanding the Investment Thesis

As noted above, an investment thesis is a written document that provides information about a potential investment. It is a research- and analysis-based proposal that is usually drafted by an investment or financial professional to provide insight into investments and to pitch investment ideas. In some cases, the investor will draft their own investment thesis, as is the case with venture capitalists and private equity firms.

This thesis can be used as a strategic decision-making tool. Investors and companies can use a thesis to decide whether or not to pursue a particular investment, such as a stock or acquiring another company. Or it can be used as a way to look back and analyze why a particular decision was made in the first place—and whether it was the right one. Putting things in writing can have a huge impact on the direction of a potential investment.

Let's say an investor purchases a stock based on the investment thesis that the stock is undervalued . The thesis states that the investor plans to hold the stock for three years, during which its price will rise to reflect its true worth. At that point, the stock will be sold at a profit. A year later, the stock market crashes, and the investor's pick crashes with it. The investor recalls the investment thesis, relies on the integrity of its conclusions, and continues to hold the stock.

That is a sound strategy unless some event that is totally unexpected and entirely absent from the investment thesis occurs. Examples of these might include the 2007-2008 financial crisis or the Brexit vote that forced the United Kingdom out of the European Union (EU) in 2016. These were highly unexpected events, and they might affect someone's investment thesis.

If you think your investment thesis holds up, stick with it through thick and thin.

An investment thesis is generally formally documented, but there are no universal standards for the contents. Some require fast action and are not elaborate compositions. When a thesis concerns a big trend, such as a global macro perspective, the investment thesis may be well documented and might even include a fair amount of promotional materials for presentation to potential investing partners.

Portfolio management is now a science-based discipline, not unlike engineering or medicine. As in those fields, breakthroughs in basic theory, technology, and market structures continuously translate into improvements in products and in professional practices. The investment thesis has been strengthened with qualitative and quantitative methods that are now widely accepted.

As with any thesis, an idea may surface but it is methodical research that takes it from an abstract concept to a recommendation for action. In the world of investments, the thesis serves as a game plan.

What's Included in an Investment Thesis?

Although there's no industry standard, there are usually some common components to this document. Remember, an investment thesis is generally a proposal that is based on research and analysis. As such, it is meant to be a guide about the viability of a particular investment.

Most investment theses include (but aren't limited to) the following information:

• The investment in question
• The investment goal(s)
• Viability of the investment, including any trends that support the investment
• Potential downsides and risks that may be associated with the investment
• Costs and potential returns as well as any losses that may result

Some theses also try to answer some key questions, including:

• Does the investment align with the intended goal(s)?
• What could go wrong?
• What do the financial statements say?
• What is the growth potential of this investment?

Putting everything in writing can help investors make more informed decisions. For instance, a company's management team can use a thesis to decide whether or not to pursue the acquisition of a rival. The thesis may highlight whether the target's vision aligns with the acquirer or it may identify opportunities for growth in the market.

Keep in mind that the complexity of an investment thesis depends on the type of investor involved and the nature of the investment. So the investment thesis for a corporation looking to acquire a rival may be more in-depth and complicated compared to that of an individual investor who wants to develop an investment portfolio.

Examples of an Investment Thesis

Portfolio managers and investment companies often post information about their investment theses on their websites. The following are just two examples.

Morgan Stanley

Morgan Stanley ( MS ) is one of the world's leading financial services firms. It offers investment management services, investment banking, securities, and wealth management services. According to the company, it has five steps that make up its investment process, including idea generation, quality assessment, valuation, risk management , and portfolio construction.

When it comes to developing its investment thesis, the company tries to answer three questions as part of its quality assessment step:

• "Is the company a disruptor or is it insulated from disruptive change? 
• Does the company demonstrate financial strength with high returns on invested capital, high margins, strong cash conversion, low capital intensity and low leverage? 
• Are there environmental or social externalities not borne by the company, or governance and accounting risks that may alter the investment thesis?"

Connetic Ventures

Connetic Adventures is a venture capital firm that invests in early-stage companies. The company uses data to develop its investment thesis, which is made up of three pillars. According to its blog, there were three pillars or principles that contributed to Connetic's venture capital investment strategy. These included diversification, value, and follow-on—each of which comes with a pro and con.

Why Is an Investment Thesis Important?

An investment thesis is a written proposal or research-based analysis of why investors or companies should pursue an investment. In some cases, it may also serve as a historical guide as to whether the investment was a good move or not. Whatever the reason, an investment thesis allows investors to make better, more informed decisions about whether to put their money into a specific investment. This written document provides insight into what the investment is, the goals of the investment, any associated costs, the potential for returns, as well as any possible risks and losses that may result.

Who Should Have an Investment Thesis?

An investment thesis is important for anyone who wants to invest their money. Individual investors can use a thesis to decide whether to purchase stock in a particular company and what strategy they should use, whether it's a buy-and-hold strategy or one where they only have the stock for a short period of time. A company can craft its own investment thesis to help weigh out whether an acquisition or growth strategy is worthwhile.

How Do You Create an Investment Thesis?

It's important to put your investment thesis in writing. Seeing your proposal in print can help you make a better decision. When you're writing your investment thesis, be sure to be clear and concise. Make sure you do your research and include any facts and figures that can help you make your decision. Be sure to include your goals, the potential for upside, and any risks that you may come across. Try to ask and answer some key questions, including whether the investment meets your investment goals and what could go wrong if you go ahead with the deal.

It's always important to have a plan, especially when it comes to investing. After all, you are putting your money at risk. Having an investment thesis can help you make more informed decisions about whether a potential investment is worth your while. Make sure you put your thesis in writing and answer some key questions about your goals, costs, and potential outcomes. Having a concrete proposal in place can spell the difference between earning returns and losing all your money. And that's if your thesis supports the investment in the first place.

Harvard Business School. " Writing a Credible Investment Thesis ."

Lanturn. " What is an Investment Thesis and 3 Tips to Make One ."

Morgan Stanley. " Global Opportunity ."

Medium. " The Data That Built Our Fund's Investment Thesis ."

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Investment Thesis: An Argument in Support of Investing Decisions

October 29, 2023 by Abi Tyas Tunggal

An investment thesis is a well-reasoned argument that supports a specific investment decision, playing a vital role in the strategic planning process for individual investors and businesses alike. It comprises detailed research and analysis to evaluate an investment's potential profitability. A good investment thesis serves multiple purposes, including helping in the decision-making process, providing a comprehensive framework for monitoring and assessment, and offering a structured approach to identifying potential opportunities.

There are different types of investment strategies, such as venture capital , private equity, and long-term value investments. The core of an investment thesis involves identifying key parameters for evaluating an investment, understanding the unique market dynamics and competitive landscape, and realizing how to create value through strategic planning. To ensure a comprehensive and detailed investment thesis, it is crucial to involve thorough research, considering emerging trends and opportunities, and incorporating industry case studies for better understanding. Ultimately, financial statements and valuation metrics play a significant role in determining a well-suited investment decision.

Key Takeaways

• An investment thesis is a well-reasoned, research-based argument supporting a specific investment decision
• There are several types of investment strategies, and a well-structured investment thesis addresses market dynamics and competition to create value
• Research, valuation metrics, and understanding emerging trends are crucial in crafting a compelling investment ideas

Defining an Investment Thesis

An investment thesis is a well-structured, logical argument that justifies a particular investment decision, based on thorough research and analysis. It is essential for investors, as well as financial professionals in the domains of investment banking, private equity, hedge funds, and venture capital funds . A confident and knowledgeable investor will build out clear investment criteria to successfully navigate the investment landscape.

The primary purpose of an investment thesis is to outline the reasons and expected outcomes of a proposed investment, often focusing on the potential for growth and profit. This document offers a roadmap for investors, guiding them through their decision-making process, and helping to ensure that they arrive at rational and informed conclusions. A comprehensive investment thesis should consider various aspects, such as market conditions, competitive landscape, and financial performance of the targeted asset or company.

A strong investment thesis is built on rigorous market research and analysis. This involves evaluating historical and current financial information, as well as scrutinizing industry trends and the overall economic environment. Skilled investors will also incorporate their expertise in the industry to better assess the merits of an investment opportunity. This level of thoroughness creates a confidently expressed thesis, allowing investors to remain steadfast in their investment decisions, even amid market volatility.

In summary, an investment thesis plays a pivotal role in the investing process. It presents a well-reasoned argument, grounded in extensive research and clear analysis, that supports an investment decision. Crafting a robust investment thesis is crucial for both individual and institutional investors as it provides a solid foundation for investment choices and ensures the alignment of investment strategies with long-term objectives.

Importance of Research in Crafting an Investment Thesis

Thorough research is a crucial aspect of creating a solid investment thesis. It allows investors to gather vital information and insights that will help guide their investment decisions. There are several elements to consider while conducting this research, with data analysis, understanding risks, and returns being essential components.

Data Analysis

Data analysis forms the backbone of any research conducted for crafting an investment thesis. It involves collecting, organizing, and interpreting various types of data, such as financial statements, market trends, and industry forecasts, to identify patterns and make informed predictions about a potential investment opportunity. A comprehensive data analysis can help investors make confident choices based on reliable information, which is essential for a successful investment strategy.

Some key data analysis techniques used in crafting an investment thesis include:

• Comparative analysis: Comparing the performance of different companies within the same industry to identify investment opportunities.
• Trend analysis: Monitoring historical data to determine patterns and potential future developments.
• Financial statement analysis: Examining the financial health of a company through its balance sheets, income statements, and cash flow statements.

Understanding Risks and Returns

One of the primary goals of research in developing an investment thesis is to assess the risk/reward profile of a potential investment. This involves evaluating the potential risks associated with the investment and weighing them against the expected returns. A sound investment thesis should demonstrate a clear understanding of these risks and offer a rationale for why the investment’s potential returns make it a worthwhile addition to a portfolio.

Some common risks to consider when crafting an investment thesis include:

• Market risk: The risk of an investment losing value due to fluctuations in the market.
• Credit risk: The risk that a company or issuer of a financial instrument may default on its obligations.
• Operational risk: The risk of losses arising from failed internal processes, systems, or personnel within a business.

Evaluating these risks requires investors to develop a deep understanding of the investment opportunity, its industry, and the factors that may impact its performance. A diligent and systematic approach to research can help investors identify potential risks and gains, leading to informed and confident decision-making in crafting a strong investment thesis.

Types of Investment Strategy

When it comes to crafting an investment thesis, selecting an appropriate investment strategy is crucial. In this section, we will discuss two popular strategies: Value Investing and Growth Investing.

Value Investing

Value investing is a strategy that focuses on identifying undervalued stocks or assets in the market. These investments typically have lower valuations, which are reflected in their price-to-earnings ratios or book values. The central idea behind value investing is that the market may sometimes undervalue a company or asset, presenting an opportunity for investors willing to do thorough research and analysis.

The process of value investing involves:

• Fundamental analysis : Evaluating a company's financial health, management, and competitive advantages
• Value metrics : Identifying various valuation metrics, such as price-to-earnings, price-to-book, and dividend yield
• Margin of safety : Discovering investment opportunities with a built-in cushion to reduce the risk of loss

Famous investors, such as Warren Buffett and Benjamin Graham, have implemented value investing strategies to achieve long-term success.

Growth Investing

On the other hand, growth investing centers on companies that are expected to grow at an above-average rate compared to their industry. Growth investors seek opportunities in businesses they believe will offer substantial capital appreciation through rapid expansion or market-share gains. They prioritize the potential for future profit over the stock's valuation.

Features of growth investing include:

• High expectations : Companies targeted by growth investors typically have a history of robust revenue and profit growth
• Momentum : Investors seek stocks with upward price momentum, as increasing demand for these stocks may drive prices even higher
• Risk tolerance : Growth stocks can be volatile, and investors must be prepared to weather price swings

Renowned growth investors like Peter Lynch and Phil Fisher have demonstrated the effectiveness of growth investing throughout their careers.

Both value and growth investing strategies have their unique advantages and require different levels of risk tolerance. Investors should carefully consider their investment thesis and select a strategy that aligns with their objectives and risk appetite.

Venture Capital and Private Equity Investment Theses

When considering investments in private companies, venture capital (VC) and private equity (PE) firms each have their own unique strategies encapsulated within their respective investment theses. These theses provide guidance on the focus of investments, the sectors or geographies of interest, and the stage of the target companies.

Learn more about the differences between private equity and venture capital .

Venture Capital Investment Thesis

A venture capital investment thesis outlines how a VC fund aims to make money for its investors, typically referred to as Limited Partners (LPs). This strategy identifies crucial factors such as the stage of companies the fund will invest in, commonly early-stage companies, the targeted geography, and specific sectors of focus.

The thesis may vary depending on a venture capitalist's unique specialization, with some firms concentrating on a specific vertical and stage, while others invest more broadly without a core thesis driving their decisions. The underlying objective of a VC investment thesis is to outline how the firm will achieve high returns on investment by supporting and nurturing the growth of portfolio companies.

Private Equity Investment Thesis

In contrast, a private equity investment thesis is an evidence-based case in support of a particular investment opportunity. It usually begins with a concise argument illustrating how the potential deal supports the fund's general investment strategy. The thesis then provides details that substantiate this preliminary conclusion.

Private equity firms often target more established companies compared to venture capital firms, focusing on businesses with a proven track record. The PE investment thesis may identify areas where operational improvements, strategic mergers, or better capital structures could enhance value, ultimately generating a good return for the firm and its investors.

Overall, both venture capital and private equity investment theses serve as critical frameworks guiding investment decisions. They not only help align these decisions with a firm's specialized strategy but also provide a basis for evaluating potential deals to ensure they contribute to the firm's goals and long-term value creation.

Key Parameters for Evaluating an Investment

When assessing the viability of an investment, it is essential to examine various key parameters to make informed decisions. By analyzing these factors, investors can gain a deeper understanding of a company's financial health and its potential for growth.

One vital metric to consider is earnings per share (EPS) , which represents the portion of a company's profit attributed to each outstanding share of its common stock. A higher EPS indicates higher earnings and suggests that the company may be a lucrative investment opportunity.

Another fundamental metric is the return on assets (ROA) , which measures the effectiveness of a company in using its assets to generate profit. The higher the ROA, the better the company is at utilizing its assets to generate earnings. Similarly, return on equity (ROE) is a measure of financial performance that calculates the proportion of net income generated by a company's equity. A higher ROE demonstrates the efficient usage of shareholders' investments.

Conducting a thorough analysis of the company's financial statements is crucial. This includes reviewing income statements, balance sheets, and cash flow statements. By doing so, investors can gain insights into the company's profitability, liquidity, and solvency.

Another important factor to consider is a company's cash position. Adequate cash reserves enable a company to meet its short-term obligations and invest in growth opportunities. On the other hand, a lack of cash can leave a company vulnerable to market fluctuations and financial stress.

It is also essential to evaluate a company's capital structure, which refers to the proportion of debt and equity financing it uses to fund its operations. A balanced capital structure ensures financial stability, while excessive debt may lead to financial distress.

Examining a company's debt level is crucial, as it can directly impact the company's financial flexibility and risk profile. A high level of debt can hinder a company's ability to grow and adapt to changes in the market, making it a less attractive investment option.

Assessing a company's assets and how they're managed plays a significant role in evaluating an investment opportunity. This includes tangible assets, such as property and equipment, and intangible assets, such as patents and trademarks. Effective asset management contributes to a company's ability to generate profit.

Finally, it is important to scrutinize a company's costs associated with its operations, such as production costs and overhead expenses. A company that efficiently manages its costs will likely generate higher profitability and provide better returns for investors.

Creating Value through Strategic Planning

Strategic planning plays a crucial role in creating value for investors and businesses. It serves as the foundation for effective decision-making and guides companies towards achieving their goals. Through strategic planning, management teams can identify and focus on core competencies that contribute to a company's competitive advantage.

One way to create value is to prioritize revenue growth. By identifying key growth drivers, such as product innovation or market expansion, companies can allocate resources accordingly to boost earnings. Such targeted investments in growth engines allow firms to capture a larger market share and drive long-term profitability.

Another aspect of strategic planning involves optimizing a company's holdings. By assessing the existing portfolio, management can decide whether to divest underperforming assets or make strategic acquisitions that align with their investment thesis. The right combinations and adjustments can significantly enhance a company's overall performance and shareholder value.

Risk management is also an essential aspect of strategic planning. Companies must assess potential risks and incorporate suitable mitigation measures in their plans. This ensures that organizations are prepared for unforeseen circumstances, which can safeguard profits and protect the company's assets.

Furthermore, creating value requires continuous improvement and adaptation to market trends. Companies should routinely reevaluate their strategies to identify both internal and external factors that may impact their current position. By setting clearly defined objectives and quantifiable financial targets, management teams can measure their progress effectively and adjust their strategic plans as needed.

In summary , creating value through strategic planning involves a combination of focusing on core competencies, prioritizing revenue growth, optimizing holdings, managing risk, and continuously reassessing the company's strategic direction. This holistic approach can help businesses enhance their profitability, strengthen their market position, and ultimately deliver strong value creation to investors.

Understanding the Market and Competition

Before developing an investment thesis, it is crucial to have a deep understanding of the market and its competition. The stock market is influenced by various factors such as economic supercycles, bear markets, and secular trends. Analyzing these elements will provide a solid foundation to recognize potential investment opportunities.

An economic supercycle is a long-term pattern that occurs over several decades, during which the economy undergoes periods of growth and contraction. Investors need to be aware of the current phase and how it may impact their investment decisions. For instance, during a growth period, certain industries tend to outperform, while others may underperform during a contraction phase.

In addition to analyzing these market conditions, investors must also pay heed to the competitive landscape of the sector in which they plan to invest. Examining the competitors within the industry enables one to identify companies with competitive advantages, which may lead to superior performance. These advantages can stem from factors such as lower costs, innovation, or a dominant market share.

A bear market occurs when the stock market experiences a prolonged decline, typically characterized by a decrease of 20% or more from recent highs. In such environments, it becomes even more crucial for investors to understand the competitive dynamics within an industry to identify resilient companies that can withstand market downturns.

A secular trend is a long-term movement in a particular direction that can last for several years or even decades. Identifying secular trends within industries is essential to spotting opportunities for long-term growth. For example, investors may capitalize on sectors benefiting from a shift towards clean energy usage or the increasing importance of artificial intelligence.

In summary, understanding the market and competition requires a deep analysis of the stock market, economic supercycles, bear markets, and secular trends. By researching industry trends, evaluating market opportunities, and assessing the strengths and weaknesses of competitors, investors can develop a robust investment thesis that increases the likelihood of achieving long-term returns.

Industry Case Studies

In the investment world, the importance of an investment thesis cannot be overstated. By examining various industry case studies, we can gain insight into how businesses make strategic investments to enhance their value. In this section, we'll discuss notable examples from companies such as DuPont, General Motors, Rexam PLC, and Clear Channel Communications.

DuPont is a leading science and innovation company with a focus on agriculture, advanced materials, and industrial biosciences. During its acquisition of Dow Chemical, DuPont developed a robust investment thesis to justify the merger. Their investment case relied on the belief that the combined entity would benefit from increased operational efficiencies, new market opportunities, and enhanced innovation capabilities. This approach provided a strong rationale for the deal, which has created a more competitive company in the global market.

General Motors (GM) , a multinational automobile manufacturer, crafted its investment thesis in response to evolving trends in the automotive industry, such as the increasing importance of emissions reduction, electrification, and autonomous technology. GM's investment case centered on embracing these trends, focusing on innovation, and expanding its product offerings through strategic M&A, investments, and partnerships. For example, GM has made significant investments in electric vehicles and autonomous driving technology, positioning the company for future growth in these areas.

Next, we have Rexam PLC , a former British packaging manufacturer that was a leading producer of beverage cans globally. When Ball Corporation sought to acquire Rexam, they developed an investment thesis based on the value derived from combining the two companies' strengths. This thesis outlined the strategic fit between both companies, synergies from combining production capabilities, and projected growth, particularly in developing markets. The successful acquisition helped Ball Corporation consolidate its position as a global leader in the packaging industry.

Lastly, Clear Channel Communications is a media company specializing in outdoor advertising. As the company sought to expand its presence in this sector, it created an investment thesis centered around leveraging its core competence in outdoor advertising and acquiring strategic assets. One example is Clear Channel's acquisition of crucial billboard locations to solidify its competitive edge in the outdoor advertising market. This targeted growth strategy has allowed Clear Channel to remain a dominant player in the industry.

In conclusion, these industry case studies demonstrate the value of a well-crafted investment thesis. Effective investment theses provide a roadmap for companies to pursue strategic acquisitions and investments that create long-term value, while also helping investors evaluate the viability of proposed deals. By understanding how companies like DuPont, General Motors, Rexam PLC, and Clear Channel Communications have strategically invested in the market, we can better appreciate the importance of a well-structured investment thesis.

Long-Term Investment Strategies

A long-term investment strategy refers to an approach where investors hold onto their investments for an extended period, typically more than one year. This type of strategy aims to achieve the investment goal by allowing assets to grow through market fluctuations and capitalizing on the power of compounding interest. Diversification and patience play pivotal roles in ensuring the success of a long-term investment strategy.

Portfolio managers often use various techniques and methods to craft long-term investment portfolios. Some of these techniques include targeting undervalued sectors or stocks, dividend reinvestment plans, dollar-cost averaging, and asset allocation. By employing these strategies, portfolio managers increase chances of achieving their clients' investment goals over time.

In order to develop long-term investment strategies, investors should first define their investment goal . This could include objectives such as saving for retirement, funding a child's college education, or purchasing a home. Clear investment goals help in designing an appropriate investment strategy, taking into account factors like the investor's risk tolerance, time horizon, and available capital.

One key aspect of a successful long-term strategy is diversification . Diversifying across asset classes and industries allows investors to spread risks and potentially achieve higher risk-adjusted returns. A well-diversified portfolio will typically consist of a mix of stocks, bonds, and other asset types, with variations in investment size, industry sector, and geographical location. This diversified approach minimizes the impact of underperforming investments on the overall portfolio.

Another crucial element in long-term investing is patience . Market fluctuations can be tempting for investors to react to their emotions and make impulsive decisions, which could derail a well-thought-out investment strategy. Maintaining a disciplined approach and sticking to one's investment plan, even during periods of market volatility, is paramount to achieving long-term success.

In conclusion, long-term investment strategies require investors to define clear goals, diversify their portfolio, and exercise patience in the face of market fluctuations. By adhering to these principles, investors and portfolio managers can steer a course towards achieving their investment objectives.

Emerging Trends and Opportunities

In recent years, various emerging trends have presented attractive opportunities for investors. Among these trends, renewable energy, megatrends, and the coffee shop market stand out as sectors with significant potential for growth.

Renewable energy has gained considerable attention and investment as a response to the global push for addressing climate change and reducing emissions. Solar, wind, and hydroelectric power are some of the most prominent technologies in this sector. With an increased interest in clean energy from both governments and consumers, companies in this space are poised to experience substantial growth.

Megatrends such as urbanization, aging populations, and technological advancements are also influencing investment opportunities. These large-scale shifts provide a backdrop for businesses to tap into new markets and adjust their strategies to capitalize on these changes. For instance, companies working in healthcare and biotechnology may benefit from catering to the needs of an aging population, while businesses focused on artificial intelligence (AI) and automation may find increased demand due to technological advancements.

The coffee shop market, too, presents investment opportunities. This industry has experienced robust growth in recent years as consumers increasingly seek out unique, high-quality coffee experiences. Independent and specialty coffee shops are at the forefront of this trend. Niche coffee shops that offer novel and authentic experiences have seen success by catering to the specialized preferences of today's consumers. As the demand for artisanal and premium beverages continues to rise, businesses operating in this space can expect to have ample opportunities for growth.

In conclusion, current emerging trends such as renewable energy, megatrends, and the coffee shop market offer a wealth of investment opportunities. As these sectors continue to develop and evolve, investors with well-informed investment theses stand to benefit from the potential rewards in these growing industries.

Role of Financial Statements and Valuation Metrics

Financial statements play a vital role in the investment thesis by providing crucial information about a company's financial health and performance. They consist of the balance sheet, income statement, and cash flow statement, which offer insights into the company's assets, liabilities, revenues, expenses, and cash flows. Investors use these statements to assess the company's past performance, current financial condition, and potential for future growth.

Valuation metrics, on the other hand, are vital yardsticks that investors use to compare different investment opportunities and make informed decisions. These metrics include price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, price-to-book (P/B) ratio, dividend yield, and return on equity (ROE), among others. By analyzing these ratios, investors can gauge a company's value relative to its peers and make better investment choices.

Analysts and investors scrutinize financial statements to identify growth trends, profitability, and financial stability. For instance, they may calculate the gross margin, operating margin, and net profit margin to determine the company's profitability across different stages of its operations. Additionally, they examine liquidity ratios, such as the current ratio and quick ratio, to assess the company's ability to meet its short-term obligations.

Valuation metrics provide a quantitative basis for comparing investment opportunities within the same industry or across different sectors. For example, a lower P/E ratio may indicate that a stock is undervalued, while a high P/E ratio might suggest overvaluation. Moreover, the P/B ratio can help investors determine if a stock is undervalued by comparing its market price to its book value.

Another key valuation metric is the dividend yield, which measures the annual dividend income per share relative to the stock's price. A higher dividend yield may attract income-oriented investors, while a lower yield might be more appealing to growth-focused investors. Furthermore, the ROE ratio, which measures a company's profitability in relation to its equity base, is an essential metric for evaluating the efficiency of management in creating shareholder value.

In conclusion, financial statements and valuation metrics are indispensable tools for investors to evaluate a company's financial health and investment attractiveness. By analyzing these data points, investors can make well-informed investment decisions that align with their risk tolerance and investment objectives.

Concluding Thoughts on Crafting a Compelling Investment Thesis

Crafting a compelling investment thesis is crucial for informed investing decisions, as it helps investors thoroughly analyze a potential opportunity. A well-researched investment thesis demonstrates the investor's conviction level and reinforces their confidence in the investment choice. This process involves a deep understanding of the business, its value drivers, and its potential growth trajectories.

A strong investment thesis should be definitive, clearly articulating the reasoning behind the opportunity and the expected returns. This allows investors to stay focused on their goals and maintain their conviction, even when the stock's price movement does not align with their expectations.

By adopting a confident, knowledgeable, and neutral tone, investors can effectively communicate their investment thesis to others. Clarity in presenting the investment case is essential for persuading potential partners or stakeholders to support the opportunity. Utilizing formatting tools such as tables and bullet points can aid in conveying essential information efficiently and ensuring the investment thesis is easy to understand.

In summary, crafting a compelling investment thesis enables investors to make well-informed decisions that align with their financial goals. By developing a thorough understanding of the investment opportunity and maintaining a strong conviction level, investors can better navigate the market and achieve long-term success.

Frequently Asked Questions

How do you develop a strong investment thesis.

A strong investment thesis begins with thorough research on the company or asset in question. This may include looking at the financials, competitive position, management team, industry trends, and future prospects. It's essential to critically analyze the available information, identify potential risks and rewards, and establish a clear rationale for the investment based on this analysis. Staying focused on the long-term outlook and maintaining a disciplined approach to the investment process can also contribute to developing a robust investment thesis.

What are the key elements to include in an investment thesis?

An investment thesis should include the following key elements:

• Overview of the company or asset: Provide a brief background of the company or asset, including its market, size, and competitive positioning.
• Investment rationale: Detail the reasons for investing, such as attractive valuation, strong revenue growth, or a unique business model.
• Risk assessment: Identify potential risks and how they could impact the investment returns.
• Expected return: Estimate the potential financial return based on the identified growth drivers or catalysts.
• Time horizon: Indicate the investment period, typically long-term, during which the thesis is expected to play out.
• Fund size: Specify the amount of invested capital that will be allocated to this particular investment, considering its impact on portfolio construction, liquidity, and potential returns within the overall portfolio strategy

How can one evaluate the success of an investment thesis?

Evaluating the success of an investment thesis involves tracking the progress of the company or asset against its initial expectations and underlying assumptions. This may involve measuring financial performance, analyzing key developments in the industry and the company's position within it, and monitoring potential changes in overall market conditions. It is helpful to revisit the investment thesis regularly to assess its validity and make adjustments as necessary.

What's the difference between an investment thesis for startups and publicly traded companies?

An investment thesis for a startup often focuses on the growth potential of a new or emerging market, considering the innovative products or services the startup offers in that market. Here, the focus may be more on the potential for long-term value creation, the management team's ability to execute on their vision, and market fit.

For publicly traded companies, the investment thesis may include analysis of current financial performance, valuation multiples, and overall market trends. Publicly traded companies have more historical data and financial performance information available, allowing investors to make more informed decisions based on these factors.

How does an investment thesis guide decision-making in private equity?

In private equity, the investment thesis helps guide the selection of companies to invest in, as well as the structuring of deals to acquire those companies. It provides a blueprint for how the private equity firm aims to create value, including plans for operational improvements, financial engineering, or growth strategies. This thesis serves as a basis for monitoring the progress of an investment and helps make decisions on the timing of potential exits.

How can real estate investment theses differ from other sectors?

Real estate investment theses may focus on factors such as location, property type, market dynamics, and demographic trends to identify attractive investment opportunities. The analysis may also take into account macroeconomic factors, such as interest rates and economic growth, which can influence real estate markets. Additionally, real estate investments may be structured as either direct property investments or through financial instruments like Real Estate Investment Trusts (REITs), affecting the underlying investment thesis.

What considerations should a first-time fund manager have when developing a fund's investment thesis?

For a first-time fund manager, crafting a compelling and robust fund's investment thesis is paramount for attracting investors. Given their lack of a track record, these managers need to lean heavily on the research, clarity, and vision articulated in their investment thesis. The thesis should detail how the fund aims to identify ideal investments, especially those in industries with high margins. It should also benchmark the strategies against industry standards to highlight the manager's acumen and awareness of market norms.

How is a stock pitch related to an investment thesis and what role does a target price play in it?

A stock pitch is essentially a condensed, persuasive form of an investment thesis, often presented to stakeholders to advocate for investing in a particular publicly-traded company. A key element of any stock pitch is the target price, which is an estimation of what the stock is worth based on projections and valuation models. This target price serves as a quantitative anchor for the investment thesis, giving stakeholders a specific metric against which to measure potential returns and risks.

interpretive economics

• Feb 27, 2023

How to Write the Perfect Investment Thesis

For investment managers, finding investment opportunities is only half the challenge. Often the harder part is raising funds. To do this they need to create the perfect investment thesis to set out a convincing argument as to why their investment strategy will generate a return on investment for their clients. In this article, we’ll explore the importance of crafting a perfect investment thesis and provide insights into how to write one.

What is an Investment Thesis?

An investment thesis outlines a fund manager’s investment strategy and rationale for investing in a particular market or niche. It’s a crucial document that investment managers use to provide investors with the information and data they need to decide whether or not to invest in a fund. It can be turned into a variety of marketing materials for the fund including white papers, one-pagers, and investment decks.

The investment thesis should be concise and articulate the investment logic and framework for why a particular market or niche presents an attractive investment. It should outline the investment strategy and how it aligns with the fund manager’s hypothesis. The thesis should also address potential risks and benefits to investors.

Successful investment theses typically include an analysis of market trends, an assessment of the competitive landscape, and an explanation of why the investment opportunity presents an attractive opportunity.

In 2013, Ron Baron, a fund manager, invested in Tesla. At the time the stock was trading at $25 per share. However, Baron believed that electric cars were the future , and he was convinced that Tesla would become the leader in the EV industry. Ten years later, Tesla’s stock is trading at over $200 per share, making it one of the most successful investments in recent years.

Step-by-Step Guide to Writing the Perfect Investment Thesis

Crafting the perfect investment thesis is not an easy task. It requires a great deal of research, analysis, and writing skills. Follow our step-by-step guide to write a perfect investment thesis.

Step 1: Define Your Investment Strategy

Determine your investment goals and objectives.

To define your investment strategy, you need to first need to understand your investment goals and objectives. Are you looking to invest in high-growth companies or established companies that generate a stable return? What is your investment horizon? What is risk profile? How much capital do you need to raise?

Identify investment opportunities

Once you have defined your investment goals and objectives, you need to identify your target market and investment opportunities in that market.

Define your investment strategy

Having determined your goals, risk tolerance and capital requirements you need to create a high-level investment strategy. This is a set of principles that will help the fund achieve its investment goals and guide investment decisions. This can be refined as you conduct market research and receive feedback from investors and industry-peers.

Step 2: Conducting Market Research

An investment thesis that is not backed by data is just opinion. To write the perfect investment thesis you need to conduct market research. This includes analyzing market trends, identifying potential risks and benefits, and conducting competitive analysis.

How to analyze market trends using data

To analyze market trends, you need to collect and analyze data. Data can come from a variety of sources including industry reports, financial statements, and news articles to identify trends in the market. You can also use tools such as Google Trends to identify search trends for specific keywords. There are also opportunities to use official data to back up claims, for example census data to prove an investment thesis based on demographic trends.

A variety of alternative data sources are available. these include:

Web scraping : Scraping data from online sources including social media sites, e-commerce or news stories. This data can be analyzed using natural language processing techniques (categorization, sentiment analysis).

Open data : There is a growing trend of organizations making data freely available. Good examples include traffic patterns on metro networks such as TFL in London .

Sensors and satellites : A growing industry of data providers is providing access to alternative data sources. From satellite data showing agricultural production to IoT sensor devices.

Polls and Surveys : Surveys provide insights into the collective consciousness. From tangible economic behaviors such as buying and shopping habits, customers expectations, information on personal finances, to social and political views.

Identifying market opportunities and potential risks

Having analyzed market trends, you need to identify market opportunities and potential risks. Investors need to be aware of different types of investment risks, such as market risk, credit risk, and liquidity risk associated with your investment thesis. A thorough analysis of potential risks helps investors make informed decisions and ensure that the investment is aligned to their risk appetite. The analysis should cover both systematic and unsystematic risks, There are a variety of statistical methods than can be used to measure risk and volatility including standard deviation, Sharpe ratio, beta, value at risk (VaR), conditional value at risk (CVaR), and R-squared.

Conducting competitive analysis

You may also want to include a competitive analysis. This looks at the competition in your target market. Who are the main players in the industry, their strengths, weaknesses, and competitive advantage.

Step 3: Developing Your Investment Hypothesis

The best investment theses include a well structured investment hypothesis. An investment hypothesis summarises why an investment opportunity exists in a given market. It should be based on your research and analysis and articulated in a clear and concise manner.

What is an investment hypothesis?

An investment hypothesis is a proposed explanation for a specific investment opportunity. It’s a statement that describes the investment opportunity and how it aligns with the investment manager’s investment goals and objectives.

Formulating an investment hypothesis based on your research and analysis

To develop a strong investment hypothesis, you need to review the data and information collected during your market research. Using this you need to identify key trends, opportunities, and risks and determine an investment strategy that allows you to achieve investment goals and objectives. This is the time to revisit and critique your initial investment strategy.

H4: Articulating the investment thesis in a clear and concise manner

Once you have developed your investment hypothesis, you need to articulate it in a clear and concise manner. This includes a clear investment logic and analytical framework for why a particular market or niche presents an attractive investment. You should also outline the investment strategy and how it aligns with your hypothesis.

Step 4: Writing the Investment Thesis

Having created the perfect investment thesis you need to structure the thesis and include key elements to make it persuasive.

The structure and format of a successful investment thesis

A successful investment thesis typically follows a structure that includes an executive summary, market analysis, investment hypothesis, investment strategy, and potential risks and benefits. The thesis should also include data and visual aids, such as graphs and charts.

Key elements to include in your investment thesis

To make your investment thesis persuasive, you need to include key elements such as a clear articulation of the investment opportunity, a detailed explanation of the investment hypothesis, an overview of the investment strategy, and describe the risks and benefits for potential investors.

Writing with clarity and brevity

To make your investment thesis easy to read and understand, you need to write with clarity and brevity. Use simple language and avoid jargon. Keep the thesis concise and to the point.

What type of resources and marketing materials do you need to create

Having defined your investment thesis you know need to create a variety of marketing materials in order to present to potential investors. These will vary depending on the type of investors and the regulatory framework you operate under. Some common investor marketing materials include:

Investor decks

An investor deck is a summary of your investment thesis. It should include a summary of your investment hypothesis, market opportunity with data, investment strategy, expected outcomes, risks, and benefits to investors. The investor deck should be concise and easy to understand. Avoid lengthy text and present the opportunity using relevant data points. Employing a professional designer will maximize the impact of your investment thesis.

The structure of an investment deck forces you to focus only on the key points, consequently a clear analytical framework or investment logic is essential.

White papers

A white paper is a more detailed description of your investment thesis. It should include an in-depth analysis of the market trends, competitive landscape, and investment opportunity. The white paper should also include an overview of your investment strategy and potential risks and benefits.

Investment one-pager

An investment one-pager is a brief summary of your investment hypothesis, market opportunity, and risks and benefits. It should be a one-page document that investors can quickly review to understand your investment opportunity.

Step 5: Refining and Perfecting Your Investment Thesis

The final step in writing a perfect investment thesis is to refine and perfect it. You need to continuously refine and improve your thesis to ensure it’s persuasive and effective.

Revising and editing your investment thesis

Once you have written your investment thesis, you need to revise and edit it. Review the thesis for grammar, punctuation, and spelling errors. Ensure that the thesis is clear, concise, and persuasive. Nothing will damage your credibility more than easily fixed errors or incorrect data.

Seek feedback from peers and industry experts

You should seek feedback from peers and industry experts to ensure that your investment thesis is persuasive and effective. Aim to get feedback from colleagues, mentors, or industry experts all of whom can offer a unique outside perspective.

Continuously refining and improving your investment thesis

Investment managers should continuously refine and improve their investment thesis. They should review the thesis periodically and update it as needed to reflect changes in the market or investment strategy.

Crafting a perfect investment thesis is a crucial task for investment and fund managers. The investment thesis is a document that outlines the investment strategy and rationale for investing in a particular market or niche. A good investment thesis provides investors with a clear understanding of the investment opportunity, the risks and benefits, and the potential return on investment.

To write a perfect investment thesis, investment managers need to define their investment strategy, conduct market research, develop an investment hypothesis, craft the thesis, and refine and perfect it. They should also create marketing materials such as an investor deck, white paper, and investment one-pager to summarize their investment opportunity. Investment managers should continuously refine and improve their investment thesis to ensure it’s persuasive and effective.

How Interpretive Economics can help you write the perfect investment thesis

At Interpretive Economics, we help investment managers, asset managers, venture capital, family offices and other investment professionals create a variety of investment marketing materials including investment white papers, investor decks and investment one-pagers. We are experts at economic analysis, sourcing and analyzing data and crafting investment hypotheses. Get in touch to see how we can help you create the perfect investment thesis.

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The Impact Investor | ESG Investing Blog

Investing for financial return is only part of the equation.

How to Create an Investment Thesis [Step-By-Step Guide]

Updated on June 13, 2023

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One of the worst mistakes an investor can make is to sink their money into an investment without knowing why. While this may seem like the world’s most obvious mistake to avoid, it happens every day. Look no further than the stock market for plenty of examples of misguided optimism gone terribly wrong.

That’s where the idea of an investment thesis comes in. An investment thesis is a common tool used by venture capital investors and hedge funds as part of their investment strategy.

Most funds also use it on a regular basis to size up potential candidates during buy-side job interviews. But you don’t have to work at a venture capital fund or private equity firm to reap the benefits of creating an investment thesis of your own.

Table of Contents

What Is an Investment Thesis?

Materials needed to create a thesis for your investment strategy, a step-by-step guide to creating a solid investment thesis, step 1: start with the essentials, step 2: analyze the current market, step 3: analyze the company’s sector, step 4: analyze the company’s position within its sector, step 5: identify the catalyst, step 6: solidify your thesis with analysis, free tools to help strengthen your investment strategy.

An investment thesis is simply an argument for why you should make a specific investment. Whether it be a stock market investment or private equity, investment theses are all about creating a solid argument for why a certain acquisition is a good idea based on strategic planning and research.

While it takes a little more work upfront, a clear investment thesis can be a valuable tool for any investor. Not only does it ensure that you fully understand why you’re choosing to put your hard-earned money into certain stocks or other assets, but it can also help you develop a long-term plan.

Should an investment idea not go as planned, you can always go back to your investment thesis to see if it still holds the potential to work out. By considering all the information your thesis contains, you’ll have a much better idea of whether it’s best to cut your losses and sell, continue holding, or even add to your position.

An investment thesis includes everything you need to create a solid game plan, making it a foundational part of any stock pitch.

See Related : Best Socially Responsible Stocks To Invest In Today

One of the benefits of an investment thesis is that it can be as complex or as simple as you like. If you actually work at a venture capital firm , then you may want to develop a full-on venture capital investment thesis. But if you’re a retail investor just looking to solidify your investment strategy, then your thesis may be much more straightforward.

If you’re an individual investor, then all you really need to create an investment thesis is somewhere to write it out. Whether it be in a Google or Word doc or on a piece of paper, just make sure you have a place to record your thesis so that you can consult it down the line.

If you’re developing a venture capital investment thesis that you plan to present to an investment committee or potential employers, then there are plenty of great tools online that can help. Slideteam has thousands of templates that can help you create a killer investment thesis , as well as full-on stock pitch templates.

As mentioned earlier, an investment thesis holds the potential to help you plot out a strategy for pretty much any acquisition. But for the sake of simplicity, we’ll assume throughout the examples in the following steps that you’re an investor interested in going long on a stock that you plan to hold for at least a few months or years.

Venture capitalists looking to invest in companies or startups can also apply the same principles to other investment goals. Investors who are looking to short a certain stock should also be able to use these techniques to locate potential investments. The main difference, of course, is that you’ll be looking for bad news instead of good.

First things first. Before you get into doing the research that goes into an investment thesis or stock pitch, make sure you take the time to write out the basics. At the top of the page, include things like:

• The name of the company and its ticker symbol
• Today’s date
• How many shares of the company you already own, if any
• The current cost average for any shares you may already hold
• Whether the stock pays dividends and, if so, how often. You may also want to include the current ex-dividend and dividend payment dates.
• A brief summary of the company and what it does

See Related : How to Start Investing With Purpose

Now it’s time to take a look at the entire market and the direction it’s headed. Why? As Investors Business Daily points out,

“History shows 3 out of 4 stocks move in the same direction as the overall market, either up or down. So if you buy stocks when the market is trending higher, you have a 75% chance of being right. But if you buy when the market is trending lower, you have a 75% chance of being wrong.”

While the overall market direction is definitely an important factor to keep in mind, what you choose to do with this information will largely come down to your individual investing style. Investors Business Daily founder William O’Neil advised investors only to jump into the market when it was trending up.

Another approach, however, is known as contrarian investing, which revolves around going against market trends. Warren Buffett summed up the idea behind this strategy with his famous quote, “Be fearful when others are greedy, and greedy when others are fearful.” Or as Baron Rothschild more graphically put it, “Buy when there is blood in the streets, even if the blood is your own.”

Most investors who are looking for a faster return will likely be better off waiting to strike until the iron is hot. If you align more with the long-term contrarian philosophy, however, bleak macroeconomic outlooks may actually strike you as an ideal investment opportunity .

See Related: How to Invest in Private Equity: A Step-by-Step

Now that you’ve got a look at the overall market, it’s time to take a look at the sector your company fits into. The Global Industry Classification Standard (GICS) breaks down the entire market into 11 sectors. If you want to get even more specific, you can further break down companies into the GICS’s 24 industry groups, 69 industries, and 158 sub-industries.

Once you identify which group your company belongs to, you’ll then want to take a look at that sector’s performance. Fidelity provides a handy breakdown of the performance of various sectors over different time periods.

But why does it matter? Two reasons.

• Identifying which sectors various companies belong to can help you ensure that your portfolio is properly diversified
• The reason that sector ETFs tend to be so popular is that when a sector is trending, many of the stocks within that sector tend to move in unison. The reverse is also true. When a certain industry is lagging, the individual stock prices of the companies in that industry may be affected negatively. While this is not always the case, it’s a general rule of thumb to keep in mind.

The idea behind working sectors into your investment criteria is to give you an overview of what type of investment you’re about to make. If you’re a momentum trader, then you may want to shoot for companies within the strongest-performing sectors this year or even over the past few months.

If you’re a value investor, however, you may be more open to sectors that have historically experienced high growth, even if they are currently suffering due to the overall state of the economy. Some speculative investors may even be interested in an innovative industry with strong potential growth possibilities, even if its time has not yet come.

See Related : How to Invest in Community [Step-by-Step Guide]

If you want to up your odds of success even more, then you’ll want to compare the company you’re interested in against the performance of similar companies in the same industry.

These are the companies that tend to get the most attention from large, institutional investors who are in a position to significantly increase their market value. Institutional investors tend to have a huge amount of money in play and are far less likely to invest in a company without a proven track record.

When choosing an investment, they’ll almost always go with a global leader over a new business, regardless of its promise. However, they also consider intrinsic value, which considers how much a company’s stock is selling for now, as opposed to how much revenue the company stands to earn in the future. In other words, institutional investors are looking for companies that are stable enough to avoid surprises but that also stand to generate considerable capital in the future.

Why work this into your game plan? Because even if you don’t have millions of dollars to invest in a company, there may be hedge funds or venture capital firms out there that do. When these guys make an investment, it tends to be a big one that can actually move a company’s share price upward. Why not ride their coattails and enjoy a solid growth rate as they invest more money over time into proven winners?

That’s why it’s important to make sure that you see how a company stacks up against its closest competitors. If it’s an industry-leading business with a large market share, it’s likely to be a strong contender with solid fundamentals. If not, you may end up discovering competing companies that make sense to consider instead.

See Related : What is a Triple Bottom Line? Definition & Examples

At this point, hopefully, you’ve identified the best stock in the best sector based on your ideal investing style. Now it’s time to find out exactly why it deserves to become a part of your portfolio and for how long.

If a company has been experiencing impressive growth, then there’s bound to be a reason why.

• Is the company experiencing a major influx of business because it’s currently a leader in the hottest sector of the moment? Or is it a “good house in a bad neighborhood” that’s moving independently of the other stocks in its industry?
• How long has it been demonstrating growth?
• What appears to be the catalyst behind its movement? Does the stock owe its growth to strong management, recent world events, the approval of a new drug, the introduction of a hot new product, etc?

One mistake that far too many beginning investors make is assuming that short-term growth alone always indicates the potential for long-term profit. Unfortunately, this is not always the case. By figuring out exactly why a stock is moving, you’ll be far better positioned to decide how long to hold it before you sell.

A strong catalyst can cause the price of a stock to skyrocket overnight, even if it’s laid dormant for years. Even things like social media hype and rumors can cause a stock’s price to shoot up over the course of a given day. But woe to the investor that assumes these profits will last. Many are often left holding the bag when the price increase turns out to be part of a “ pump and dump .”

While many day traders can make a nice profit by capitalizing on these situations, such trades are best avoided altogether if you plan to hold a stock long-term. That’s why it’s so important to understand whether a stock is “in play” for the day or whether its growth can be attributed to more permanent factors that support the potential for a high return over time.

See Related : How to Become an Impact Investor [Step-By-Step Guide]

If you’re planning on investing a significant amount of capital in any stock, then a little research may be able to save you from a lot of heartache. Keep in mind that the focus of an investment thesis is to formulate a reasoned argument about why adding an asset to your portfolio is a good idea.

While all investments come with some level of risk, research can be an excellent risk mitigation strategy. There’s nothing worse than watching an investment fail due to an obvious factor you could have spotted with closer analysis. Don’t let it happen to you!

Fundamental analysis can help you ensure that your potential investments have the underlying traits that winning stocks are made of. While there’s a bit of a learning curve involved when you’re first starting out, here are some of the things you’ll want to focus on:

EPS stands for “earnings per share.” It’s a common financial indicator that basically tells you how much a company makes each time it sells a share of its stock. In this regard, a higher EPS is a good thing, but it’s important to look for solid EPS growth over time. Ideally, you’ll want to see consistent growth in a company’s EPS over the past three or more quarters.

Sales and Margins

Investing is all about putting your cash into successful companies, which is why sales and margins are key components to finding worthy investments. Sales indicate how much a business has made from (you guessed it) sales. Sales margin, also known as gross profit margin, is the amount of revenue a company actually gets to keep after you factor in overhead and other production costs. Ideally, a good investment will exhibit strong, consistent sales growth in recent years.

Return On Equity (ROE)

ROE is one of the more commonly used valuation metrics and is calculated by dividing the company’s net income/shareholders’ equity. ROE is basically a measure of how efficiently a company is using the capital it generates from equity fundraising to increase its own value. The higher the ROE, the more likely it is that a company operates with a focus on using its cash flow to increase its profits.

See Related : How to Do a Stakeholder Impact Analysis?

While these are just a few examples of various analysis methods to work into your investment thesis, they can go a long way toward locating solid companies worth investing in. Interested in learning more about technical and fundamental analysis? There are now plenty of great sites that can help you master the secrets of the training world.

In our opinion, Tradimo is one of the most underrated, as it provides tons of free classes for investors of all levels. Udemy also has some great classes that can help you learn how to beef up your investment thesis with as much quality information as possible.

But keep in mind that these are only suggestions. The most important part of any personal investment thesis is that it makes sense to you and can serve as a valuable tool to help you along your investing journey.

Related Resources

• Best Impact Investing Online Courses
• Best Green Apps for a More Sustainable Life
• Sustainable Investing vs Impact Investing: What’s the Difference?

Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.

Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.

Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.

When not immersed in the world of finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile.

S T R E E T OF W A L L S

Building an investment thesis.

Now that you understand what characteristics make up attractive long and short ideas, it is time to explain how to formulate an investment thesis. Being able to construct a real and actionable investment idea is in the heart and soul of an analyst’s work in the hedge fund industry. Building a successful thesis begins with (1) rigorous due diligence at the Micro level, (2) aligning that view with the Macro environment, and (3) understanding the overall trade setup.

Good Company Qualities

• High return on capital
• Barriers to entry
• Growing industry
• High margins relative to competition

Good Management

• High insider ownership
• Well respected
• Clean accounting
• Infrequent restating of earnings
• Not overly promotional
• Good allocators of capital

All of these qualities are obvious and won’t differentiate your pitch, but they are qualities you will have to talk about, so make sure you understand them well.

Target Price = Your Earnings Estimate × Multiple

Company Earnings

• Will the company beat earnings expectiations in the next quarter or in the next year?
• If so, what are the catalysts that will cause the Company to beat earnings (e.g., higher revenue, higher margins, lower interest expense, share buybacks, etc.)? Paint the picture of how, when, and why there will be a catalyst that supports your view. Providing an opinion without fully understanding and explaining the relevant value drivers will be a recipe for failure.
• What’s your confidence the company will beat earnings? What’s the probability?
• What’s your margin of safety? What can go wrong?
• Does your pitch rely on multiple expansion? Why? Where is the company trading relative to its historical multiple? Should the multiple trade at a premium or discount given how the company has changed over the years, and where we are now in the business cycle?
• Where is the company trading relative to its peer group? If the entire market has seen multiple expansion, then is it fair that this company should too? In other words, is it expensive or cheap relative to itself historically and/or its peers, and can you explain why this might be wrong?
• What catalyst is going to cause this multiple to start expanding? Again, paint the picture of how, when, and why there will be a catalyst that supports your view.
• What is your confidence in multiple expansion? What’s the probability?

Target Price:

Your target price is the product of a forecasted earnings metric multiplied by the expected multiple. This multiple can be P/E, EV/EBITDA, EV/Sales, FCF/Market Cap, or any other reasonable metric. Some metrics are industry-specific and more valuable for those industries than the aforementioned general ones.

Regardless, if you provide a target price, you need to explain how you arrived at this target, and the stages of your thought process to get there. for example, if you claim that a stock is going to have +50% upside, but feel they won’t beat consensus earnings, then you are calling for +50% multiple expansion, pure and simple.

Although not ideal, stocks in industries with bleak macroeconomic outlooks can still be good investments. It is important to understand what is taking place at the company level, sub-sector level, industry level, and national level. This approach will help you determine whether you are investing in a “good house in a bad neighborhood.”

• How has the stock performed heading into the catalyst, i.e, before you put the trade on? If it has already gone up 10% recently, for instance, it will be much harder to outperform on the catalyst.
• How crowded is the trade? Are a lot of hedge funds already invested in the name? One easy way to determine this is to speak to a sell-side research analyst and ask whether they are getting a lot of calls from other funds regarding the company.
• Is the general public bullish or bearish? If you are researching a short pitch, it is key to check for existing short interest (SI function on Bloomberg). If it is a long, you should review the list of major holders of the stock (HDS function on Bloomberg). If the top holders are several hedge funds, then the stock pitch is likely overcrowded and may not be actionable. One of the biggest mistakes in a hedge fund interview is to pitch a stock that every hedge fund has already heard of and evaluated.

Crowded names can still work, but investors must tread lightly. When the market sells off or there is a change in sentiment, crowded names typically perform the worst. To check this, there is an index on Bloomberg of high hedge fund ownership stocks; you can use it to see whether your idea is on that list to make sure it isn’t already an overcrowded trade idea.

Other technical tools that can help evaluate the setup for a stock include RSI (relative strength index) and moving averages. The RSI is a momentum indicator—below 30 is considered oversold and above 70 is considered overbought.

Ideally, you want a stock that has recently underperformed its peers, is lightly owned by hedge funds, and is heading into a catalyst that you think will have a positive surprise . By contrast, a crowded name that has already outperformed based on the expectation of a positive catalyst will likely get a limited reaction if and when the catalyst does occur. For example, it is very common for companies to beat earnings expectations but not to experience an increase in their stock prices, because the general public or hedge funds are already expecting the earnings surprise. In today’s hyper-competitive market, one needs a truly different variant perception in order to outperform the market.

Other Investing Thoughts

• What constitutes a good investment idea? What does that phrase even mean? The answer is that it means something different to every person–that is what provides opportunities in a market. That is why some investors own a stock and others short it. If everyone agreed on what makes a good investment then everyone would own the same stocks.
• How much should you make per idea? Investors do not even agree on this principle. Developing frameworks for investing will help you follow a set of guidelines that you can refine over the years through experience, and as part of that, you will learn to determine what the expected profit and acceptable risk for a particular investment are.

Value Investing Framework

• Benjamin Graham defined the first basic tenant of value investing as follows: when the price of a security diverges from its intrinsic value (its corresponding cash flows), a value investor should work to exploit that divergence.
• The second basic tenant of value investing is the margin of safety: a security should preferably be purchased at a deep discount to its intrinsic value, to help limit the amount of downside risk the investment has.

Street of Walls Investing Framework

• It is very easy to get ideas from other investment professionals, but it will be very obvious in your pitch whether you have done the analytic work yourself or not.
• This is typically discovered when you are questioned on your assumptions in the model. If you built the model yourself, you can likely defend the assumptions much more intelligently.

Industry Analysis

Market size and growth.

Study the market size and growth of the company’s core industry. Even though you may be studying the beverage industry, the manufacturing companies and distribution companies have very different dynamics. The beverage manufacturers may not be growing much faster than CPI, but the distributors may be going through a massive consolidation period and therefore have earnings that are growing at a much faster pace.

Historical Industry Returns

A security may be cheap and look attractive, but that may be because the returns of the company and the industry are not attractive. For example, the stock Owens Corning (OC) traded at 8x earnings for a long time. This sounds inexpensive, but it was ultimately justified because operating margins were in the single digits. Eventually, however, industry did consolidate and operating margins expanded to 20%. Thereafter, the company’s earnings multiple expanded into the low teens.

Unit Economics

Most bottom-up, fundamental analysis is used to study the unit economics of a company. For example, what does it cost to make and sell one unit of output, and what is the profit on that unit? What are the pricing and volume trends? It is important to understand the value drivers clearly in order to build a detailed operating model for your pitch.

Competitive Positioning

• Do certain companies control industry pricing?
• How sustainable is the company’s competitive advantage?
• Are there high or low switching costs?
• Does branding matter
• Are there regulatory protections, such as tariffs?
• What important considerations are there with respect to the company’s customers and suppliers?

Cyclical / Seasonal

An industry may be in a strong growth period and look very attractive, but it may also be at the peak of a cycle that is possibly about to turn substantially negative. For example, the housing industry looked extremely attractive in the early 2000s, but crashed and was extremely unattractive into the late 2000s and beyond. This is due to both an economic downturn and a systematic overbuilding of homes that collapsed in the middle of the decade. In addition to the economic/business cycle, certain industries have drivers of cyclicality that are very specific. One example of this is the Oil & Gas industry—the price of oil alone can have a huge impact on a Oil & Gas company’s earnings potential.

It is also important to understand the seasonality of the business. Retailers tend to sell more product during the fourth quarter of the year, because of the holiday shopping season. Therefore, it may be wrong to extrapolate a trend in March and April if the majority of the company’s sales take place in the later months.

Investment Considerations

When you start working for a hedge fund you will quickly learn that each fund has their own unique investment style. Some hedge funds simply will not invest in companies that have weak management teams. It does not matter how attractive the opportunity or valuation is—the fund simply won’t invest. This principle often results from an investor getting burned from a bad management decision, such as a bad acquisition, or a focus on short-term earnings at the expense of long-term objectives. After gaining experience analyzing companies, you will eventually develop your own philosophy. Still, bear in mind that other investors may have an opinion on this topic that differs from yours, and you need to consider the philosophies of your teammates when evaluating an investment idea.

In studying management teams, you should look at the management team’s track record and understand both the buy-side and sell-side opinion on the management team. Study the company’s internal philosophy: how do they allocate capital? Is the current management team following what the company has always done? Another key to understanding how a management team will probably act is to study how the members are compensated. Is their compensation tied to revenue or earnings, return on capital, or some other metric? How much stock does the management team currently own? How much risk are they taking? Are they buying or selling stock? How many options do they have outstanding?

Study both relative and absolute valuation. A stock may appear cheap when compared to a stock in another sector, but very expensive against its peers. Thus, different investment situations call for different valuation metrics to be used.

One example of this principle is that it is completely unhelpful to use P/E if the company has no earnings (or negative earnings). You should also study the rate of growth of the earnings metric you chose. A company may look expensive at 30x earnings, but if it is doubling revenue every year and tripling earnings, it may not be so expensive after all. In fact, if you believe that this trend can continue, it may be an excellent long investment idea.

• Is there a difference between your earnings estimates and those of the street?
• If not, is your thesis really interesting, or is it just a “consensus trade”?
• What are the key events that the street will care about? Is it an earnings release, a new product release, or something more unusual?
• Does the street care about what happens next quarter or are they more focused on the potential signing of a big contract that could take place at any time?

Donald Rumsfeld once said there are “Known unknowns and unknown unknowns.” Some risks are riskier than others. How does the company control for this? How do you as the investor assess the downside risk from this?

• What has to happen for the downside case to play out?
• What has to happen in order to lose some benchmark amount, say 20% or more?
• If that event plays out, what will happen to the multiple? Will it go down or actually expand?
• All in all, what is the probability of a downside event and what is the maximum potential loss you might face in such a scenario?

Catalysts are extremely important in identifying when you are going to “get paid.” This is a crucial factor in sizing positions. If a catalyst is expected to take place in the near future, you probably want to have your position fully sized immediately. If not, it may make sense to taper into a position.

Framework for Investing: Large Market Movements

Rising Markets: The typical reaction to a rising stock price is to “chase” the returns. That means when a stock continuously goes up, day after day, the investor feels like he or she is missing an opportunity, and will be inclined to buy the stock. This pile-on mentality causes more investors to become a part of the action. This is a classic, human reaction to a strongly outperforming stock, and it can often lead to poor returns due to an undisciplined approach and the fickle nature of the market.

The same thing can happen when a stock continues to drop in price. Investors tend to panic and sell at exactly the worst time. During the heat of the battle, people tend to get emotional and sell their best stocks out of fear.

• Tell yourself it is normal to react this way when you are losing a lot of money. Fear is normal: both the fear of missing an opportunity and the fear of continuing to lose more money.
• Ask yourself, “Has my investment thesis changed?” If it has, then sell, but if it has not, then ignore your fears and hold the position.
• Have strict target prices in place. This will help you exit a position once your target has been achieved, and thereby avoid the trap of trying to “ride a winner.”

Here is a related excerpt written by Benjamin Graham, from The Intelligent Investor:

• “Imagine that in some private business you own a small share that costs you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects, as you know them. Often, on the other hand, the value he proposes seems to you a little short of silly.
• If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.”

Trading Considerations

The liquidity of a single stock is not a reason for a fundamental investor to buy a stock, but it can definitely be a reason for an investor not to buy a stock. The less liquid a stock is, the riskier the position becomes, as it is difficult to exit an illiquid position—especially during turbulent market conditions, when liquidity is often demanded.

In order to determine how liquid a stock is, you need to see how many shares trade on a regular basis. For example, if the average daily volume of a $10 stock is 1 million shares, then the stock trades $10 million per day. If you have a $1 million hedge fund, and you want to take a 10% position, you will need to buy $100,000 worth of stock, or 10,000 shares. If you wanted to buy all of that stock in 1 day you could, as you would only account for 1% of the daily volume ($100,000 in stock to be purchased ÷ $10,000,000 daily volume = 1%). A reasonable rule of thumb is that you do not want to account for more than 10-15% of a stock’s daily trading volume if you do not want to influence its price. So in this example, you could buy up to $1,500,000 worth of stock per day without moving the share price. If you were to buy $2,000,000 of stock in 1 day, or 20% of the daily volume, you would likely cause the stock price to increase (at least temporarily). If your desired position is much larger, then it could take many days to accumulate the desired position – and similarly, it could take a long time to unwind the position when you want to exit. This makes the investment much more risky.

Therefore, a stock may have fantastic management, excellent earnings growth, and an attractive price, but if there is no liquidity you probably simply cannot buy it.

Shareholder Base

You may think that you have found a gem: a rare and precious investment opportunity that no other hedge fund is talking about. Fortunately, that notion is relatively easy to confirm or disprove. To check and see whether other sophisticated investors are involved in the company you’re researching, you can pull up the company’s quarterly holdings report on Bloomberg and see who the largest shareholders are.

For example, suppose that W.R. Grace (GRA) offers an exciting investment opportunity, according to your analysis. However, looking at the holders list, you determine that other hedge funds are well aware of this opportunity, as the top shareholders include large hedge funds such as Lone Pine, York Capital, TPG Axon, and Hound Partners.

It may not be a bad thing that other hedge funds are involved. You will probably be invested in a good company in this case, as large hedge funds rarely get involved in unsound investment ideas. That being said, crowded trades can, again, be very risky. First, if the market is already anticipating good news, it may be that the good news is already baked into the stock price. Second, if bad news comes out, then everyone will likely be forced to run for the exits at the same time. This will lead to adverse price movement that could destroy your holding.

Hedge funds in general tend to be short-term focused, so it could turn into a situation where one investor exits swiftly and triggers a domino-effect panic, crushing other investors in the wake.

Looking at charts can be very deceiving and can create misleading signals. For example, the stock chart below shows a quickly rising stock price, but that does not mean it is expensive. It may be cheap relative to its own history, the rest of the sector, or the market as a whole. The entire stock market might have been going up rapidly, or the sector as a whole might have had a big rally, and relative to the sector the stock underperformed, so it may actually be cheap on a relative basis.

You may also want to compare several valuation metrics simultaneously. For example, a company may look expensive on a Price/Earnings basis but cheap on an EV/EBITDA basis.

In the graph below, you can see that Factset Research Systems (FDS) is trading at 20x P/E. Relative to the market that is high, but relative to its own history, that is a normal trading ratio.

Business Model Questions

It is just as important to understand the industry in which a company operates as it is to understand the company itself. For example, if you are studying a homebuilder, it is important to understand the companies the homebuilders buy supplies from. If the building products companies are raising their prices and the homebuilder cannot raise prices, the builders are going to see their margins compress. Therefore, it is important to scan what is happening with related companies across the industry and sector to get a sense of the overall dynamic affecting the company’s earnings potential.

Homebuilding Industry: Related Participants

• Building Materials – USG, EXP, VMC, SHW
• Home Builders – LEN, DHI, KBH
• Building Products – WHR, MAS
• Furniture – TPX, LZB, ETH
• Extensions – Lawn care – SMG
• Mortgage Originator – BAC, C
• Insurance Provider – PRU, MET

A change by the mortgage originator will likely have an impact on the entire industry. If Bank of America (BAC) tightens its origination standards, then people will buy fewer homes; homebuilders will buy less carpet to go inside the homes; fewer beds will be sold; etc. Therefore, before considering an investment in a homebuilder or related entity, it would behoove you to perform checks to see what else is occurring in related industries and sectors across the value chain.

Business Model Advantages

Barriers to entry.

Companies with barriers to entry have a huge advantage relative to companies that do not. These barriers can occur for a variety of reasons, but some of the most common include economies of scale, substantial investment requirements, technological innovation, favorable government regulation, and networking effects. eBay, for example, is an extremely difficult company to compete against, because the company has established a formidable position as the largest Internet-based auction site available. Both buyers and sellers are unlikely to go to other sites, because both realize that eBay offers more individuals on the other side of the aisle to transact with. This makes it hard for new auction companies to compete with eBay effectively.

Companies in most industries will claim that they have high barriers to entry, but time will often show that a company earning significantly higher than its cost of capital will attract competitors. Put simply, if the company is earning outsized returns on the capital it invests, then it will attract competitor investment seeking to earn comparable returns. This competitive investment will result in increased production and sales competition, and diminished profit-earning potential will surely follow in the future.

Cost Advantages

The low-cost producer can have a huge advantage over its competition. In industries with large legacy assets, such as cement or coal production, the players with the newest assets are typically the lowest cost providers, and that allows for lower pricing often results in greater market share.

Alternatively, there is also a learning curve that can create the reverse effect, wherein the older industry participants have lower costs as the newer players are still “figuring it out.”

Customer Habits

Repeat purchase items, such as paper or office supplies, can create a strong advantage for the producer. The more entrenched companies become within their customer bases, the higher the switching costs for those customers. For example, a large technology roll-out may effectively lock a customer in to the provider’s products, as it costs too much to execute a complete technology overhaul to switch to a different vendor.

Economies of Scale

Companies with large fixed costs need scale in order to make a profit. The larger the fixed costs, the larger the scale needs to be. Incremental margins can be very high once a company crosses a certain threshold and is able to sufficiently leverage its cost base. This can make a company highly attractive and cause a company to trade at a high multiple, once the threshold production level has been achieved. This phenomenon is sometimes referred to as “operating leverage.”

Oligopolies, or Monopolistic Competition

Functioning oligopolies can act similar to monopolies, in terms of locking in outsized profit margins from its business. These situations should not take place for long according to basic economic theory, but they can and quite often do. For example, the roofing industry has greatly consolidated in recent years, so that four players currently control 80% of the roofing shingle manufacturing market. When one of the four manufacturers raises its prices, the other three can easily follow. For the past five years, none of the players has broken from the pack and tried to steal market share from the other three by offering a lower price. As a result, the industry has seen its operating margins grow from 8% to 20% in recent years. Whether this increase in margin is sustainable over the long term remains to be seen.

Expected Return

What is a “good” return for a portfolio? How do you know? What is a good return for an individual investment?

The Academic Approach

Expected Rate of Return = Risk-free return + Beta × (Expected Market Return – Risk-free return)

This is the equation from the Capital Asset Pricing Model (CAPM), which you will learn in school—but try pitching this to a portfolio manager at a hedge fund. He or she will likely tell you to get lost!

Theoretically this makes perfect sense, but most hedge funds don’t use this as a hurdle rate. Most funds target a 20% return—though very few are capable of actually achieving that return consistently.

The Practical Hedge Fund Approach

A more practical approach is to study what percentage of the time you will make money and lose money on your investments. From there, you need to understand how much you make when you are right and how much you lose when you are wrong. Here is an example of this framework:

As you can see:

Average Return per Idea = (% Right × Avg. Return When Right) + (% Wrong × Avg. Loss When Wrong)

% Right is often referred to as your “Hit Rate,” and Average Return When Right is often referred to as your “Slugging Rate.” The magnitude of your wins relative to that of your losses is referred to as your “Win/Loss Ratio.”

The best analysts are right about 60% of the time. Most people think they will be right closer to 75%, but the sad truth is that most investors will not do much better than 50%. You can still make money being right only 50% of the time, but you have to be very disciplined about cutting your losses. That is why maintaining a 2-to-1 Win/Loss ratio is so important.

Here is what is so troubling about the example given above: a fantastic analyst who is right 60% of the time, makes a 30% return when right, and maintains a 2-to-1 Win/Loss ratio, will only earn an average return of 12% per idea. However, as we noted, most hedge funds try to earn 20%, so how can they do this?

One possible solution is to employ leverage, but from an analyst’s perspective, he/she typically does not have control over this. So how can an analyst generate a higher return per idea?

A higher Hit Rate is very difficult to achieve. Also, achieving greater than a 2-to-1 Win/Loss ratio is also not realistic, as it would require tighter stop-loss controls that may result in the premature exit of lucrative investments simply because they took an initial “hit” before panning out.

Therefore the only real area to control is the Slugging Rate. If this is the lever, then the analyst cannot afford to invest in stocks that will only earn 10%, 20%, or even 30%. It is just not a high enough annualized return. At a 40% Slugging Rate, the analyst can get closer to the elusive 20% total return hurdle.

40% thus tends to be a “sweet spot” for many hedge fund analysts, as a minimum hurdle rate of return for putting on a position. If the investment only has a 6-month duration, then the return only needs to be 20%, which is roughly 40% on an annualized basis.

Searching for 40% Returns

What needs to happen in order for a stock price to increase? Either earnings need to expand, or the multiple needs to expand, or a combination of the two. The first step is to look at where the sell-side estimates are for the current year and two years into the future. If AAPL is trading at $611 today and is expected to earn $54 in 2013 and $63 in 2014, it is trading at 11x P/E and 10x P/E in 2013 and 2014. In order for the stock to reach $855, or 40% higher, you might project earnings to be 20% higher than the street in 2013 at ~$65, and for the multiple to expand by 20% to ~13x. Or, you might predict stronger earnings growth and less multiple expansion, or vice versa.

As you can see, it pays to think through different scenarios needed to achieve your target return.

A common mistake analysts make is to say that they believe a stock will appreciate by an amount but have earnings expectations that equal or are very similar to those of sell-side earnings estimates. That means that for the investment thesis to prove correct, the stock must increase entirely due to multiple expansion. That is generally viewed as a “low-quality” thesis, as expansion in a valuation multiple is more difficult to predict and gain confidence in than is growth in earnings.

Evaluation of the Return on Investment of BIM—The Case of an Architectural Firm

• Conference paper
• First Online: 30 May 2022
• Cite this conference paper

• N. Lechhab 15 ,
• I. Iordanova 15 &
• D. Forgues 15  

Part of the book series: Lecture Notes in Civil Engineering ((LNCE,volume 251))

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Building Information modeling (BIM) is recognized in the literature as a potentially powerful means of improving project performance in the construction industry. The adoption of BIM requires significant and ongoing investment in hardware, software, training, and process change. However, for most companies, the choice to invest in BIM is essentially an economic one. Therefore, an assessment of the return-on-investment (ROI) of BIM is necessary. In addition, there is in fact no standard method for calculating BIM ROI. The aim of this action-research was to define and validate a method to empirically measure the ROI of BIM implementation in an architectural firm. Based on the literature, KPIs were established to compare projects realized with BIM and without BIM to build a business case for the benefits of using BIM. Benchmarking results suggest that the use of BIM allows for better control of project costs, reduces the speed of production of project execution plans, helps optimize workflow, and improves employee productivity. Finally, this exploratory study implements a KPI-based strategy that allows the firm to consistently evaluate its BIM implementation performance. Future opportunities for research to validate and improve the ROI assessment of BIM are recommended.

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Lechhab, N., Iordanova, I., Forgues, D. (2023). Evaluation of the Return on Investment of BIM—The Case of an Architectural Firm. In: Walbridge, S., et al. Proceedings of the Canadian Society of Civil Engineering Annual Conference 2021 . CSCE 2021. Lecture Notes in Civil Engineering, vol 251. Springer, Singapore. https://doi.org/10.1007/978-981-19-1029-6_33

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Perjos, Ulrika. "e-Services - where is the return on investment?" Thesis, University of Gävle, Department of Business Administration and Economics, 2007. http://urn.kb.se/resolve?urn=urn:nbn:se:hig:diva-88.

e-Services, or customer service, over the Internet is becoming increasingly popular and well traveled, but it is also rapidly changing along with new needs and demands as well as new technology. Many companies are about to experience the change from just using the web as a static service tool to be able to use the web as an interactive medium and an online extension of their business. Simplexica has developed, and implemented, their own e-service where their customers have access to their personal pages where they receive news and publications. The main purpose, though, is to make their technical expertise available for their trusted partners and customers in order for them to design their own technical system and to place orders online. Simplexica’s experience from the e-service implementation has proven to be a success in some markets, within some areas and with some customers, but the e-service is still struggling to get utilized to it’s full potential and showing an return on investment.

The purpose and objective of this thesis report is to analyze and generally describe the e-service portal and the e-service business process used by Simplexica today in order to find areas and functions within e-service which Simplexica can use and apply to improve their existing e-service business process. This thesis report also aims to analyze and evaluate the return on investment of the e-service.

More specifically the thesis work strives to answer:

 How could the e-service process in place at Simplexica today be described?

 How to best globally utilize the full concept of e-service at Simplexica?

 Where is the return on investment at Simplexica?

The theoretical framework includes e-services, customer relationship management, business process management and methods of identifying gains, which is combined with a hermeneutic scientific perspective, a deductive research approach and a qualitative method in order to identify and evaluate different ways of calculating a return on investment that would be useful to Simplexica.

There is no simple solution to the dilemma, but the author summarizes the findings and recommendations in a suggested action plan where changes within Simplexica’s current e-service concept and the financial benefits of the investment, are in focus by:

 removing the barriers for using the e-service where a key element is to create a common understanding, internally and externally, for their current e-service and e-process.

 measuring key indicators and to incorporate crucial customer data

 analyzing the return on investment and estimating the effect and value of intangible benefits

 establishing a model for determining a successful investment based on a variant of the 5-table

 extending, upgrading and changing the current e-service by using new technology as, for instance, M2M and e-mail channeling, and to introduce a total customer service strategy throughout Simplexica.

Wagner, Palheta Viana Paulino. "FROISPI Framework return on investment of software process improvement." Universidade Federal de Pernambuco, 2009. https://repositorio.ufpe.br/handle/123456789/1982.

Bigham, Joshua D., and Thomas R. Goudreau. "Return on investment in the public sector." Thesis, Monterey, California. Naval Postgraduate School, 2004. http://hdl.handle.net/10945/1317.

Salih, Sen. "The Impact of BIM/VDC on ROI : Developing a Financial Model for Savings and ROI Calculation of Construction Projects." Thesis, KTH, Fastigheter och byggande, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-101167.

Lal, B., Elvira Ismagilova, Y. K. Dwivedi, and S. Kwayu. "Return on Investment in Social Media Marketing: Literature Review and Suggestions for Future Research." Springer, 2018. http://hdl.handle.net/10454/17927.

Mast, Anne-Sophie. "Ermittlung eines ROI für BI-HR-Lösungen am Beispiel SAP BW." [S.l. : s.n.], 2004. http://www.bsz-bw.de/cgi-bin/xvms.cgi?SWB11675730.

Zakharenkava, Sviatlana. "Investiční rozhodování v IT a ROI jako prostředek měření přínosů ITSM pro business." Master's thesis, Vysoká škola ekonomická v Praze, 2008. http://www.nusl.cz/ntk/nusl-4548.

Kraft, Jakob. " ROI - Effekten av kompetensutveckling inom IT-området : ." Thesis, Högskolan i Gävle, Ämnesavdelningen för företagsekonomi, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:hig:diva-6636.

Kosová, Gabriela. "Investování do nemovitostí." Master's thesis, Vysoké učení technické v Brně. Ústav soudního inženýrství, 2019. http://www.nusl.cz/ntk/nusl-401069.

Čevorová, Nina. "Problematika ROI v oblasti získávání a výběru zaměstnanců." Master's thesis, Vysoká škola ekonomická v Praze, 2010. http://www.nusl.cz/ntk/nusl-77881.

Jayachandran, Naveen. "Understanding roi metrics for software test automation." [Tampa, Fla.] : University of South Florida, 2005. http://purl.fcla.edu/fcla/etd/SFE0001241.

Helander, Fredrik. "Measuring Digital Signage ROI : A combination of Digital Signage and Mobile Advertising as a method for measuring Digtal Signage ROI." Thesis, Umeå University, Umeå School of Business, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-34755.

Marketing has changed a lot the past decade. New modern marketing channels have been developed and marketing have become more effective. This has affected the expectations advertisers have on advertising channels. One thing advertisers increasingly expect is to be able to efficiently measure the result of advertising, the ROI. A method for measuring ROI of digital signage is in focus in this study. The measurement is enabled by a combination of digital signage and mobile advertising. First a consumer is exposed to digital signage encouraging SMS interaction in order to receive an electronic voucher entitling the consumer to a discount. If the voucher is used, revenues can be linked to a specific campaign and ROI can be calculated. The study focus on measuring the tendency consumers have to interact through SMS when they get exposed to relevant advertising and the tendency they have to use the voucher that is sent to them as a result of the interaction.  The question is how efficient this method is for measuring ROI. In order to bring clarity to the issue, I conducted a quantitative survey using an online self completion questionnaire as measurement tool. It was distributed through e-mail among students at the College of Management at National Taiwan University. Furthermore, I have chosen a deductive approach, my epistemological position is positivism and I therefore utilize the scientific model conducting my research. My ontological position is objectivism meaning that I believe reality is independent of social actors.

The empirical data collected showed that the method in focus have great potential in working efficient for measuring ROI of digital signage. The general tendency to interact through SMS was high, on average 82.3% of the respondents would interact through SMS when getting exposed to relevant advertising. In addition, 96.5% of those would also use the voucher sent to them, enabling ROI calculations.

It was presumed that the digital signage advertising was relevant to such an extent to the consumer getting exposed to it, that he/she already had a purchase intention of the product/service which the advertising regarded. This should be remembered when evaluating the results. Nevertheless, if advertisers succeed in reaching out with relevant advertising enough, the findings in this study indicates that the method is an efficient tool to use for ROI calculations of digital signage.

Lee, Anne Lim. "Return on Investment of the CFTP Framework With and Without Risk Assessment." ScholarWorks, 2017. https://scholarworks.waldenu.edu/dissertations/3306.

Chun, Julie M. "Using a Design for Project Implementation (DFPI) methodology to accelerate Return on Investment (ROI) of an Enterprise Resource Planning (ERP) System." Thesis, Massachusetts Institute of Technology, 2010. http://hdl.handle.net/1721.1/59164.

Wilson, Krystal L. "Determining the Critical Elements of Evaluation for University Advancement Staff: Quantifiable and Nonquantifiable Variables Associated with Fundraising Success." Digital Commons @ East Tennessee State University, 2015. https://dc.etsu.edu/etd/2565.

Brewer, Travis K. "Use of Phillips's five level training evaluation and ROI framework in the U.S. nonprofit sector." Thesis, University of North Texas, 2007. https://digital.library.unt.edu/ark:/67531/metadc3996/.

Yusuf, Mukhtar Abubakar. "What drives individual decision-making of Foreign Direct Investments (FDI) to Sub-Saharan Africa." Case Western Reserve University School of Graduate Studies / OhioLINK, 2020. http://rave.ohiolink.edu/etdc/view?acc_num=case1595283544911804.

Britz, Albertus Gerhardus. "Six Sigma : a framework for successful implementation in South African firms / A.G. Britz." Thesis, North-West University, 2008. http://hdl.handle.net/10394/2601.

Kposowa, Kaitor. "The Financial Success of Franchise Film Sequels: An Exploration of the Relationship of Budget, Personnel Factors, and Reviews with Sequel Return on Investment." Ohio University / OhioLINK, 2015. http://rave.ohiolink.edu/etdc/view?acc_num=ohiou1429187596.

Yañez, David, Iñigo Portilla, and Christopher Claw. "Marketing Investment Effectiveness of Small Clothing Firms in Sweden." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Företagsekonomi, 2015. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-26526.

Wåhlgren, Yvonne. "Hur beräknas den ekonomiska avkastningen för en datalagerinvestering?" Thesis, University of Skövde, Department of Computer Science, 2002. http://urn.kb.se/resolve?urn=urn:nbn:se:his:diva-694.

Syfte med detta arbete är att undersöka huruvida avkastningsberäkning för en datalagerinvestering bör göras, hur det kan göras och om det görs. Vidare avses att undersöka om generella kalkylmetoder kan användas av företag, oavsett storlek, som avser att starta datalagerinvesteringsprojekt. Datalagerteknologin har ännu en hög utvecklingstakt och detta medför ofta höga utvecklingskostnader i samband med investeringar inom datalager.

Undersökningen baseras på en kombinerad dokumentstudie och enkätundersökning. Dokumentstudien belyser den problematik vilken förknippas med problemområdet. Enkätundersökningen fokuseras mot olika större organisationer såsom banker, post och dagligvaruhandeln, vilka idag använder sig av datalager. De tillfrågas om huruvida avkastningsberäkning görs i deras organisation och, i så fall, hur den utförs.

Analysen och resultatet tyder på att problemområdet inte har en enkel lösning och att någon typ av avkastningsberäkning bör användas. Svårigheterna ligger i att värdera de potentiella fördelar som ett datalager kan generera.

Östling, Anna, and Sara Strand. "PR och trovärdigheten : en studie av PR-byrån Four C och dess kund Akzo Nobel." Thesis, Södertörn University College, School of Business Studies, 2005. http://urn.kb.se/resolve?urn=urn:nbn:se:sh:diva-241.

PR appears to be an indistinct division and a complicated resource for companies to value. The current circumstances are negative to the credibility and reliability of PR. This study emphasizes how an application of return on investment contributes to a more strategic use of PR and increases the status and credibility for the division.

We experience that measuring the economic value of PR is of great importance and of current interest with few prior studies made. The purpose of this study is to find out how a PR-agency and one of its clients relates to and works with evaluation of PR-activities and to which extent the economic contribution of the activity is measured.

The foundation which the theoretical reference grounds on is theories of Delusions of PR and the use of benefit-cost analyzes, Stages and Levels for Evaluating Public Relations Programs, Marketing Return on Investment and PR Return on Investment. The theoretical reference serves as a base during the analyze of the study.

The conclusion, based on the empirical body of information, is that an application of return on investment could contribute with a higher status and credibility for the PR-division. The effects that derive from PR-activities are made visible with ROI and can contribute with strong arguments during the negotiation of the budget for the division. PR-agencies are also given motives for the pricing of their work. The objective assessment that is possible to evaluate with help from ROI can bring PR-agencies and companies guidance in the planning of future activities. By considering the budget of PR as an investment its contribution to an organization profit can be evaluated.

The study’s introduces several critical factors for an application of ROI. These critical factors are evaluation, knowledge and understanding PR and it’s potentials, the relation towards the division and cooperation and maturity in the field.

Företag tenderar att ha en otydlig bild av vad PR innebär och ser PR-aktiviteter som svåra att värdera. Detta påverkar trovärdigheten och pålitligheten för verktyget negativt. En naturlig frågeställning för rapporten blir hur en tillämpning av måttet avkastning på investerat kapital kan bidra till en mer strategisk användning av PR och därmed öka funktionens status och trovärdighet.

Vi upplever att mätning av PR:s effekter och beräkning av avkastning på investerat kapital är ett mycket aktuellt, intressant och ett relativt outforskat område. Rapporten syftar därför till att utröna hur en PR-byrå och en av dess kunder förhåller sig till och arbetar med mätning och utvärdering av PR-aktiviteter samt att undersöka i vilken grad resultat av dessa aktiviteter kopplas till lönsamhetsmål.

Som teoretisk grund till denna rapport använder vi oss av teorier kring föreställningar om PR och Benefit-cost-analys, Stages and Levels for Evaluating Public Relations Programs, Marketing Return on Investment samt teorier kring PR Return on Investment. Våra teorier mynnar ut i en teoretisk referensram, vilken används som ett underlag vid analys.

Utifrån det empiriska underlaget drar vi slutsatsen att en tillämpning av lönsamhetsmått kan leda till ökad status och trovärdighet för PR-funktionen. ROI synliggör de effekter som kommer av PR-aktiviteter och underlättar för funktionens argumentation vid budgetförhandlingar. Med hjälp av ROI får PR-byråer tydligare argument till det pris som bestäms för PR-aktiviteter. Vidare kan PR-byråer och företag ta fram objektiva resultat, vilka kan verka vägledande inför framtida aktiviteter. Genom att se PR:s budget som en investering kan dess bidrag till en organisations lönsamhet tydliggöras.

I slutsatsen presenteras ett antal kritiska faktorer för tillämpning av ROI. Dessa är utvärdering, kunskap och förståelse för PR och dess potential, förhållningssätt till funktionen samt samarbete och mognad inom området PR och mätning.

Locust, Jonathan E. Jr. "An Outcome Study Examining the Institutional Factors Related to African-American College Graduation Rates and Return on Investment." University of Toledo / OhioLINK, 2017. http://rave.ohiolink.edu/etdc/view?acc_num=toledo1498811978269526.

Cardoso, Fernando de Carvalho. "Resultados em e-Learning corporativo." Pontifícia Universidade Católica de São Paulo, 2011. https://tede2.pucsp.br/handle/handle/18079.

Khumalo, Cynthia Tuduetso. "An evaluation and a cost-benefit analysis of the HIV/AIDS peer education programme of the South African Police Service / by Cynthia Tuduetso Khumalo." Thesis, North-West University, 2007. http://hdl.handle.net/10394/1823.

Zimmer, Gustavo. "Avaliação técnica e econômica do uso de sementes de soja no Rio Grande do Sul." Universidade Federal de Pelotas, 2017. http://guaiaca.ufpel.edu.br:8080/handle/prefix/4036.

Brodin, Igor, and Abraham Shahin. "EA & Organisation : Att kartlägga en kartläggningsprocess." Thesis, Högskolan i Borås, Institutionen Handels- och IT-högskolan, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:hb:diva-16928.

Sousa, Inês Oliveira de. "Avaliação e retorno de investimento em formação em vendas : estudo de caso." Master's thesis, Instituto Superior de Economia e Gestão, 2019. http://hdl.handle.net/10400.5/19780.

Williams, Heiletje Marili. "The effect of the human relations and health maintenance components of the SAPS self-management programme / Heiletje Marili Williams." Thesis, North-West University, 2006. http://hdl.handle.net/10394/1631.

Järkeborn, Sandra, and Vera Werner. "Enabling the Computation of Marketing ROI Through Technical and Organizational Changes : A Case Study." Thesis, KTH, Skolan för industriell teknik och management (ITM), 2020. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-279620.

Lízner, Tomáš. "Využití automatizace testování z hlediska nákladů a přínosů." Master's thesis, Vysoká škola ekonomická v Praze, 2014. http://www.nusl.cz/ntk/nusl-192423.

Rais, Filip. "Master Data Management, Integrace zákaznických dat a hodnota pro business." Master's thesis, Vysoká škola ekonomická v Praze, 2009. http://www.nusl.cz/ntk/nusl-72428.

Huisamen, Petronella. "Die effek van die besluitnemings- en lewensdoelkomponente van die SAPD se selfbestuur personeelkapasiteitsbouprogram / Petronella Huisamen." Thesis, North-West University, 2005. http://hdl.handle.net/10394/1518.

Waz, Magdalena Agata. "Return on Investment." Miami University / OhioLINK, 2014. http://rave.ohiolink.edu/etdc/view?acc_num=miami1407154357.

Gonzalez, Granadillo Gustavo Daniel. "Optimization of cost-based threat response for Security Information and Event Management (SIEM) systems." Phd thesis, Institut National des Télécommunications, 2013. http://tel.archives-ouvertes.fr/tel-00939091.

Au, Yea-wan Anna. "Return to educational investment in Hong Kong." Click to view the E-thesis via HKUTO, 2003. http://sunzi.lib.hku.hk/hkuto/record/B31954674.

Myung, Young-soo, and Dong-wan Tcha. "Return on Investment Analysis for Facility Location." Massachusetts Institute of Technology, Operations Research Center, 1991. http://hdl.handle.net/1721.1/5306.

Au, Yea-wan Anna, and 區綺雲. "Return to educational investment in Hong Kong." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2003. http://hub.hku.hk/bib/B31954674.

Bigham, Joshua D. "Return on investment in the public sector /." Monterey, Calif. : Springfield, Va. : Naval Postgraduate School ; Available from National Technical Information Service, 2004. http://library.nps.navy.mil/uhtbin/hyperion/04Dec%5FBigham.pdf.

Puglia, Vincent. "Unified communications : the search for ROI through tomorrow's business communication solutions /." Online version of thesis, 2010. http://hdl.handle.net/1850/11590.

Tse, Pui-yin Fiona, and 謝佩妍. "Systematic review : the return on investment of EHR implementation and associated key factors leading to positive return-on-investment." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2013. http://hdl.handle.net/10722/193818.

Tiedemann, Fredrik. "Strategic lead-times and their implications on financial performance." Licentiate thesis, Tekniska Högskolan, Högskolan i Jönköping, JTH, Industriell organisation och produktion, 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-34804.

Rios, Cesar G. "Return on investment analysis of information warfare systems." Thesis, Monterey, Calif. : Springfield, Va. : Naval Postgraduate School ; Available from National Technical Information Service, 2005. http://library.nps.navy.mil/uhtbin/hyperion/05Sep%5FRios.pdf.

Traver, Aaron S., and Douglas W. Harold. "Return on Investment of Network Design Exchange (NDEX)." Monterey, California. Naval Postgraduate School, 2005. http://hdl.handle.net/10945/10007.

Humr, Scott A. "Understanding return on investment for data center consolidation." Thesis, Monterey, California: Naval Postgraduate School, 2013. http://hdl.handle.net/10945/37641.

Hidalgo, González Guillermo, and António Queirós. "Railway Mobility Hubs: A feature-based investment return analysis." Thesis, Blekinge Tekniska Högskola, Institutionen för industriell ekonomi, 2019. http://urn.kb.se/resolve?urn=urn:nbn:se:bth-18204.

Jan, Paul Jenq-Haw. "Tailored hospital supply chain for greater return on investment." Thesis, Massachusetts Institute of Technology, 2006. http://hdl.handle.net/1721.1/35536.

Kellum, Jennifer Louise. "Child-care: The return on investment for American business." CSUSB ScholarWorks, 1998. https://scholarworks.lib.csusb.edu/etd-project/1657.

Zakharenkava, Sviatlana. "Decision-making in IT investment and ROI as a measure of ITSM business benefits." Master's thesis, Vysoká škola ekonomická v Praze, 2008. http://www.nusl.cz/ntk/nusl-165227.

Sand, Adam, Emil Svahn, and Lange Kim Nilsson. "Investment Strategies : Can accumulated stock recommendations provide positive abnormal return?" Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Redovisning och finansiering, 2009. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-11305.

The social return on investment model: a systematic literature review

Meditari Accountancy Research

ISSN : 2049-372X

Article publication date: 10 March 2022

Issue publication date: 19 December 2022

Social return on investment (SROI) has received increasing attention, both academically and professionally, since it was initially developed by the Roberts Enterprise Development Fund in the USA in the mid-1990s. Based on a systematic review of the literature that highlights the potential and limitations related to the academic and professional development of the SROI model, the purpose of this study is to systematize the academic debate and contribute to the future research agenda of blended value accounting.

Design/methodology/approach

Relying on the preferred reporting items for systematic reviews and meta-analyses approach, this study endeavors to provide reliable academic insights into the factors driving the usage of the SROI model and its further development.

A systematic literature review produced a final data set of 284 studies. The results reveal that despite the procedural accuracy characterizing the description of the model, bias-driven methodological implications, availability of resources and sector specificities can influence the type of approach taken by scholars and practitioners.

Research limitations/implications

To dispel the conceptual and practical haze, this study discusses the results found, especially regarding the potential solutions offered to overcome the SROI limitations presented, as well as offers suggestions for future research.

Originality/value

This study aims to fill a gap in the literature and enhance a conceptual debate on the future of accounting when it concerns a blended value proposition.

• Social return on investment
• Social impact assessment
• Literature review
• Impact of accounting

Corvo, L. , Pastore, L. , Mastrodascio, M. and Cepiku, D. (2022), "The social return on investment model: a systematic literature review", Meditari Accountancy Research , Vol. 30 No. 7, pp. 49-86. https://doi.org/10.1108/MEDAR-05-2021-1307

Emerald Publishing Limited

Copyright © 2022, Luigi Corvo, Lavinia Pastore, Marco mastrodascio and Denita Cepiku.

Published by Emerald Publishing Limited. This is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

The world has recently witnessed the decline and fragmentation of established bureaucracies in the face of a progressively more complex system involving the public, private and third sectors ( Mintzberg, 2015 ; Osborne, 2006 ). New geographies of value creation, including social and environmental dimensions, have emerged and merged into the economic value defining the concept of blended value ( Emerson, 2003 ). Specifically, while economic value is created when there is a financial return on an investment, social value is produced when people’s lives are improved owing to the successful combination of resources, input and processes. Further, environmental value regards the preservation of natural capital and its continuous regeneration ( Stiglitz et al. , 2009 ).

The combination and integration of the three dimensions of value has increasingly appealed different types of organizations within the private, public and third sectors.

Since the 2000s, the number of methodologies for assessing economic, social and environmental value has been rapidly increasing, innovating the field of policy, management and accounting ( Corvo et al. , 2021a ).

To satisfy the need for assessing the blended value, different approaches have been used over the years, including cost-effectiveness analysis, cost–utility analysis and cost–benefit analysis ( Layard and Glaister, 1994 ). Among these approaches, a methodology known as social return on investment (SROI) was first developed and promoted in the nonprofit sector by the Roberts Enterprise Development Fund (REDF) in 1996 and concurrently in academia as a social impact assessment tool. During the past decades of the 21st century, the nonprofit sector underwent a period of deep change, being challenged by the paradigm of social innovation and social entrepreneurship ( Portales, 2019 ) and being increasingly involved in multistakeholder relations with profit organizations, public administrations and financial actors. Consequently, the public and private funders (such as the REDF Foundation), businesses and national governments have also become interested in assessing the blended value created, through which public interventions are selected, therefore assuring, the maximization of the “value for money” and, concurrently, an efficient and economic allocation of public resources.

The SROI is one of the most well-known social impact methods ( Farr and Cressey, 2019 ) which represents “the nearest to a current industry standard for project or organizational level social impact reporting” ( Nicholls and Emerson, 2015 , p. 21). Therefore, using the SROI methodology, socioeconomic value is measured by quantifying the elements comprising an activity’s social value and subsequently monetizing them ( Emerson, 2003 ; Gair, 2002 ). Although this social impact measurement (SIA) model has been given increasing prominence both academically and professionally, it has been highly questioned in the academic field with regard to its practical and conceptual limitations ( Farr and Cressey, 2019 ; Green, 2019; Maier et al. , 2015 ), which have blurred its efficacy, resulting in fluctuating academic production. Based on a systematic literature review that highlights the potential and limitations related to the academic and professional development of the SROI model, this study aims to systematize the academic debate and contribute to the future research agenda of blended value accounting.

The remainder of this paper is organized as follows. The next section highlights the theoretical roots of SROI and how it has developed throughout the years. After providing an account of the research method implemented to conduct this systematic literature review, the results of the analysis are presented. The last section includes a discussion and concluding remarks on future research paths and the limitations of the study.

Theoretical background

The SROI model was initially developed by the REDF in 1996 as a tool to evaluate capital grant requests made by organizations belonging to the REDF’s philanthropic portfolio. The rationale behind REDF’s willingness to assess their resources’ impact was to evaluate how much people’s lives were improving in reality ( Gair, 2002 ) and simultaneously, broaden the traditional concept of financial return by enclosing “who” the return was linked to and including all the elements contributing to the production of the return.

Since its first application, SROI has been gradually modified and integrated with principles and processes usually applied to economic and financial assessments (e.g. return on investment). It aims to assess an intervention under social, economic and environmental points of view, known as the triple bottom line ( Norman and MacDonald, 2004 ), as each investment has to yield social, economic and environmental returns to create blended value ( Emerson, 2003 ). Moreover, REDF tried to overcome the barriers that nonprofit organizations had experienced for years in assessing nonmonetizable social results, by translating social results into dollars by developing the index of return , which is expressed as the ratio of the estimated value of benefits to the value of the estimated investment required to generate those benefits ( Gair, 2002 ).

The SROI model was developed and structured as a specific blended value-accounting method . First promoted in the nonprofit world and second in academia as an impact assessment tool, it has been defined as a framework for measuring and accounting for the much broader concept of value. It seeks to reduce inequality and environmental degradation and improve well-being by incorporating social, environmental and economic costs and benefits ( Nicholls and Murdock, 2012 ). The first step of the SROI process includes the calculation of the SROI ratio, which is the numerical relationship between monetized benefits and investments ( Faivel et al. , 2012 ) or according to Klemelä, a “pseudo-financial parameter” (2016, p. 387). For instance, a ratio of 4:1 indicates that an investment of $1 produces a social value of $4. However, even though the pursuit of a single digit as a summary of the social value created has been overemphasized among the potential results obtained from the SROI analysis, this model is not intended to be one sided and reductive ( Klemelä, 2016 ). Table 1 provides an executive summary of an SROI report to better present the information analyzed through this methodology.

The SROI analysis can target either a specific program or an entire organization in two different directions: evaluative and forecasting. While the former is conducted retrospectively on outcomes that have already occurred, whose information comes from the organization’s management systems, the latter aims to predict how much social value will be created if the activities meet their intended outcomes with information that should stem from an estimation of the organization’s experience, data from previous years and research based on other people’s experiences ( Mook et al. , 2015 ; Nicholls et al. , 2012 , p. 8).

In pursuing the twofold aim of proving and improving ( Arvidson et al. , 2010 ), SROI has spread worldwide since its first discovery in the USA, with different improvements occurring throughout the years. As part of an ongoing process, further advancements of the SROI model were proposed by the New Economics Foundation (NEF) in London and a new version was applied to social enterprises (SEs) throughout the UK with support from the Hadley Trust. One of the guiding principles that drove the expansion of the SROI model was to extend its usage as much as possible by including organizations with limited resources and integrating SROI with social accounting methods. Consequently, two reports were produced by the NEF as guidelines for the correct implementation of the SROI model ( NEF (New Economic Foundation) , 2007, 2008 ). In the second edition of the guidelines, Measuring Real Value: a DIY guide to Social Return on Investment , NEF decreased the number of procedural steps, standardized them, provided more knowledge through increasing assistance for organizations willing to implement the model and developed reliable impact indicators and financial proxies whose scarce availability is highlighted as one of the crucial barriers in the SROI analysis ( Higham et al. , 2018 ; Lophongpanit et al. , 2019 ; Murzaliyeva et al. , 2018 ; Ribeiro et al. , 2018 ; Willis et al. , 2018 ) leading to what Cooney defines as the “illusion of precision” (2017). Consequently, the choice of financial proxies becomes entirely subjective, compromising the reliability of the model ( Gibbon and Dey, 2011 ; Lingane and Olsen, 2004 ; Mook et al. , 2015 ).

In 2008, owing to the continuing growth of interest in SIA, a British government-funded program, conducted by the consortium of the SROI network, comprising the NEF, Charities Evaluation Services, the National Council for Voluntary Organizations and New Philanthropy Capital, aimed at measuring social value. Consequently, A Guide to Social Return on Investment was published by the Office of the Third Sector in the Cabinet Office in 2009 ( Nicholls et al. , 2009 ) and a revised version was published three years later ( Nicholls et al. , 2012 ). Furthermore, to support practitioners in the implementation of the SROI model, the Social Impact Analysis Association was established in the UK in 2011, and four years later, it merged with the SROI Network in a new organization known as Social Value International (SVI), which represented the governing body of the UK national networks. SVI developed a principle-based approach comprising seven principles of social value ( The SROI Network, 2015 ): involve stakeholders, understand change, do not overclaim, only include what is material, value what matters, be transparent and verify the result . The implementation of these guiding principles requires the undertaking of six stages: establishing scope and identifying stakeholders, mapping outcomes, evidencing outcomes and then availability, establishing impact, calculating the SROI and reporting and embedding ( Nicholls et al. , 2012 ). More specifically, SROI represents “a special case of implementation of these principles where valuation of the outcomes uses financial proxies to monetize outcomes” ( Nicholls, 2017 , p. 128). Therefore, SROI cannot be simplified by showing a single digit that is not able to fully explain how much value has been created, as SROI is “a story about change” ( Nicholls et al. , 2012 , p. 8).

Although the first application of the SROI model was registered in the USA and later in the UK, the model has not remained geographically confined to them. In fact, SROI has become an international product applied by a wide range of organizations in Europe and Asia. Interestingly, in addition to the surge of practical guidelines and handbooks produced by organizations and practitioners over the past 30 years, skepticism seems to dominate the academic field regarding the practical implications of SROI implementation. More specifically, while the SROI’s benefits have been widely explained ( Arvidson and Lyon, 2014 ), its limitations have received less attention, resulting in vague academic explanations. Therefore, starting from the analysis of the limitations hindering both the academic and professional development of the SROI model, this study aims to explore the levers that could maximize the potential of this measurement system.

The systematic literature review has some distinctive conceptual and methodological peculiarities. For instance, in addition to the review provided by Manetti (2014) on the usage of SROI by SEs, the review by Maier et al. (2015) concerning the merits and limitations of SROI as a method for evaluation research and the review conducted by Watson and Whitley (2017) on the different social impact assessment methods.[AQ3]

Several aspects differentiate this review from the others. First, although scholars have attempted to review the literature on SROI, none of the reviews available seem to provide a comprehensive approach by investigating the usage of SROI in all sectors. The majority of reviews have primarily focused on one sector, such as health ( Banke-Thomas et al. , 2015 ; Hutchinson et al. , 2019 ), environment ( Higham et al. , 2018 ) and sports ( Gosselin et al. , 2020 ; Keane et al. , 2019 ). Second, this review endeavors to retrieve as many academic contributions as possible by analyzing four databases: Web of Science , Scopus, EBSCO and JSTOR . Third, additional aspects highlighted in this review include the academic production distributed geographically and over the years and, more importantly, the approach taken (cautionary vs optimistic) by the authors toward implementing the SROI. The results presented stem from the data crossing of the different aspects of the SROI analyzed throughout the study.

The next section details the methodological model used to carry out this systematic literature review.

Methodological approach

The understanding of a specific topic requires a review of the existing literature concerning what has already been researched to reveal its main drivers, issues and future research paths (Hart, 1998). Particularly, Hart claims that a literature review involves:

[…] the selection on the topic, which contains information, ideas, data and evidence written from a particular standpoint to fulfill certain aims or express certain views on the nature of the topic (1998, p. 13; 2018).

However, this selection process requires qualitative researchers to implement “methodological pluralism and diversity rather than unitary or simplistic perspectives” ( Parker, 2005 , 2014 , p. 14). Therefore, to systematically review the literature within a specific stream of research, different strategies must be used to detect appropriate studies to guarantee the analysis of only the significant literature ( Wirtz and Daiser, 2018 ).

The first step of this process involves the selection of some common criteria to classify all available studies. This requires denominating and aggregating specific peculiarities to particular concepts and blending them into clusters, thus providing a clear picture of the research field investigated. However, loss of information is unavoidable, but it is compensated by the transparency of the knowledge acquired ( Webster and Watson, 2002 ).

Several scholars such as Braadbaart and Yusnandarshah (2008) and Arduini and Zanfei (2014) claim that confining the analysis to scientific journals as the main sources of current research represents a valid approach to retrieve high-quality literature ( Norris and Lloyd, 2006 ; Webster and Watson, 2002 ). However, as SROI analysis was originally revealed through a report edited by a private charitable foundation (REDF), both books and grey literature were analyzed in the theoretical framework of this review. This secondary source of knowledge led to the discovery of further publications in academic journals, which were included in the final results. These contributions provided strong inputs to the academic debate regarding the nature of the limitations in the usage of the SROI model and what drives these restrictions to explore the levers that would maximize the potential of this model. However, only academic articles were included in the final data set. Books and grey literature were merely used to understand the foundations of the SROI model.

Grant and Booth (2009) identified 14 different methods for reviewing the literature on a specific topic. However, although scholars have shown compelling examples of reviews such as structured literature review ( Cuozzo et al. , 2017 ), scoping review ( Ashton et al. , 2020 ) and critical review ( Keane et al. , 2019 ), this study implements a systematic literature review as it “seeks to systematically search for, appraise and synthesis research evidence, often adhering to guidelines on the conduct of a review” ( Grant and Booth, 2009 , p. 94). Additionally, as Gosselin et al. (2020) performed in their systematic literature review on SROI in sports, this study also follows the preferred reporting items for systematic reviews and meta-analyses (PRISMA) statement ( Moher et al. , 2009 ). More specifically, this method has been selected for its extensive replicability and transparency compared to traditional literature reviews, as it implies that scholars should follow simple and explicit steps to identify all potentially appropriate articles ( Moher et al. , 2009 ).

Figure 1 shows the flowchart of the PRISMA model followed for this review.

The first step involved the identification of all records related to the research topic investigated (SROI). This process required the analysis of the four databases: Web of Science, Scopus, JSTOR and EBSCO , which comprise several additional databases such as GreenFILE, Academic Search Complete, Business Source Complete and EconLit. This search strategy allowed the examination of a broad spectrum of peer-reviewed academic publications. For each database, either the term “Social Return on Investment” or simply “SROI” had to be included in the search fields such as article title, abstract, keywords, keywords plus and full text. The time frame chosen was 30 years (1990–2020). This initial search led to an unfiltered total batch of 589 peer-reviewed academic English-language publications (114 in EBSCO , 179 in JSTOR , 167 in Web of Science and 129 in Scopus ).

The second step involved screening for the relevance of the initial 589 articles included in the data set. All titles and abstracts were fully screened, 174 duplicates were removed from the data set and in case of ambiguity, papers were fully read by all the authors, leading to the exclusion of 63 additional studies and a data set of 352 articles. Considering the high number of scientific journals currently available, it is likely that we may have missed some significant publications. However, all the authors of this study feel confident that the developed set of articles should represent a concrete basis for this and further analysis.

field – articles ought to regard the usage of SROI in any sector;

topic – studies should contain either the words “Social return on Investment” or “SROI” in any part of the article, such as title, abstract, keyword or full text;

study design – only peer-reviewed academic journals were sought to fully acknowledge the validity of our findings;

year of publication – only studies published between January 1990 and December 2020 were included in the data set;

language – only papers written in English were included to avoid conceptual misunderstandings; and

publication status – only international peer-reviewed academic journal articles were included in the analysis.

Further, testing articles for eligibility resulted in 77 papers that did not meet the eligibility criteria. The full text of each article was carefully read by each author, which allowed the addition of nine papers, reaching a final number of 284 studies included in the data set analyzed ( Appendix ).

Although there is some debate in the social sciences concerning whether to elucidate the differences between applied and theoretical studies ( Ritchie et al. , 2013 ), a clarification of this ought to be made at this point. While theoretical researchers mainly aim at testing, generating or improving thinking within a particular discipline to “generate new theories or test existing theories” ( Patton, 2002 , p. 215), “applied research is concerned with using the knowledge acquired through research to contribute directly to the understanding or resolution of a contemporary issue” ( Ritchie et al. , 2013 , p. 24). In this research context, applied papers refer to studies that mainly focus on a practical calculation of the SROI to verify its suitability in different contexts. However, theoretical studies refer to the deepening of the understanding of either the reliability of the SROI calculation through the application of the SROI algorithm or, more generally, the validity of the results found in comparison with other SIAs. Both types of studies have contributed to strengthening the SROI theoretical foundations.

Legitimation function : The reliability of the SROI stems from its capacity to legitimize the existence and functioning of the projects and organizations primarily aimed at generating social and environmental value ( Klemelä, 2016 ; Luke et al. , 2013 ; Maier et al. , 2015 ; Manetti, 2014 ).

Strengthening function : This mainly refers to either an organization, association or a project that is financially sustainable. In this case, the SROI aims to highlight to the stakeholders the other dimensions of the blended value created, the environmental and/or social, respectively ( Daems et al. , 2014 ; Watson, 2018 ).

Managerial and communicative function : SROI can increase the internal managerial awareness and the external reputation about the relevance of the impact yielded beyond the generic financial terms on which activities, projects and, more generally, organizations are usually assessed ( Hervieux and Voltan, 2019 ).

In the next section, the results obtained from the analysis of the 284 papers included in the final data set are summarized and presented.

To assess the academic production expressed in terms of the number of articles published on SROI, Figure 2 shows the temporal academic production that occurred between 1996 (SROI’s first development by REDF) and 2020.

Even though SROI was first introduced in 1996, interestingly, for more than a decade (12 years) the number of articles related to SROI was no more than three per year, with no academic studies published between 1996 and 2001. However, it is worth noting that between 1996 and 2008, the methodological foundations of the SROI were laid through the publication of the most important reports ( Chun et al. , 2001 ; Emerson et al. , 2000 ; Emerson and Twersky, 1996 ; Jones and Tuan, 2000 ). Moreover, from 2009 to 2013, the number of articles published per year increased slightly, reaching a peak of 48 articles in 2015 and 2020. Unsurprisingly, from 2017 to 2020, academia produced no fewer than 30 articles per year, showing a constantly increasing interest in SROI.

This section presents the main results obtained from the data extraction performed on the 284 articles included in the final data set.

Table 2 shows three main aspects characterizing the evolution of SROI, the type of paper (theoretical vs applied), the approach taken by the author/s (cautionary vs optimistic) and the country of origin. In addition, the transversal approach has been taken to assess the validity and relevance of the results found.

The optimistic approach toward SROI prevails substantially. In fact, 226 out of 284 articles (80%) showed an encouraging attitude toward the results obtained from the application of SROI, of which 123 were from Anglo Saxon countries. Further, the cautionary approach prevails among theoretical studies (34 out of 58) and is mainly published in the UK (29%).

The theoretical approach toward SROI is manifested in less than one-third of the data set (79 out of 284 = 28%), of which almost half (43%) manifested a cautionary vision of SROI. The main drawbacks highlighted by the cautionary scholars refer to the “reductionism” critique, that is the excessive attempt to single out a number able to express the complexity of the impact assessment process ( Moody et al. , 2015 ; Mook et al. , 2015 ). A more philosophical rather than methodological approach is offered by Maier et al. (2015) , who mainly criticize the SROI approach regarding its usefulness, comparability and, more interestingly, its position and role within the branch of social sciences. In this regard, Farr and Farr and Cressey claim that “SROI reduces social complexity to an economic ratio” ( 2019 , p. 240). Furthermore, several scholars firmly reprimand the alleged and unrealistic ability of reducing social complexity based on a positivist and linear approach that can explain unexpected social events ( Maier et al. , 2015 ; Mook et al. , 2015 ; Neil, 2014). Other critiques are based on the effective usage of the results offered by the SROI. For instance, according to Neil, “consultants evaluating social value and impact have limited control over how SROI reports are subsequently used by their client, commissioners or service managers” (2014, p. 157).

Overall, the theoretical doubts regarding the implementation of SROI seem to be weakened by the 205 applied papers included in the data set categorized into legitimation, strengthening, managerial and communicative functions. Applied papers outnumbered theoretical studies considering that, through the practical applications of the SROI, the latter can be further advanced, allowing researchers to lay stronger theoretical foundations for social impact assessment.

In the sample analyzed, the legitimation and strengthening functions are predominant over the managerial and communicative ones. In particular, the legitimation function has proved to be relevant in case of financial difficulties encountered by the target organization where the SROI is still able to identify the social value created in the medium and long term. The SROI methodology shows a clear advantage, either for the donor or the target organization, in maintaining the provision of services because of its potential social and economic value. The health sector is particularly prone to highlight the relevance of this SROI function ( Bhaumik et al. , 2013 ; Laing and Moules, 2017 ; Millar and Hall, 2013 ). Regarding the 91 papers demonstrating the legitimation function of SROI, 60 studies were published in Anglo Saxon countries, of which 22 were published in the UK ( Iafrati, 2015 ; Parks and Brownlee, 2014 ), 16 in Canada ( Akingbola et al. , 2015 ; Shi et al. , 2019 ) and 13 in the USA ( Kousky et al. , 2019 ; Ramon et al. , 2018 ). Interestingly, the sector legitimized by the SROI is mainly the welfare sector, particularly health, with 31 studies ( Aguilar-Agudo et al. , 2019 ; Goudet et al. , 2018 ; Searles et al. , 2016 ), social inclusion counting 13 studies ( Hoffmann et al. , 2014 ; Mihalopoulos et al. , 2020 ) and other sectors such as well-being, education and justice (Akingbola et al. , 2015; Lund, 2015; Ravulo et al. , 2020 ).

The strengthening function requires the direct and active involvement of the stakeholders most affected by the impact created through the activities carried out. The objective of actively involving stakeholders in the SROI analysis is twofold: first, understanding what is important and therefore including it in the SROI analysis ( Nicholls et al. , 2012 ), and second, consolidating the relationship among stakeholders who are usually not part of the assessment process. A total of 68 applied papers were identified. There is a lack of a predominantly investigated sector; however, health, environmental, infrastructure and rural development are the primary sectors of interest ( Barber and Jackson, 2017 ; Vargas et al. , 2019 ; Venezia and Pizzutilo, 2018 ). Even for the strengthening function of SROI, Anglo Saxon countries dominate worldwide in terms of publication, particularly the UK ( Arvidson et al. , 2014 ; Everard et al. , 2017 ).

Lastly, the managerial and communicative function increases awareness of the multiple dimensions of value and enables the innovation of the organizational communication strategy for the internal environment, linking and motivating the internal stakeholders toward socially relevant goal achievements, and the external environment, shaping a more effective accountability for the engagement of the most crucial stakeholders (donors, funders, users, media partners).This function focuses on the communicative power of the SROI regarding the multiple dimensions of the value created through either an organization or approach. This was shown in 46 out of the 226 applied studies included in the data set. Almost half (22 papers) were focused on Anglo Saxon countries and 13 on European countries ( Hirunsalee et al. , 2013 ; Meza-Bolaños et al. , 2019 ; Stuermer and Dapp, 2016 ; Tulla et al. , 2020 ). It has been demonstrated in a variety of sectors, particularly in the health and finance sectors ( Murzaliyeva et al. , 2018 ; Moral Torres et al. , 2020 ). It is also noticeable in culture ( Refki et al. , 2020 ; Viganó and Lombardo, 2019 ; Whelan, 2015), sports ( Davies et al. , 2020 ; Osokin et al. , 2018 ) and health sectors ( Laing and Moules, 2017 ; Moral Torres et al. , 2020 ).

However, regardless of the sectors and functions exerted through the SROI, emerging countries seemed to have contributed to the advancement of the SROI assessment process to a minor extent, as the majority of studies, both theoretical and applied, stem from an Anglo-Saxon context.

Social return on investment limitations and levers for improvement

The ability of SROI to validly convey reliable social and environmental impact does not go unchallenged ( Klemelä, 2016 ), leading to an increase in doubts both within the academia ( Arvidson and Lyon, 2014 ; Luke et al. , 2013 ; Pathak and Dattani, 2014 ) and among practitioners ( Fujiwara, 2015 ; Higham et al. , 2018 ). Consequently, a deeper investigation of these barriers is required and a better understanding of ways to overcome them is necessary to further enhance this methodology and render it more reliable ( Arvidson and Lyon, 2014 ; Banke-Thomas et al. , 2015 ; Nicholls and Murdock, 2012 ).

Two sets of limitations were identified in the order of recurrence within the data set analyzed.

The first set of limitations is related to the lack of standardization, which represents the most recurrent limitations found in the implementation of the SROI methodology. The high subjectivity characterizing the choice of financial proxies ( Goudet et al. , 2018 ; Walk et al. , 2015 ) especially regarding the “soft outcomes” [ 1 ] such as well-being and self-esteem ( Willis et al. , 2018 ), deadweight and displacement, attribution and drop-off percentage ( Farr and Cressey, 2019 ) can make the entire process extremely subjective and, therefore, hardly comparable across similar organizations, programs and interventions ( Banke-Thomas et al. , 2015 ; Jones et al. , 2020a , 2020b ; King, 2014 ; Mook et al. , 2015 ; Vaileanu, 2017 ).

Studies have shown that different individuals working on the same data can produce different final SROI ratios ( Cooney and Lynch-Cerullo, 2014 ). Although the procedural implementation of SROI requires the running of a sensitivity analysis to assess the robustness of the SROI ratio by testing the effect of certain variables, such as the magnitude of discounting factors and the valuation given to important outcomes ( Weston et al. , 2015 ), subjectivity is still a factor that blurs the clarity of this method. However, according to Gosselin et al. (2020) , robust financial valuation can only partly improve the robustness of the SROI if outcomes are not properly measured and if deadweight is not robustly established using a proper study design. The lack of standardization still remains the main obstacle to the implementation of the SROI model, and it is principally because of the absence of benchmark data, metrics and social performance indicators, which inevitably leads to a condition of “information asymmetry” ( Hazenberg et al. , 2015 ) and limited comparability ( Hervieux and Voltan, 2019 ; Maier et al. , 2015 ).

The second set of limitations refers to the lack of resources . SROI analysis is a costly and time-consuming process that requires highly skilled human resources ( Hummels, 2012 ; Millar and Hall, 2013 ; Watson and Whitley, 2017 ). Carrying out a comprehensive SROI analysis involves considerable cost implications in terms of the resources required for training and labor ( Wood and Leighton, 2010 ). Moreover, the lack of financial and human resources is strictly linked to the lack of standardization of the SROI implementation process ( Jackson and McManus, 2019 ; Yates and Marra, 2017 ), which makes the entire process even more resource consuming and subjective ( Rangan et al. , 2011 ; Serrano-Cinca and Gutiérrez-Nieto, 2013 ) than it would usually be in the case of an abundance of resources. Furthermore, the availability of resources is usually directly proportional to the dimensions of the organization or program. Therefore, in the case of small organizations or programs with no standardized procedure to follow, the implementation of the SROI analysis can lead to an incomplete or untruthful analysis of the social impact generated by the activities carried out.

With regard to this first group of limitations, different solutions are offered as levers for improvement. For instance, Chandoevwit et al. (2014) recommend that the value of outcome indicators should be nationally and internationally collected in a systematic way and, therefore, available for any SROI analysis. Nicholls (2017) adds that a clearer normative approach would be beneficial for SROI analysis. Regarding comparability, Bosco et al. (2019) claim that the SROI methodology is highly sensitive to the context in which it is implemented, therefore the findings are difficult to generalize, while Maier et al. affirm that “a SROI analysis that is objective, in the sense of avoiding value judgments, is impossible” (2015, p. 1819). Klemelä (2016) proposed a different perspective to tackle the subjectivity issue, claiming that SROI should be considered as a multidimensional, discursive, legitimating means to manage organizations and prove that they are able to do valuable things ( Nicholls et al. , 2012 ). Therefore, the subjectivity obstacle can be reduced, but not completely removed.

Referring to the second set of limitations, among the academic solutions provided, Jackson and McManus (2019) recommend the provision of training courses for organizations’ stakeholders and SROI analysts to overcome the lack of skills and, consequently, to maximize the potential of the SROI model. On the one hand, the route of acquiring knowledge should be followed by organizations willing to be decisive about overcoming the obstacles caused by a lack of knowledge that characterize the current usage of SROI. On the other hand, the dissemination of knowledge and skills should be more substantially endorsed by government. First, by making more financial resources available, and second, by issuing policies and guidelines that should guide organizations interested in assessing the social value of their activities, without owning the necessary skills and resources, to productively implement the SROI method, therefore overcoming the “practical and ideological barriers” ( Millar and Hall, 2013 , p. 923) that have led so far to a low uptake of SROI as a performance measurement tool ( Arvidson and Lyon, 2014 ).

Discussion and conclusions

The evolution of standardized bureaucracies into a more convoluted system involving the public, private and third sectors ( Mintzberg, 2015 ; Osborne, 2006 ) led to the creation and interest of multiple dimensions of value: the economic, social and environmental ( Emerson, 2003 ). These new dimensions were integrated into what was defined as a blended value ( Manetti, 2014 ; Nicholls, 2009 ). Therefore, the interest in tracking, assessing and maximizing the blended value produced either by an organization or a program implicated the development of several types of measurements. Among these methodological approaches, the SROI, first used in the nonprofit sector, has progressively overcome its initial nonprofit confinement, and consequently was promoted in academia as a social impact assessment tool. Based on a systematic review of the literature highlighting the potential and limitations related to the academic and professional development of the SROI model, this study aims to systematize the academic debate and contribute to the future research agenda of blended value accounting.

A systematic literature review produced a final data set of 284 studies. The results show that despite the procedural accuracy characterizing the description of the model, bias-driven methodological implications, availability of resources and sector specificities can influence the type of approach taken by scholars and practitioners (optimistic vs cautionary).

Despite its limitations being grouped into two main sets – lack of standardization and lack of resources – this study has endeavored to highlight the benefits of the SROI model. It has been identified as a tool to legitimize ( Klemelä, 2016 ; Luke et al. , 2013 ; Manetti, 2014 ) and strengthen the collaboration and active involvement of organizations’ stakeholders, as they are a crucial part of the SROI process ( Nicholls et al. , 2012 ), and, finally, manage the consciousness regarding the social impact potentially produced by the activities carried out, which may offset the insistence on financial returns ( Hervieux and Voltan, 2019 ).

Specifically, the study has highlighted three key points to problematize the academic debate and design of the future research agenda of accounting regarding a blended valu e proposition. The first point regards the need to overcome dichotomous perspectives between scholars supporting the monetization methods versus those who see it as reductive measurement and, simultaneously, preferring the usage of participatory and narrative methods able to manage complexity. Consequently, the future of SROI seems to be directed toward the integration of methods that simultaneously include monetization and attention paid to the complexity of social and environmental value through qualitative insights. The trade-off between monetization and complexity reduces the potential of both perspectives. If monetization methods might suffer from the problem of reductionism and economism ( Farr and Cressey, 2019 ; Maier et al. , 2015 ; Moody et al. , 2015 ; Mook et al. , 2015 ), the participatory and narrative methods fail to express an instantaneous message to favor an effective representation of the blended value generated. These qualitative methods are usually characterized by less effective narratives compared to those expressed by the SROI ratio. Therefore, the two perspectives, rather than being seen as alternatives, should be interpreted as complementary.

However, this poses a key challenge for the future research agenda related to finding integrable solutions capable of balancing the two functions. On the one hand, managing to preserve the ability of the SROI to produce an instantaneous signal and, simultaneously, enriching this message through qualitative elements without diminishing the complexity characterizing social and environmental issues.

In addition, the results showed two important facts that should be considered in future research. First, applied studies outnumbered the theoretical counterparts which is considering that SROI was first developed and promoted in the nonprofit sector by the REDF as a tool to apply the blended value proposition ( Emerson, 2003 ). Therefore, the SROI soon became the applicative principle of the blended value theory, which, to be validated, needs to be pragmatically implemented and tested in different contexts, justifying the higher number of applied studies and reports in comparison with theoretical studies. Second, the results show the prevalence of studies coming from Anglo-American contexts and a clear minority of studies stemming from developing countries.

As Qian and colleagues stated, “extant social and environmental accounting (SEA) research in the developing countries context is limited” (2021 , p. 22). Therefore, more research from previously underexplored contexts including that of emerging countries should be conducted to offer valuable insights from a perspective that is different from the one offered by wealthy economies where the SROI was originally developed.

The second point focuses on the extension of blended value studies by scaling the units of analysis, typically projects and/or organizations, toward value chains and ecosystems. Regarding the use of SROI as a signal, it is crucial not only to focus on the technical issue of calculation but also rather to direct the attention toward the relationships that this signal is able to represent. The key issue is related to the role that the SROI might play within value chains and multistakeholder ecosystems as a common signal that works as “mediating technology” ( Puyou and Quattrone, 2019 ) among the different actors. SROI has increasingly been used within impact investing and impact finance contexts where the presence of different types of stakeholders (public administration, profit companies, investment funds, nonprofit organizations) is more frequent ( Addy et al. , 2019 ). In these contexts, therefore, SROI plays a role of mediating technology, focusing on diverse issues, and provides a blended value evaluation of the ecosystem that ensures the sharing of information pertaining to the interests and perspectives of the different actors involved. In the future research agenda, the mediating role of SROI should gain more attention, especially in complex ecosystems characterized by a wide range of stakeholders with conflicting views and interests ( Dentoni et al. , 2016 ).

The third point concerns the evolution of the accounting systems. Although the current split between financial and nonfinancial disclosure is widely criticized in the literature ( Erkens et al. , 2015 ; Maas and Sampers, 2020 ), practitioners continue to encounter severe obstacles to the adoption of integrated social, environmental and economic accounting reporting systems. In this regard, the lack of standardization has been identified as one of the most hindering elements for tools such as SROI to capture and assess the blended value ( Banke-Thomas et al. , 2015 ; Goudet et al. , 2018 ; Jones et al. , 2020a , 2020b ; Vaileanu, 2017 ; Walk et al. , 2015 ). More specifically, different scholars claim that even though economic, social and environmental values currently deserve equal attention at both academic and practical levels, a fully reliable blended accounting and reporting system is currently unavailable ( Nicholls, 2018 ). Therefore, the main challenge is to accelerate the sharing process of metrics and databases to feed a blended accounting system with the same type of information regarding the economic, social and environmental values generated by organizations, activities and programs. A few steps have been taken in this direction at the international level, such as the Data Stewards Network [ 2 ] initiative promoted by the GovLab and the Rockefeller Foundation that aims at opening the public and private data sets; the International Network for Data on Impact and Government Outcomes [ 3 ] based at the Go Lab of the Oxford University that promotes the sharing of measurements especially related to impact finance advocating for a disclosure of data on outcome, indicators and financial proxies; and finally the Impact Weighted Accounts [ 4 ] research project promoted by the Harvard Business School that tackles the challenge of creating a new accounting system. However, sporadic examples and initiatives do not fully count to have reliable integrated accounting and reporting systems and, therefore, much of the efforts have to be made in this direction to allow both academics and practitioners to gain trust in social, environmental and economic values that define the new era of accounting.

In conclusion, taking into consideration the analysis of the 284 studies, there is a clear sign of a willingness to improve this methodology and extend it as much as possible, contributing to the research agenda designed above and advancing knowledge in those three directions. Indeed, the overall results showed that academia has definitely been moving forward in the development of SROI, confirming what Arvidson and Lyon stated in their study, claiming that SROI “aims to both prove and improve” (2014, p. 5).

This study has some limitations. From a methodological point of view, this review relies only on peer-reviewed articles; therefore, future research may involve additional data sources, especially considering the sheer volume of grey literature now available. Second, generalization of the results should be done cautiously, especially with regard to the solutions found in the literature because, regardless of the type of limitations found in this literature analysis, the results of both the benefits and limitations should be contextualized.

Therefore, future research is required to elucidate the dynamics that drive these obstacles toward a more holistic application of the SROI methodology.

Preferred reporting items for systematic review and meta-analyses flowchart

Temporal academic evolution of SROI

SROI executive summary

*Optimistic and **Cautionary

Source: Authors’ own elaboration

From Go Lab Glossary, University of Oxford: Soft outcomes depend on measurement which is more subjective and less quantifiable available at: https://golab.bsg.ox.ac.uk/knowledge-bank/glossary/#s

https://medium.com/data-stewards-network

https://golab.bsg.ox.ac.uk/knowledge-bank/indigo/

https://www.hbs.edu/impact-weighted-accounts/Pages/default.aspx

Studies included in the data set

Addy , C. , Chorengel , M. , Collins , M. and Etzel , M. ( 2019 ), “ Calculating the value of impact investing, an evidence-based way to estimate social and environmental returns, business and society ”, Harvard Business Review , Vol. 97 No. 1 , pp. 102 - 109 .

Aguilar-Agudo , A. , Herruzo-Cabrera , J. , Ochoa-Sepulveda , J. and Pino-Osuna , M.J. ( 2019 ), “Social return of investment (SROI) in evidence-based treatments”, Clínica y Salud [online] , Vol. 30 No. 1 , pp. 13 - 20 , doi: 10.5093/clysa2019a4 , Epub 02-Nov-2020. ISSN 21740550 .

Akingbola , K. , Phaetthayanan , S. and Brown , J. ( 2015 ), “A-way express courier”, Nonprofit Management and Leadership , Vol. 26 , pp. 173 - 188 , doi: 10.1002/nml.21188 .

Arduini , D. and Zanfei , A. ( 2014 ), “ An overview of scholarly research on public e-services? A meta-analysis of the literature ”, Telecommunications Policy , Vol. 38 Nos 5/6 , pp. 476 - 495 .

Arvidson , M. and Lyon , F. ( 2014 ), “ Social impact measurement and non-profit organisations: compliance, resistance, and promotion ”, Voluntas: International Journal of Voluntary and Nonprofit Organizations , Vol. 25 No. 4 , pp. 869 - 886 .

Arvidson , M. , Lyon , F. and McKay , S. ( 2010 ), The Ambitions and Challenges of SROI , TSRC , Birmingham .

Arvidson , M. , Battye , F. and Salisbury , D. ( 2014 ), “The social return on investment in community befriending”, International Journal of Public Sector Management.

Ashton , K. , Schröder-Bäck , P. , Clemens , T. , Dyakova , M. , Stielke , A. and Bellis , M.A. ( 2020 ), “The social value of investing in public health across the life course: a systematic scoping review”, BMC Public Health , Vol. 20 , pp. 1 - 18 , doi: 10.1186/s12889-020-08685-7 .

Banke-Thomas , A.O. , Madaj , B. , Charles , A. and van den Broek , N. ( 2015 ), “ Social return on investment (SROI) methodology to account for value for money of public health interventions: a systematic review ”, BMC Public Health , Vol. 15 No. 1 , p. 582 .

Barber , M. and Jackson , S. ( 2017 ), “ Identifying and categorizing cobenefits in state-supported Australian indigenous environmental management programs: international research implications ”, Ecology and Society , Vol. 22 No. 2 , p. 11 .

Bhaumik , U. , Norris , K. , Charron , G. , Walker , S.P. , Sommer , S.J. , Chan , E. , Dickerson , D.U. , Nethersole , S. and Woods , E.R. ( 2013 ), “A cost analysis for a community-based case management intervention program for pediatric Asthma”, Journal of Asthma , Vol. 50 No. 3 , pp. 310 - 317 .

Bosco , A. , Schneider , J. and Broome , E. ( 2019 ), “The social value of the arts for care home residents in England: a social return on investment (SROI) analysis of the imagine arts programme”, Maturitas , Vol. 124 , pp. 15 - 24 , doi: 10.1016/j.maturitas.2019.02.005 . Epub 2019 Mar 13. PMID: 31097173 .

Braadbaart , O. and Yusnandarshah , B. ( 2008 ), “ Public sector benchmarking: a survey of scientific articles, 1990-2005 ”, International Review of Administrative Sciences , Vol. 74 No. 3 , pp. 421 - 433 .

Chun , T. , Zellman , G. , Stecher , B. and Giddens , E. ( 2001 ), “ An evaluation strategy developed by RAND for the broad foundation ”, RAND CORP SANTA MONICA CA .

Cooney , K. and Lynch-Cerullo , K. ( 2014 ), “ Measuring the social returns of nonprofits and social enterprises: the promise and perils of the SROI ”, Nonprofit Policy Forum , Vol. 5 No. 2 , pp. 367 - 393 , doi: 10.1515/npf-2014-0017 .

Corvo , L. , Pastore , L. and Ghibelli , M. ( 2021b ), “ Who likes SIBs? A bibliometric analysis of academic literature (time span 1990-2018) ”, Contemporary Issues in Sustainable Finance , Palgrave Macmillan , Cham , pp. 5 - 36 , doi: 10.1007/978-3-030-65133-6_2 .

Corvo , L. , Pastore , L. , Manti , A. and Iannaci , D. ( 2021a ), “ Mapping social impact assessment models: a literature overview for a future research agenda ”, Sustainability , Vol. 13 No. 9 , p. 4750 , doi: 10.3390/su13094750 .

Cuozzo , B. , Dumay , J. , Palmaccio , M. and Lombardi , R. ( 2017 ), “ Intellectual capital disclosure: a structured literature review ”, Journal of Intellectual Capital , Vol. 18 No. 1 , pp. 9 - 28 , doi: 10.1108/JIC-10-2016-0104 .

Daems , R. , Maes , E. , Mehra , M. , Carroll , B. and Thomas , A. ( 2014 ), “Pharmaceutical portfolio management: global disease burden and corporate performance metrics”, Value Health , Vol. 17 No. 6 , pp. 732 - 738 , doi: 10.1016/j.jval.2014.07.005 , PMID: 25236997 .

Davies , L.E. , Taylor , P. , Ramchandani , G. and Christy , E. ( 2019 ), “Social return on investment (SROI) in sport: a model for measuring the value of participation in England”, International Journal of Sport Policy and Politics , Vol. 11 No. 4 , pp. 585 - 605 .

Dentoni , D. , Bitzer , V. and Pascucci , S. ( 2016 ), “ Cross-sector partnerships and the co-creation of dynamic capabilities for stakeholder orientation ”, Journal of Business Ethics , Vol. 135 No. 1 , pp. 35 - 53 .

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Further reading

Amin , A. , Cameron , A. and Hudson , R. ( 2002 ), Placing the Social Economy. Contemporary Political Economy Series , Routledge , London , ISBN 0-203-16612-4 Master e-book ISBN .

Barata Cavalcanti , O. , Costa , S.A. , Ferris , E. , Guillermin , M. , Palmedo , C. , Crossley , R. and Huang , T.T.K. ( 2020 ), “ Benchmarking food and beverage company investment in healthful eating and active living initiatives ”, Corporate Social Responsibility and Environmental Management , Vol. 27 No. 2 , pp. 1051 - 1068 , doi: 10.1002/csr.1865 .

Barman , E. , Hall , M. and Millo , Y. ( 2021 ), “ Demonstrating value: how entrepreneurs design new accounting methods to justify innovations ”, European Accounting Review , Vol. 30 No. 4 , pp. 675 - 704 .

Broccardo , E. , Mazzuca , M. and Frigotto , M.L. ( 2020 ), “ Social impact bonds: the evolution of research and a review of the academic literature ”, Corporate Social Responsibility and Environmental Management , Vol. 27 No. 3 , pp. 1316 - 1332 , doi: 10.1002/csr.1886 .

Clarke , T. (Ed.) ( 2004 ), Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance , Routledge , London .

Cooney , K. ( 2017 ), “ Legitimation dynamics: how SROI could mobilize resources for new constituencies ”, Evaluation and Program Planning , Vol. 64 , pp. 110 - 115 , doi: 10.1016/j.evalprogplan.2016.11.010 .

Go Lab glossary, University of Oxford . ( 2022 ), “ Batlanik School of Government, Government Outcome Lab ”, available at: https://golab.bsg.ox.ac.uk/knowledge-bank/glossary/#s

Hood , C. ( 1998 ), “ The arts of the state: culture ”, Rhetoric and Public Management , Clarendon , Oxford .

Krlev , G. Münschner , R. and Mülbert , K. ( 2013 ), “ Social return on investment (SROI): state-of-the-art and perspectives. A meta-analysis of practise in social return on investment (SROI) studies published 2002-2012 ”, available at: www.csi.uniheidelberg.de/downloads/CSI_SROI_Meta_Analysis_2013.pdf Heidelberg, Germany: Heidelberg University.

Labuschagne , C. , Brent , A.C. and Claasen , S.J. ( 2005 ), “ Environmental and social impact considerations for sustainable project life cycle management in the process industry ”, Corporate Social Responsibility and Environmental Management , Vol. 12 No. 1 , pp. 38 - 54 , doi: 10.1002/csr.76 .

Manetti , G. , Bellucci , M. , Como , E. and Bagnoli , L. ( 2015 ), “ Investing in volunteering: measuring social returns of volunteer recruitment, training and management ”, Voluntas: International Journal of Voluntary and Nonprofit Organizations , Vol. 26 No. 5 , pp. 2104 - 2129 .

Nicholls , J. Lawlor , E. Neitzert , E. and Goodspeed , T. ( 2015 ), “ The SROI network. A guide to social return on investment ”, authors , available at: www.socialvalueuk.org/app/uploads/2016/03/The%20Guide%20to%20Social%20Return%20on%20Investment%202015.pdf

Nielsen , J.G. , Lueg , R. and Van Liempd , D. ( 2021 ), “ Challenges and boundaries in implementing social return on investment: an inquiry into its situational appropriateness ”, Nonprofit Management and Leadership , Vol. 31 No. 3 , pp. 413 - 435 .

Purwohedi , U. and Gurd , B. ( 2019 ), “ Using social return on investment (SROI) to measure project impact in local government ”, Public Money and Management , Vol. 39 No. 1 , pp. 56 - 63 .

Scottish Executive . ( 2003 ), “ A review of the Scottish executive’s policies to promote the social economy ”, crown. Copyright , Edinburgh .

Vickers , J. and Wright , V. ( 1988 ), “ The politics of industrial privatisation in Western Europe: an overview ”, West European Politics , Vol. 11 No. 4 , pp. 1 - 30 , doi: 10.1080/01402388808424706 .

Web of Science

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2 Emerson , J. ( 2003 ), “ The blended value proposition: integrating social and financial returns ”, California Management Review , Vol. 45 No. 4 , pp. 35 - 51 .

3 Rambur , B. , McIntosh , B. , Palumbo , M.V. and Reinier , K. ( 2005 ), “ Education as a determinant of career retention and job satisfaction among registered nurses ”, Journal of Nursing Scholarship , Vol. 37 No. 2 , pp. 185 - 192 .

4 Cooper , J.M. , Nelson , J.D. , Wright , S. and Cooper , U. ( 2008 ), “ Rural access gain, an economic and social analysis of access to work schemes in rural communities of Scotland ”, Traffic and Transportation Studies , pp. 85 - 98 .

5 Ryan , P.W. and Lyne , I. ( 2008 ), “ Social enterprise and the measurement of social value: methodological issues with the calculation and application of the social return on investment ”, Education, Knowledge and Economy , Vol. 2 No. 3 , pp. 223 - 237 .

6 Wright , S. , Nelson , J.D. , Cooper , J.M. and Murphy , S. ( 2009 ), “ An evaluation of the transport to employment (T2E) scheme in Highland Scotland using social return on investment (SROI) ”, Journal of Transport Geography , Vol. 17 No. 6 , pp. 457 - 467 .

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9 Millar , R. and Hall , K. ( 2013 ), “ Social return on investment (SROI) and performance measurement: the opportunities and barriers for social enterprises in health and social care ”, Public Management Review , Vol. 15 No. 6 , pp. 923 - 941 .

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12 Hoffmann , H. , Jäckel , D. , Glauser , S. , Mueser , K.T. and Kupper , Z. ( 2014 ), “ Long-term effectiveness of supported employment: 5-year follow-up of a randomized controlled trial ”, American Journal of Psychiatry , Vol. 171 No. 11 , pp. 1183 - 1190 .

13 Manetti , G. ( 2014 ), “ The role of blended value accounting in the evaluation of socio-economic impact of social enterprises ”, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations , Vol. 25 No. 2 , pp. 443 - 464 .

14 Hall , M. ( 2014 ), “ Evaluation logics in the third sector ”, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations , Vol. 25 No. 2 , pp. 307 - 336 .

15 Daems , R. , Maes , E. , Mehra , M. , Carroll , B. and Thomas , A. ( 2014 ), “ Pharmaceutical portfolio management: global disease burden and corporate performance metrics ”, Value in Health , Vol. 17 No. 6 , pp. 732 - 738 .

16 Annibal , I. and Price , L. ( 2014 ), “ The role of ‘leader’ in delivering resilient communities ”, Exploring Rural Enterprise: New Perspectives on Research, Policy and Practice , Emerald Publishing Limited .

17 Parks , D. and Brownlee , P. ( 2014 ), “ The skill mill: an example from North East England of diversification and a catchment-based approach for multiple benefit ”, Proceedings of the 7th Knowledge Cities World Summit: Knowledge-based Services (KCWS 2014) .

18 Banke-Thomas , A.O. , Madaj , B. , Charles , A. and van den Broek , N. ( 2015 ), “ Social return on investment (SROI) methodology to account for value for money of public health interventions: a systematic review ”, BMC Public Health , Vol. 15 No. 1 , pp. 1 - 14 .

19 Hall , M. , Millo , Y. and Barman , E. ( 2015 ), “ Who and what really counts? Stakeholder prioritization and accounting for social value ”, Journal of Management Studies , Vol. 52 No. 7 , pp. 907 - 934 .

20 Maier , F. , Schober , C. , Simsa , R. and Millner , R. ( 2015 ), “ SROI as a method for evaluation research: understanding merits and limitations ”, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations , Vol. 26 No. 5 , pp. 1805 - 1830 .

21 Weston , P. , Hong , R. , Kaboré , C. and Kull , C.A. ( 2015 ), “ Farmer-managed natural regeneration enhances rural livelihoods in dryland West Africa ”, Environmental Management , Vol. 55 No. 6 , pp. 1402 - 1417 .

22 Moody , M. , Littlepage , L. and Paydar , N. ( 2015 ), “ Measuring social return on investment: lessons from organizational implementation of SROI in the Netherlands and the United States ”, Nonprofit Management and Leadership , Vol. 26 No. 1 , pp. 19 - 37 .

23 Jones , R.B. , Ashurst , E.J. , Atkey , J. and Duffy , B. ( 2015 ), “ Older people going online: its value and before-after evaluation of volunteer support ”, Journal of Medical Internet Research , Vol. 17 No. 5 , p. e122 .

24 Mook , L. , Maiorano , J. , Ryan , S. , Armstrong , A. and Quarter , J. ( 2015 ), “ Turning social return on investment on its head: the stakeholder impact statement ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 229 - 246 .

25 Mook , L. , Chan , A. and Kershaw , D. ( 2015 ), “ Measuring social enterprise value creation: the case of furniture bank ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 189 - 207 .

26 Manetti , G. , Bellucci , M. , Como , E. and Bagnoli , L. ( 2015 ), “ Investing in volunteering: measuring social returns of volunteer recruitment, training and management ”, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations , Vol. 26 No. 5 , pp. 2104 - 2129 .

27 Owen , F. , Li , J.Y. , Whittingham , L. , Hope , J. , Bishop , C. , Readhead , A. and Mook , L. ( 2015 ), “ Social return on investment of an innovative employment option for persons with developmental disabilities Common Ground Co-operative ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 209 - 228 .

28 Walk , M. , Greenspan , I. , Crossley , H. and Handy , F. ( 2015 ), “ Social return on investment analysis: a case study of a job and skills training program offered by a social enterprise ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 129 - 144 .

29 Whelan , G. ( 2015 ), “ Understanding the social value and well-being benefits created by museums: a case for social return on investment methodology ”, Arts and Health , Vol. 7 No. 3 , pp. 216 - 230 .

30 Classens , M. ( 2015 ), “ What's in it for the volunteers? An SROI approach to volunteers’ return on investment in the good food markets ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 145 - 156 .

31 Miller , M.C. , Rueda , J.A. and Gransberg , D.D. ( 2015 ), “ Applying social return on investment to risk-based transportation asset management plans in low-volume bridges ”, Transportation Research Record: Journal of the Transportation Research Board , Vol. 2473 No. 1 , pp. 75 - 82 .

32 Vieta , M. , Schatz , N. and Kasparian , G. ( 2015 ), “ Social return on investment for good foot delivery: a collaborative reflection ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 157 - 172 .

33 Akingbola , K. , Phaetthayanan , S. and Brown , J. ( 2015 ), “ A-way express courier: social enterprise and positive psychology ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 173 - 188 .

34 Miller , M.C. and Gransberg , D.D. ( 2015 ), “ Integrating social impact to bridge’s asset management plans ”, Infrastructure Asset Management , Vol. 2 No. 1 , pp. 3 - 14 .

35 Iafrati , S. ( 2015 ), “ The investment and regenerative value of addiction treatment ”, Drugs and Alcohol Today , Vol. 15 No. 1 , pp. 12 - 20 .

36 Pérez-Espés , C. and Moreno-Jiménez , J.M. ( 2015 ), “ Social-economic approach to an eParticipation experience based on eCognocracy ”, International Conference on Electronic Participation , Springer , Cham , pp. 120 - 131 .

37 Phoochinda , W. ( 2015 ), “ Sustainability approach for energy production using biomass at household and community levels: a case study in Thailand ”, International Journal of Renewable Energy Research (IJRER) , Vol. 5 No. 3 , pp. 859 - 872 .

38 Chobotová , V. ( 2015 ), “ Measurement efficiency of social innovation ”, Innovation Management and Corporate Sustainability (IMACS 2015) , Vysoká škola ekonomická v Praze , pp. 89 - 98 .

39 Yeung , R.L. , Li , A.H. and Hung , S.K. ( 2015 ), “ Monetising social and environmental costs in infrastructure evaluation: the case of Hong Kong’s third international airport runway ”, Asia Pacific Journal of Public Administration , Vol. 37 No. 3 , pp. 207 - 215 .

40 Searles , A. ( 2016 ), “ An approach to measuring and encouraging research translation and research impact ”, Health Research Policy and Systems , Vol. 14 No. 1 , pp. 1 - 13 .

41 Watson , K.J. , Evans , J. , Karvonen , A. and Whitley , T. ( 2016 ), “ Capturing the social value of buildings: the promise of social return on investment (SROI) ”, Building and Environment , Vol. 103 , pp. 289 - 301 .

42 Mirosa , M. , Mainvil , L. , Horne , H. and Mangan-Walker , E. ( 2016 ), “ The social value of rescuing food, nourishing communities ”, British Food Journal , Vol. 118 No. 12 , pp. 3044 - 3058 .

43 Windle , G. ( 2016 ), “ Dementia and imagination: a mixed-methods protocol for arts and science research ”, BMJ Open , Vol. 6 No. 11 , p. e011634 .

44 Chaudhury , A.S. , Helfgott , A. , Thornton , T.F. and Sova , C. ( 2016 ), “ Participatory adaptation planning and costing. Applications in agricultural adaptation in western Kenya ”, Mitigation and Adaptation Strategies for Global Change , Vol. 21 No. 3 , pp. 301 - 322 .

45 Leck , C. , Upton , D. and Evans , N. ( 2016 ), “ Social return on investment: valuing health outcomes or promoting economic values? ”, Journal of Health Psychology , Vol. 21 No. 7 , pp. 1481 - 1490 .

46 Klemelä , J. ( 2016 ), “ Licence to operate: social return on investment as a multidimensional discursive means of legitimating organisational action ”, Social Enterprise Journal , Vol. 12 No. 3 , pp. 387 - 408 .

47 Stuermer , M. and Dapp , M.M. ( 2016 ), “ Measuring the promise of open data: development of the impact monitoring framework perspectives on digital sustainability ”, Proceedings of the Sixth International Conference for E-Democracy and Open Government, (CEDEM16) .

48 Kumar , S.R. and Banke-Thomas , A. ( 2016 ), “ Social return on investment (SROI): an innovative approach to sustainable development goals for sexual and reproductive health programming in sub-Saharan Africa ”, African Journal of Reproductive Health , Vol. 20 No. 3 , pp. 85 - 93 .

49 Bischoff , W.A. , Kupfer , C. , Schleicher , S. , Bukowski , P. and Dyjakon , A. ( 2016 ), “ Pruning to energy: a case study on social and ecological benefits of a value chain ”, Papers of the 24th European Biomass Conference: Setting the Course for a Biobased Economy .

50 Sebestova , J. and Palova , Z. ( 2016 ), “ Managing effectiveness of EU funds outputs: lessons learned from period 2007-2013 ”, Proceedings of 14th International Scientific Conference: Economic Policy in the European Union Member Countries, Pts 1 and 2 .

51 Cordes , J.J. ( 2017 ), “ Using cost-benefit analysis and social return on investment to evaluate the impact of social enterprise: promises, implementation, and limitations ”, Evaluation and Program Planning , Vol. 64 , pp. 98 - 104 .

52 Guirado , C. , Valldeperas , N. , Tulla , A.F. , Sendra , L. , Badia , A. , Evard , C. , Cebollada , À. , Espluga , J. , Pallarès , I. and Vera , A. ( 2017 ), “ Social farming in Catalonia: rural local development, employment opportunities and empowerment for people at risk of social exclusion ”, Journal of Rural Studies , Vol. 56 , pp. 180 - 197 .

53 Nicholls , J. ( 2017 ), “ Social return on investment—development and convergence ”, Evaluation and Program Planning , Vol. 64 , pp. 127 - 135 .

54 Yates , B.T. , Marra , M. ( 2017 ), “ Social return on investment (SROI): problems, solutions […] and is SROI a good investment? ”, Evaluation and Program Planning , Vol. 64 , pp. 136 - 144 .

55 Watson , K.J. and Whitley , T. ( 2017 ), “ Applying social return on investment (SROI) to the built environment ”, Building Research and Information , Vol. 45 No. 8 , pp. 875 - 891 .

56 Laing , C.M. and Moules , N.J. ( 2017 ), “ Social return on investment: a new approach to understanding and advocating for value in healthcare ”, JONA: The Journal of Nursing Administration , Vol. 47 No. 12 , pp. 623 - 628 .

57 Banke-Thomas , A. , Madaj , B. , Kumar , S. , Ameh , C. and van den Broek , N. ( 2017 ), “ Assessing value-for-money in maternal and newborn health ”, BMJ Global Health , Vol. 2 No. 2 , p. e000310 .

58 Pattison-Williams , J.K. , Yang , W. , Liu , Y. and Gabor , S. ( 2017 ), “ Riparian wetland conservation: a case study of phosphorous and social return on investment in the black river watershed ”, Ecosystem Services , Vol. 26 , pp. 400 - 410 .

59 Cooney , K. ( 2017 ), “ Legitimation dynamics: how SROI could mobilize resources for new constituencies ”, Evaluation and Program Planning , Vol. 64 , pp. 110 - 115 .

60 Gargani , J. ( 2017 ), “ The leap from ROI to SROI: farther than expected? ”, Evaluation and Program Planning , Vol. 64 , pp. 116 - 126 .

61 Sari , N. , Muhajarine , N. and Chow , A.F. ( 2017 ), “ The Saskatchewan/New Brunswick Healthy Start-Depart Sante intervention: implementation cost estimates of a physical activity and healthy eating intervention in early learning centers ”, BMC Health Services Research , Vol. 17 No. 1 , pp. 1 - 14 .

62 Fischer , R.L. and Richter , F.G.C. ( 2017 ), “ SROI in the pay for success context: are they at odds? ”, Evaluation and Program Planning , Vol. 64 , pp. 105 - 109 .

63 Cheung , J.C.S. ( 2017 ), “ A social work perspective on using social return on investment (SROI) in humanistic social care ”, Australian Social Work , Vol. 70 No. 4 , pp. 491 - 499 .

64 Everard , M. , Longhurst , J. , Pontin , J. , Stephenson , W. and Brooks , J. ( 2017 ), “ Developed-developing world partnerships for sustainable development (1): an ecosystem services perspective ”, Ecosystem Services , Vol. 24 , pp. 241 - 252 .

65 Bottero , M. , Ambrosini , G. and Callegari , G. ( 2017 ), “ Valuing the impact of social housing renovation programs: an application of the social return on investment (SROI) ”, Appraisal: From Theory to Practice , Springer , Cham , pp. 291 - 302 .

66 Vaileanu , C. ( 2017 ), “ Analyzing the social value of Bucharest community foundation programs: social return on investment ”, The Foundation Review , Vol. 9 No. 3 , p. 8 .

67 Willis , E. , Semple , A.C. and de Waal , H. ( 2018 ), “ Quantifying the benefits of peer support for people with dementia: a social return on investment (SROI) study ”, Dementia , Vol. 17 No. 3 , pp. 266 - 278 .

68 Oman , S. and Taylor , M. ( 2018 ), “ Subjective well-being in cultural advocacy: a politics of research between the market and the academy ”, Journal of Cultural Economy , Vol. 11 No. 3 , pp. 225 - 243 .

69 Goudet , S. ( 2018 ), “ Social value of a nutritional counselling and support program for breastfeeding in urban poor settings, Nairobi ”, BMC Public Health , Vol. 18 No. 1 , pp. 1 - 14 .

70 Hall , M. and Millo , Y. ( 2018 ), “ Choosing an accounting method to explain public policy: social return on investment and UK non-profit sector policy ”, European Accounting Review , Vol. 27 No. 2 , pp. 339 - 361 .

71 Hutchinson , C.L. , Berndt , A. , Gilbert-Hunt , S. , George , S. and Ratcliffe , J. ( 2018 ), “ Valuing the impact of health and social care programmes using social return on investment analysis: how have academics advanced the methodology? A protocol for a systematic review of peer-reviewed literature ”, BMJ Open , Vol. 8 No. 12 , p. e022534 .

72 Suaiden , E.J. ( 2018 ), “ The public library and the skills of the XXI century ”, El Profesional de la Información , Vol. 27 No. 5 , pp. 1136 - 1140 , doi: 10.3145/epi.2018.sep.17 .

73 Ramon , I. , Chattopadhyay , S.K. , Barnett , W.S. and Hahn , R.A. ( 2018 ), “ Early childhood education to promote health equity: a community guide economic review ”, Journal of Public Health Management and Practice , Vol. 24 No. 1 , p. e8 .

74 Oosterhoff , M. , Bosma , H. , van Schayck , O.C. , Evers , S.M. , Dirksen , C.D. and Joore , M.A. ( 2018 ), “ A systematic review on economic evaluations of school-based lifestyle interventions targeting weight-related behaviours among 4–12 year olds: issues and ways forward ”, Preventive Medicine , Vol. 114 , pp. 115 - 122 .

75 Watson , K.J. ( 2018 ), “ Establishing psychological wellbeing metrics for the built environment ”, Building Services Engineering Research and Technology , Vol. 39 No. 2 , pp. 232 - 243 .

76 Edmunds , K. , Ling , R. , Shakeshaft , A. , Doran , C. and Searles , A. ( 2018 ), “ Systematic review of economic evaluations of interventions for high risk young people ”, BMC Health Services Research , Vol. 18 No. 1 , pp. 1 - 10 .

77 Etxarri , E.E. , Castresana , J.C.P.D. , Molina , L.D. and Amozarrain , A.E. ( 2018 ), “ Social value of social cooperatives: application of the polyhedral model to Zabalduz S. Coop ”, Ciriec-Espana Revista DE Economia Publica Social Y Cooperativa , Vol. 93 , pp. 155 - 180 .

78 Higham , A. , Barlow , C. , Bichard , E. and Richards , A. ( 2018 ), “ Valuing sustainable change in the built environment: using SuROI to appraise built environment projects ”, Journal of Facilities Management , Vol. 16 No. 3 , pp. 266 - 278 .

79 Dominguez , A.I. , Chaves , J.L.A. and Romero , J.G. ( 2018 ). “ Economic and social impact of personal assistance through the methodology of social return on investment ”, REVISTA ESPANOLA DE DISCAPACIDAD-REDIS , Vol. 6 No. 2 , pp. 81 - 102 .

80 Shaw , A. ( 2018 ), “ Using the social return on investment framework to evaluate behavior changes of individuals living with learning difficulties ”, Social Marketing Quarterly , Vol. 24 No. 4 , pp. 281 - 298 .

81 Winrow , E. and Edwards , R.T. ( 2018 ), “ Effectiveness and stakeholder impact of the Sistema Cymru-Codi'r to music programme in north Wales: a social return on investment evaluation ”, The Lancet , Vol. 392 , p. S93 .

82 Moral , E. ( 2018 ), “ Social return on investment of an ideal approach to multiple sclerosis within the Spanish national health system ”, Value in Health , Vol. 21 , p. S337 .

83 Courtney , P. ( 2018 ), “ Conceptualising social value for the third sector and developing methods for its assessment ”, VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations , Vol. 29 No. 3 , pp. 541 - 557 .

84 Jirarattanasopha , V. , Witvorapong , N. and Hanvoravongchai , P. ( 2018 ), “ Social return on investment for community-based alcohol consumption control program during Buddhist lent ”, Journal of Health Research , Vol. 32 No. 6 , pp. 398 - 407 .

85 Osokin , N.A. , Solntsev , I.V. and Zaytsev , P.A. ( 2018 ), “ The socio-economic importance of grassroots football in Russia: possibilities for research ”, Journal of the New Economic Association , Vol. 40 No. 4 , pp. 184 - 191 .

86 Venezia , E. and Pizzutilo , F. ( 2018 ), “ SROI: a cost-inclusive evaluation method ”, International Conference on Traffic and Transport Engineering (ICTTE 2018) .

87 Lombardo , G. , Mazzocchetti , A. , Rapallo , I. , Tayser , N. and Cincotti , S. ( 2019 ), “ Assessment of the economic and social impact using SROI: an application to sport companies ”, Sustainability , Vol. 11 No. 13 , p. 3612 .

88 Grandia , J. and Voncken , D. ( 2019 ), “ Sustainable public procurement: the impact of ability, motivation, and opportunity on the implementation of different types of sustainable public procurement ”, Sustainability , Vol. 11 No. 19 , p. 5215 .

89 Keane , L. , Hoare , E. , Richards , J. , Bauman , A. and Bellew , W. ( 2019 ), “ Methods for quantifying the social and economic value of sport and active recreation: a critical review ”, Sport in Society , Vol. 22 No. 12 , pp. 2203 - 2223 .

90 Hutchinson , C.L. , Berndt , A. , Forsythe , D. , Gilbert-Hunt , S. , George , S. and Ratcliffe , J. ( 2019 ), “ Valuing the impact of health and social care programs using social return on investment analysis: how have academics advanced the methodology? A systematic review ”, BMJ Open , Vol. 9 No. 8 , p. e029789 .

91 Bellucci , M. , Nitti , C. , Franchi , S. , Testi , E. and Bagnoli , L. ( 2019 ), “ Accounting for social return on investment (SROI): the costs and benefits of family-centred care by the Ronald McDonald House Charities ”, Social Enterprise Journal , Vol. 15 No. 1 , pp. 46 - 75 .

92 Farr , M. and Cressey , P. ( 2019 ), “ The social impact of advice during disability welfare reform: from social return on investment to evidencing public value through realism and complexity ”, Public Management Review , Vol. 21 No. 2 , pp. 238 - 263 .

93 Solórzano-García , M. , Navío-Marco , J. and Ruiz-Gómez , L.M. ( 2019 ), “ Ambiguity in the attribution of social impact: a study of the difficulties of calculating filter coefficients in the SROI method ”, Sustainability , Vol. 11 No. 2 , p. 386 .

94 Leung , Z.C. , Ho , A.P. , Tjia , L.Y. , Tam , R.K. , Chan , K.T. and Lai , M.K. ( 2019 ), “ Social impacts of work integration social enterprise in Hong Kong–workfare and beyond ”, Journal of Social Entrepreneurship , Vol. 10 No. 2 , pp. 159 - 176 .

95 Bosco , A. , Schneider , J. and Broome , E. ( 2019 ), “ The social value of the arts for care home residents in England: a social return on investment (SROI) analysis of the imagine arts programme ”, Maturitas , Vol. 124 , pp. 15 - 24 .

96 Tulla , A.F. and Vera , A. ( 2019 ), “ Could social farming be a strategy to support food sovereignty in Europe? ”, Land , Vol. 8 No. 5 , p. 78 .

97 Purwohedi , U. and Gurd , B. ( 2019 ), “ Using social return on investment (SROI) to measure project impact in local government ”, Public Money and Management , Vol. 39 No. 1 , pp. 56 - 63 .

98 Tanaree , A. , Assanangkornchai , S. , Isaranuwatchai , W. , Thavorn , K. and Coyte , P.C. ( 2019 ), “ Integrated treatment program for alcohol related problems in community hospitals, Songkhla province of Thailand: a social return on investment analysis ”, Plos One , Vol. 14 No. 1 , p. e0209210 .

99 Kousky , C. , Ritchie , L. , Tierney , K. and Lingle , B. ( 2019 ), “ Return on investment analysis and its applicability to community disaster preparedness activities: calculating costs and returns ”, International Journal of Disaster Risk Reduction , Vol. 41 , p. 101296 .

100 Ravulo , J. , Said , S. , Micsko , J. and Purchase , G. ( 2019 ), “ Utilising the social return on investment (SROI) framework to gauge social value in the fast forward program ”, Education Sciences , Vol. 9 No. 4 , pp. 290 .

101 Shi , Y.P. , Joyce , C. , Wall , R. , Orpana , H. and Bancej , C. ( 2019 ), “ A life satisfaction approach to valuing the impact of health behaviours on subjective well-being ”, BMC Public Health , Vol. 19 No. 1 , pp. 1 - 11 .

102 Davies , L.E. , Taylor , P. , Ramchandani , G. and Christy , E. ( 2019 ), “ Social return on investment (SROI) in sport: a model for measuring the value of participation in England ”, International Journal of Sport Policy and Politics , Vol. 11 No. 4 , pp. 585 - 605 .

103 Banke-Thomas , A. , Madaj , B. and Van Den Broek , N. ( 2019 ), “ Social return on investment of emergency obstetric care training in Kenya ”, BMJ Global Health , Vol. 4 No. 1 , p. e001167 .

104 Broad , G. , Ortiz , J. and Meades , S. ( 2019 ), “ Public libraries: measuring their value ”, Public Library Quarterly , Vol. 38 No. 3 , pp. 309 - 319 .

105 Jackson , A. and McManus , R. ( 2019 ), “ SROI in the art gallery; valuing social impact ”, Cultural Trends , Vol. 28 Nos 2/3 , pp. 132 - 145 .

106 Lophongpanit , P. , Tongsiri , S. and Thongprasert , N. ( 2019 ), “ Social return on investment for patient treated by continuous ambulatory peritoneal dialysis: a case study in Ubon Ratchathani province, Thailand ”, ClinicoEconomics and Outcomes Research , Vol. 11 , p. 569 .

107 Ballamingie , P. , Poitevin-DesRivières , C. and Knezevic , I. ( 2019 ), “ Hidden harvest's transformative potential: an example of community economy ”, Journal of Agriculture, Food Systems, and Community Development , Vol. 9 No. A , pp. 125 - 139 .

108 Green , K.R. ( 2019 ), “ Social return on investment: a women’s cooperative critique ”, Social Enterprise Journal , Vol. 15 No. 3 , pp. 320 - 338 .

109 Ricciuti , E. and Bufali , M.V. ( 2019 ), “ The health and social impact of blood donors associations: a social return on investment (SROI) analysis ”, Evaluation and Program Planning , Vol. 73 , pp. 204 - 213 .

110 Aguilar-Agudo , A. , Herruzo-Cabrera , J. , Ochoa-Sepúlveda , J.J. and Pino-Osuna , M.J. ( 2019 ), “ Retorno social de la inversión (SROI) en tratamientos psicológicos basados en la evidencia ”, Clínica y Salud , Vol. 30 No. 1 , pp. 13 - 20 .

111 Baker , C. , Courtney , P. and Knepil , G. ( 2019 ), “ Evaluating societal outcomes of orthognathic surgery: an innovative application of the social return on investment methodology to patients after orthognathic treatment ”, British Journal of Oral and Maxillofacial Surgery , Vol. 57 No. 2 , pp. 145 - 150 .

112 Feuerherdt , L. , Peevor , S. , Clinch , M. and Moore , T. ( 2019 ), “ Social return on investment: application for an indigenous rangelands context ”, The Rangeland Journal , Vol. 41 No. 3 , pp. 177 - 183 .

113 Vargas , R. , Miller , B. , Anhalzer , G. , Mickelson , A. and Kulkarni , K. ( 2019 ), “ Evaluating progress of a social venture in Wakiso district Uganda ”, 2019 IEEE Global Humanitarian Technology Conference (GHTC) , IEEE , pp. 1 - 8 .

114 Mihalopoulos , C. , Le , L.K.D. , Chatterton , M.L. , Bucholc , J. , Holt-Lunstad , J. , Lim , M.H. and Engel , L. ( 2020 ), “ The economic costs of loneliness: a review of cost-of-illness and economic evaluation studies ”, Social Psychiatry and Psychiatric Epidemiology , Vol. 55 No. 7 , pp. 823 - 836 .

115 Jones , C. , Windle , G. and Edwards , R.T. ( 2020 ), “ Dementia and imagination: a social return on investment analysis framework for art activities for people living with dementia ”, The Gerontologist , Vol. 60 No. 1 , pp. 112 - 123 .

116 Moral Torres , E. ( 2020 ), “ Social value of a set of proposals for the ideal approach of multiple sclerosis within the Spanish National Health System: a social return on investment study ”, BMC Health Services Research , Vol. 20 No. 1 , p. 84 .

117 Courtney , P. and Powell , J. ( 2020 ), “ Evaluating innovation in European rural development programmes: application of the social return on investment (SROI) method ”, Sustainability , Vol. 12 No. 7 , p. 2657 .

118 Ruiz-Lozano , M. , Tirado-Valencia , P. , Sianes , A. , Ariza-Montes , A. , Fernández-Rodríguez , V. and López-Martín , M.C. ( 2020 ), “ SROI methodology for public administration decisions about financing with social criteria. A case study ”, Sustainability , Vol. 12 No. 3 , p. 1070 .

119 Merino , M. ( 2020 ), “ The social return on investment of a new approach to heart failure in the Spanish National Health System ”, ESC Heart Failure , Vol. 7 No. 1 , pp. 131 - 138 .

120 Oosterhoff , M. , Van Schayck , O.C. , Bartelink , N.H. , Bosma , H. , Willeboordse , M. , Winkens , B. and Joore , M.A. ( 2020 ), “ The short-term value of the ‘healthy primary school of the future’ initiative: a social return on investment analysis ”, Frontiers in Public Health , Vol. 8 , p. 401 .

121 Vongchan , P. , Chompunth , C. and Phoochinda , W. ( 2020 ), “ Green business model of biomass very small power producers in Thailand ”, International Journal , Vol. 19 No. 72 , pp. 102 - 108 .

122 Jones , C. , Hartfiel , N. , Brocklehurst , P. , Lynch , M. and Edwards , R.T. ( 2020 ), “ Social return on investment analysis of the health precinct community hub for chronic conditions ”, International Journal of Environmental Research and Public Health , Vol. 17 No. 14 , p. 5249 .

123 Samuel , F. and Hatleskog , E. ( 2020 ), “ Why social value? ”, Architectural Design , Vol. 90 No. 4 , pp. 6 - 13 .

124 Schoen , V. , Caputo , S. and Blythe , C. ( 2020 ), “ Valuing physical and social output: a rapid assessment of a London community garden ”, Sustainability , Vol. 12 No. 13 , p. 5452 .

125 Tulla , A.F. , Vera , A. , Guirado , C. and Valldeperas , N. ( 2020 ), “ The return on investment in social farming: a strategy for sustainable rural development in rural Catalonia ”, Sustainability , Vol. 12 No. 11 , p. 4632 .

126 Ashton , K. , Schröder-Bäck , P. , Clemens , T. , Dyakova , M. , Stielke , A. and Bellis , M.A. ( 2020 ), “ The social value of investing in public health across the life course: a systematic scoping review ”, BMC Public Health , Vol. 20 No. 1 , pp. 1 - 18 .

127 Venezia , E. and Pizzutilo , F. ( 2020 ), “ Evaluation tools for transport infrastructures: social return on investments ”, European Transport\Trasporti Europei (2020) .

128 Vluggen , R. , Kuijpers , R. , Semeijn , J. and Gelderman , C.J. ( 2020 ), “ Social return on investment in the public sector ”, Journal of Public Procurement , Vol. 20 No. 3 , pp. 235 - 264 .

129 Refki , D. , Mishkin , K. , Avci , B. and Abdelkarim , S. ( 2020 ), “ Using social return on investment to evaluate the public art exhibit breathing lights ”, Poetics , Vol. 79 , p. 101401 .

130 Grzeszczyk , T.A. and Pełszyński , J. ( 2020 ), “ Towards a conceptualization of a social efficiency notion in management sciences ”, Ekonomia i Prawo , Vol. 19 No. 1 , pp. 33 - 46 .

131 Phoochinda , W. ( 2020 ), “ Assessment of social return on investment from the utilisation of oil palm’s residues ”, Journal of Oil Palm Research , Vol. 32 No. 1 , pp. 145 - 151 .

132 Ashton , K. , Parry-Williams , L. , Dyakova , M. and Green , L. ( 2020 ), “ Health impact and social value of interventions, services, and policies: a methodological discussion of health impact assessment and social return on investment methodologies ”, Frontiers in Public Health , Vol. 8 , p. 49 .

133 Gosselin , V. , Boccanfuso , D. and Laberge , S. ( 2020 ), “ Social return on investment (SROI) method to evaluate physical activity and sport interventions: a systematic review ”, International Journal of Behavioral Nutrition and Physical Activity , Vol. 17 No. 1 , pp. 1 - 11 .

134 Hutchinson , C. , Berndt , A. , Cleland , J. , Gilbert-Hunt , S. , George , S. and Ratcliffe , J. ( 2020 ), “ Using social return on investment analysis to calculate the social impact of modified vehicles for people with disability ”, Australian Occupational Therapy Journal , Vol. 67 No. 3 , pp. 250 - 259 .

135 Baker , C. , Courtney , P. , Kubinakova , K. , Crone , D. and Billingham , D. ( 2020 ), “ Assessing the broader social outcomes of a community health programme through a social-ecological framework ”, International Journal of Health Promotion and Education , Vol. 58 No. 3 , pp. 137 - 151 .

136 Carretero , G. ( 2020 ), “ Multidisciplinary approach to psoriasis in the Spanish National Health System: a social return on investment study ”, Global and Regional Health Technology Assessment , Vol. 7 No. 1 , pp. 50 - 56 .

137 Ravulo , J. , Said , S. , Micsko , J. and Purchase , G. ( 2020 ), “ Social value and its impact through widening participation: a review of four programs working with primary, secondary and higher education students ”, Cogent Social Sciences , Vol. 6 No. 1 , p. 1722307 .

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141 Barman , E. , Hall , M. and Millo , Y. ( 2021 ), “ Demonstrating value: how entrepreneurs design new accounting methods to justify innovations ”, European Accounting Review , pp. 1 - 30 .

142 Wood Daly , M. ( 2020 ), “ Dollars and $ense: uncovering the socio-economic benefit of religious congregations in Canada ”, Studies in Religion/Sciences Religieuses , Vol. 49 No. 4 , pp. 587 - 610 .

143 Saenz , C.S. ( 2020 ), “ A new mapping outcome method to measure social return on investment: a case study in Peru ”, Social Responsibility Journal , Vol. 17 No. 4 , pp. 562 - 577 .

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8 King , N. ( 2014 ), “ Making the case for sport and recreation services: the utility of social return on investment (SROI) analysis ”, International Journal of Public Sector Management , Vol. 27 No. 2 , pp. 152 - 164 .

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11 Classens , M. ( 2015 ), “ What's in it for the volunteers? An SROI approach to volunteers’ return on investment in the good food markets ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 145 - 156 .

12 Vieta , M. , Schatz , N. and Kasparian , G. ( 2015 ), “ Social return on investment for good foot delivery: a collaborative reflection ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 157 - 172 .

13 Owen , F. , Li , J. , Whittingham , L. , Hope , J. , Bishop , C. , Readhead , A. and Mook , L. ( 2015 ), “ Social return on investment of an innovative employment option for persons with developmental disabilities: common ground co-operative ”, Nonprofit Management and Leadership , Vol. 26 No. 2 , pp. 209 - 228 .

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19 Foster , A. ( 2020 ), “ Impact of social prescribing to address loneliness: a mixed methods evaluation of a national social prescribing programme ”, Health and Social Care in the Community , Vol. 29 No. 5 , pp. 1439 - 1449 .

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22 Cooney , K. ( 2017 ), “ Legitimation dynamics: how SROI could mobilize resources for new constituencies ”, Evaluation and Program Planning , Vol. 64 , pp. 110 - 115 .

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24 Tulla , A.F. , Vera , A. , Valldeperas , N. and Guirado , C. ( 2018 ), “ Social return and economic viability of social farming in Catalonia: a case-study analysis ”, European Countryside , Vol. 10 No. 3 , pp. 398 - 428 .

25 Higham , A. , Barlow , C. , Bichard , E. and Richards , A. ( 2018 ), “ Valuing sustainable change in the built environment: using SuROI to appraise built environment projects ”, Journal of Facilities Management , Vol. 16 No. 3 , pp. 315 - 353 .

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27 Viganó , F. and Lombardo , G. ( 2018 ), “ Calculating the social impact of culture. A SROI application in a museum ”, International and Interdisciplinary Conference on Digital Environments for Education, Arts and Heritage , Springer , Cham , pp. 507 - 516 .

28 Hlabano , M. and Van Belle , J.P. ( 2019 ), “ Tracing the impact of the city of cape town’s open data initiative on communities and development ”, International Conference on Social Implications of Computers in Developing Countries , Springer , Cham , pp. 284 - 294 .

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31 Leung , Z.C. , Ho , A.P. , Tjia , L.Y. , Tam , R.K. , Chan , K.T. and Lai , M.K. ( 2019 ), “ Social impacts of work integration social enterprise in Hong Kong–workfare and beyond ”, Journal of Social Entrepreneurship , Vol. 10 No. 2 , pp. 159 - 176 .

32 Bellucci , M. , Nitti , C. , Franchi , S. , Testi , E. and Bagnoli , L. ( 2019 ), “ Accounting for social return on investment (SROI): the costs and benefits of family-centred care by the Ronald McDonald house charities ”, Social Enterprise Journal , Vol. 15 No. 1 .

33 Ye , X. , Sui , X. , Xie , J. , Wang , T. , Yan , X. and Chen , J. ( 2020 ), “ Assessment of the economic and social impact of shared parking in residential areas ”, Information , Vol. 11 No. 9 , pp. 411 .

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35 Kim , D.J. and Ji , Y.S. ( 2020 ), “ The evaluation model on an application of SROI for sustainable social enterprises ”, Journal of Open Innovation: Technology, Market, and Complexity , Vol. 6 No. 1 , pp. 7 .

36 Fuertes-Fuertes , I. , Cabedo , J.D. and Jimeno-García , I. ( 2020 ), “ Capturing the invisible wealth in nonprofits to overcome myopic perceptions ”, Sustainability , Vol. 12 No. 1 , pp. 48 .

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83 Gutiérrez-Nieto , B. , Serrano-Cinca , C. and Camón-Cala , J. ( 2016 ), “ A credit score system for socially responsible lending ”, J Bus Ethics , Vol. 133 No. 4 , pp. 691 - 701 , doi: 10.1007/s10551-014-2448-5 .

84 Kroeger , A. and Weber , C. ( 2014 ), “ Developing a conceptual framework for comparing social value creation ”, Academy of Management Review , Vol. 39 No. 4 , pp. 513 - 540 .

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86 Verkerk , M.J. ( 2013 ), “ Social entrepreneurship and impact investing ”, Philosophia Reformata , Vol. 78 No. 2 , pp. 209 - 221 .

87 Hazenberg , R. , Seddon , F. and Denny , S. ( 2015 ), “ Intermediary perceptions of investment readiness in the UK social investment market ”, Voluntas: International Journal of Voluntary and Nonprofit Organizations , Vol. 26 No. 3 , pp. 846 - 871 .

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89 Muñoz , S.A. ( 2010 ), “ Towards a geographical research agenda for social enterprise ”, Area , Vol. 42 No. 3 , pp. 302 - 312 .

90 Hummels , H. ( 2012 ), “ Coming out of the investors’ cave?: Making sense of responsible investing in Europe in the new millennium ”, Business and Professional Ethics Journal , Vol. 31 No. 2 , pp. 331 - 348 .

91 VanSandt , C.V. , Sud , M. and Marmé , C. ( 2009 ), “ Enabling the original intent: catalysts for social entrepreneurship ”, Journal of Business Ethics , Vol. 90 No. S3 , pp. 419 - 428 .

92 Davies , A.R. and Mullin , S.J. ( 2011 ), “ Greening the economy: interrogating sustainability innovations beyond the mainstream ”, Journal of Economic Geography , Vol. 11 No. 5 , pp. 793 - 816 .

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97 Domenech , J. , Eveleigh , T. and Tanju , B. ( 2018 ), “ Marine hydrokinetic (MHK) systems: using systems thinking in resource characterization and estimating costs for the practical harvest of electricity from tidal currents ”, Renewable and Sustainable Energy Reviews , Vol. 81 , pp. 723 - 730 .

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ROI 101: Making the Business Case for Technology Investments

Return on investment (ROI) is a textbook methodology for financial managers – and is rapidly being recognized as a critical metric for understanding the value of a technology investment. But you don’t have to be a financial wiz to build a business case for technology – you just need to know how the financial Wizzes do it.

First of all, no finance officer can compare their planned investment in a factory, airplane, or new division to an identical project at another company to determine what their returns will be – nor can they “baseline” the project before they start and then travel back in time with the data to justify the investment. What they can do is identify what they expect the benefits and costs to be, assess the likelihood of them occurring, and determine how far they can diverge from expected costs and benefits without losing money. IT projects can – and should – be evaluated in exactly the same way.

Without opening a spreadsheet, you can use some key criteria to assess a project and the likelihood of a positive ROI:

• Breadth. How many people will be helped by the application? The greater the number of people, the greater the potential ROI.
• Repeatability. How often will people use the application? The more often an application is used, the greater the ROI.

Secondary factors to consider include the following:

• Cost. The more costly the task, the greater the benefit from automation or appropriate technology support.
• Knowledge. The greater the potential to reuse the information in the system, the greater the potential ROI.
• Collaboration. Communication between employees is costly, so the greater the collaboration component, the greater the potential ROI.

Once you’ve passed the text on the five factors, you’ll want to gather and validate data to support your ROI calculation. Nucleus Research uses a 3-year time horizon to evaluate projects. Costs and benefits can be either one time or recurring, so be sure to include them appropriately. Follow these basic rules when gathering and including costs in the calculation:

• Count everything that is directly associated with the project. For example, “I purchased a Web server for this project.”
• Don’t count infrastructure items not associated with the project. For example, “I used the existing Web server.”
• Do count infrastructure items that were driven by the project. For example, “The company purchased a Web server because of this project and two others like it” means you should include one-third of the cost.

Benefits are more difficult to assess and can be either directly quantifiable or indirect productivity-based gains. It’s easy to claim that productivity gains should not be included because there are no direct benefits or reductions in budgets from increased productivity. However, you should consider the additional employees you would need to hire to do the same work or the increase in output from the same number of employees. The challenge is to fairly account for gains in productivity. To do this, correct for inefficient transfer of time – which simply means that the total time saved rarely equals the total additional work performed. To measure, follow these rules:

• Measure based on fully loaded cost.
• Correct for inefficient transfer of time using a value of 1.0 for line workers to 0.5 for general employees.
• Find a corroborating measurement that supports the change. For example, if the legal department saves 10% of its time, do you expect it to fire 10% of the lawyers or increase its productivity by 10%?

When in doubt, you may want to survey your users and average their estimates, look for case studies or similar examples to get an idea of the scale of benefits, or look for industry benchmarks that can provide guidance on an appropriate estimate for your company. If you choose a conservative estimate, consider calculating the ROI twice: once for the expected ROI and once for the worst-case scenario. In fact, running different scenarios (what if the consultants don’t finish on time? What if one division refuses to participate?) will give you and the finance folks a clear view of how closely you need to track key elements of the project as you deploy.

Once you’ve gathered the data, you can make the calculations. There are a number of different financial metrics – and some are more useful than others. Following are the primary calculations and their value to the decision-making process:

• ROI is the most important metric to use for choosing an application and prioritizing projects within a company during budgeting. ROI = average benefit over 3 years/initial cost.
• Payback period is the time it takes for benefits returned to equal the initial cost of the project. This is a key measurement of risk – in the rapidly changing technology area, look for payback periods of less than 1 year and don’t be afraid to discard a solution in favor of a better one once it’s past its payback period.
• NPV is net present value – the value of the ongoing benefits discounted back to the present year. NPV tells you if the project should not be undertaken, but it doesn’t tell you to proceed. If the calculation is less than 0, you shouldn’t proceed with the project (you’d be better off putting the money in the bank). A project with a value greater than 0 can’t be compared with other projects unless the time horizons and the magnitude of the investment are the same, so don’t use that as your metric to proceed – turn to ROI instead.
• TCO , or total cost of ownership, provides a good metric for budgeting purposes but can’t be used to judge the bottom-line benefits of a project because it calculates only lowest cost rather than greatest return. Cost is a factor in the ROI analysis, so use ROI instead.
• IRR , or internal rate of return, calculates the effective interest rate of a project but has a serious flaw: It assumes a reinvestment rate equal to the IRR. In most cases, the calculation is misleading, and it should NEVER be used for evaluating technology. Use MIRR if you need to.
• cROI means cumulative ROI over a 3-year period and is used by some research firms, but it is primarily a marketing metric because it dramatically overstates the ROI by using the sum of the benefits over 3 years. Do not use it as a metric.

When a good project has bad ROI

If your initial calculations yield an ROI less than expected, don’t panic – take a closer look at the calculation. If the ROI is drastically negative, there are probably breadth and repeatability issues or unreasonably high costs. If the ROI is simply lower than you need to proceed, it’s likely you can fix it – and gain appropriate benefits from your investment – by considering the following:

• Change cost timing. Move costs out of the initial year by spreading training or consulting investment over one or two years.
• Negotiate on price. A small percentage decrease in price can dramatically increase the ROI depending on the magnitude of the project.
• Ramp costs with employees. Gradually increasing costs for training and other areas as employees begin to use the technology may be more accurate and will improve the ROI.
• Change deployment strategy. Using the technology to support a smaller key (high-ROI) return group first or looking at outsourced solutions or consulting can drive a positive initial ROI – and the technology can be deployed more broadly later.
• Re-examine your correction factors. If you’ve been overly conservative with your correction factors and productivity gains you may be passing up technology that can help your company. The objective is not to be conservative or aggressive but as accurate as possible.

Calculating ROI isn’t difficult, just structured. Done correctly, a ROI analysis serves as the perfect road map for a successful deployment that delivers clear returns to your organization.

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Is the Boom-and-Bust Business Cycle Dead?

There is a growing view that the U.S. business cycle has changed (for better) in a more diversified economy. To some, that sounds like tempting fate.

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By Talmon Joseph Smith

For much of modern history, even the richest nations have been subject to big perennial upswings and crashes in commercial activity almost as fixed as the four seasons.

Periods of economic growth get overstretched by increased risk-taking. Hiring and investment crest and fall into a contraction as consumer confidence wanes and spending craters. Sales fall, bankruptcies and unemployment rise. Then, in the depths of a recession, debts are settled, panic abates, green shoots appear, and banks begin lending more easily again — fueling a recovery that enables a new upswing.

But a brigade of academic economists and prominent voices on Wall Street are asking if the unruly business cycle they learned in school, and witnessed in practice, has fundamentally morphed into a tamer beast.

Rick Rieder, who manages about $3 trillion in assets at the investment firm BlackRock, is one of them.

“There is a lot of ink spilled on what type of landing we will see for the U.S. economy,” he wrote in a note to clients last summer — employing the common metaphor for whether the U.S. economy will crash or achieve a “soft landing” of lower inflation, slower growth and mild unemployment.

“But one point to keep in mind,” Mr. Rieder continued, “is that satellites don’t land and maybe that is a better analogy for a modern advanced economy” like the United States. In other words, dips in momentum will now happen within a steadier orbit.

And there is some evidence that the current spurt of economic growth may have not just months but several years to run, barring an external disruption (what economists call an “ exogenous shock ”) or a return of high inflation that prompts the Federal Reserve to push the economy into recession.

“Financial reporters and market strategists often argue about whether we are ‘early-cycle,’ ‘mid-cycle’ or ‘late-cycle,’” David Kelly, the chief global strategist at J.P. Morgan Asset Management, wrote in a March 11 note to investors that closely aligned with Mr. Rieder’s “satellite” thesis. “However, these perspectives are based on an outdated model of how the U.S. economy behaves.”

According to the National Bureau of Economic Research, the U.S. economy between the 1850s and the early 1980s experienced 30 recessions lasting an average of 18 months, with intervening periods of economic growth averaging only 33 months.

Helping drive this pattern, Mr. Kelly and other economists explain, were highly cyclical industries: Manufacturing and agriculture, now only a fraction of overall output, were once mainstays of the U.S. economy.

Today, manufacturing accounts for about $2.3 trillion of gross domestic product, employs about 12 million people and indirectly supports other local jobs. (Every manufacturing job, for instance, spurs seven to 12 new jobs in related industries, according to a McKinsey estimate.)

But the consumer-driven U.S. economy, mostly made up of services (health care, auto repair, nail salons, customer service, administration and so on), is almost $30 trillion in size. Uptrends and pullbacks in the production of goods have less impact now. The relative stability of total household spending in recent years is a key part of why the United States has avoided a recession.

America’s contemporary economy, Mr. Rieder argued in his note to clients, is less vulnerable to the boom-and-bust cycles of old — mainly because its prosperous consumers are service-oriented, less dependent than ever on factories or farms. Consumption spending makes up about 70 percent of the economy.

“Consumption doesn’t really adjust that dramatically without some major form of economic stress,” he added.

One piece of data in favor of Mr. Rieder’s “satellite” theory is the absence of any widespread weakness before the pandemic crippled economies worldwide.

That was consistent with a developing trend: Since the early 1980s, there have been only four recessions, lasting an average of nine months, with economic expansions averaging 104 months.

The current period of job growth is in its 40th month.

“You don’t want to jinx it,” Ann Harrison, the dean of the Haas School of Business at the University of California, Berkeley, said in an interview — noting that peak confidence in economic expansions frequently arrives right before their downfall. (Talk has picked up of a new “ Roaring Twenties ,” an era that didn’t end well.)

As ever, there are reasons to worry. The emergence and rapid growth of “shadow banks” operating in private markets with little oversight of their lending has concerned many economists and old-school regulators. And a range of industry insiders in commercial real estate say the negative effects of lower office occupancy rates — for local economies and government budgets — have only just begun.

Yet Mr. Kelly of J.P. Morgan lists various reasons that periods of U.S. economic growth may be elongated and less chaotic going forward. Federal deposit insurance, introduced after the Depression, sharply reduced bank panics and failures. Vastly improved information on inventory levels among goods-producing businesses, he said, has “tamed” the inventory cycle, preventing mismatches between supply and demand that can cause mass layoffs.

The rise of international trade, Mr. Kelly added, can often offset slowing domestic demand since businesses, enabled by the internet, can find customers throughout the globe. And the service sector’s growth, he concluded, has “made the economy more stable and, importantly, less sensitive to interest rates.”

Across the economics profession, many are not feeling as reassured.

When weighing recession risks, Thomas Herndon, a professor of economics at John Jay College of the City University of New York, doesn’t take much long-term solace in the growing sophistication of big business. There are, he said, “many, many, many causes” for downturns — some of which are not directly linked to financial instability.

Mr. Herndon noted the work of the 20th-century Polish economist Michal Kalecki, who argued that business leaders feel “undermined” by the maintenance of full employment. Using their substantial influence over policy, Kalecki argued, they can help institute restrictive economic policies that bring times of economic expansion to an end and reset them with softer, more tolerable labor power.

And Mr. Herndon said he thought old-fashioned “bubble” manias and “credit cycles” remained a danger, too.

Eliminating the longstanding economic cycle would be “the holy grail of central banking,” said James Knightley, chief international economist at ING, the global bank. “The Fed’s willingness to use innovative tools” — like its off-the-cuff creation of lending facilities to keep credit flowing on Main Street and heal bank balance sheets since 2020 — gives it “more levers to wiggle to help reduce the chance of a downturn,” Mr. Knightley said.

“Phrases like ‘This time it will be different’” generally have a bad track record, he said. “But maybe it will.”

In several ways, this time has been different so far.

Typically, the housing sector — and its interconnected industries, from construction and home improvement to real estate finance — accounts for nearly 20 percent of U.S. output . The Federal Reserve has more than quadrupled its interest-rate levels since the spring of 2022, bringing its key policy rate to over 5 percent from near zero. That drove mortgage rates to unaffordable highs and made financing new home building difficult. And the residential real estate sector, highly sensitive to interest rates, ground to a halt. But the economy as a whole continued to grow.

When in-person services plummeted during the pandemic, e-commerce and goods-buying picked up the slack. By the time millions of households were sated with goods purchases and manufacturing fell off, the in-person economy was reopening and in-person services began a booming recovery.

There are some market analysts, such as Jim Bianco of Bianco Research, who believe that the U.S. economy — in its dynamism, diversity and size — has in some respects begun to resemble the global economy itself, which typically contracts only when colossal shocks to output occur.

The global financial crisis and the Covid-19 pandemic — which were separated by only 10 years and did cause global recessions — show that while rare, such maelstroms can coincidentally occur back to back. So, long expansions are no guarantee. On the flip side, Australia went about three decades without a recession until Covid ended the streak .

Nina Eichacker, a professor of economics at the University of Rhode Island and the author of two recent papers about government responses to crises, cited another influence: a powerful school of thought that government interventions, even amid downturns, add “frictions and inefficiencies to markets” and “make us worse off overall.”

The robust federal response to the pandemic shock was enabled by a general view that it was an act of nature. Future financial stresses are more likely to have villains, which means proposed solutions are more likely to face division in Congress even if unemployment is notably rising.

But Ms. Eichacker thinks that those political limits to consensus may soften if this expansion rolls on and public opinion of the hefty federal response that helped foster it grows fonder.

“I am sometimes freaked out by how optimistic I feel about the state of things,” she said. “Economically anyway.”

Talmon Joseph Smith is a Times economics reporter, based in New York. More about Talmon Joseph Smith

More From Forbes

Science angels: public/private fund aims to boost deep tech investment.

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Dr Jonathan Matlock, co-founder of Empirical Ventures sees opportunities for angels to invest in ... [+] hard science

Here’s the problem. Collectively speaking, deep-science startups working in fields such as AI, quantum computing and biotech are seen as a vital cornerstone of future economic prosperity but they don’t always find it easy to secure early-stage investment. That’s partly because it can take a while for science-led companies to work out use cases for the technologies they are developing and, thus, present a credible route to market for prospective investors. It’s also the case that deep science ican be daunting for generalist VCs and angels. It’s difficult to assess the merits of something you don’t fully understand, even - or perhaps especially - if the concept is being outlined by PhD researchers steeped in the subject.

Arguably, angel investors face the biggest challenge. Traditionally, angels jump in at the Seed or Pre-Seed stages, providing relatively small amounts of capital before VCs with larger pockets arrive on the scene. That’s fine if the investment is in - for example - a franchising consumer business or a chain of restaurants - but putting money into, say, a science-led university spin-out represents a tougher call. angels may not have the expertise to weigh the opportunities and risks.

That’s a problem that Doctors Jonathan Matlock and Ben Miles - respectively, PhDs in chemistry and physics - have set out to solve.

Last week, they announced the launch of an £8 million fund to support early-stage deep-science businesses, with the capital provided by a combination of angel investors and the U.K. government-owned British Business Investments as part of its Regional Angels program. The aim the fund is to focus funding on solutions to pressing scientific problems.

So how will it all work? The first thing that has to be said is that the involvement of the Regional Angels program is part of a wider government effort to drive investment. The initiative was launched in 2018 by British Business Investments (a subsidiary of the British Business Bank ) to level the U.K.’s investment playing field. According to the organization’s own research, most of Britain’s business angels were based in London and the south-east of England. The plan was - and is - to work with partners to channel equity finance to other parts of the country.

The arrangement with Empirical Ventures should see more money going into science startups, with the risks spread between angels and British Business Investments.

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Nyt strands hints spangram and answers for friday april 12th, juiced o j simpson once had a hidden camera prank show and made stabbing jokes on it, due diligence on science.

As Dr Matlock explains, Empirical Ventures supplies the necessary scientific expertise. He and co-founder. Dr Ben Miles met when they were part of the scientific team working for University of Bristol spin-out, Ziylo, a company that was later acquired by healthcare group Novo Nordisk. In 2021 they set up the Science Angel Syndicate with the aim of encouraging non-expert investors to back cutting-edge science.

“We did all the due diligence,” says Dr Matlock. “And then we shared with both the angels and the founders.”

The concept evolved into Empirical Ventures, not least, Dr Matlock says, because of demand from the investors. “Members of the syndicate were saying, why don’t you just set up a fund.”

Fast forward to the present day and the partnership with the Regional Angels Fund means more money is available. The Regional Angels Fund is putting up £5 million, which can be drawn down when required. In parallel, the Empirical Ventures S/EIS fund (which takes advantage of U.K. tax breaks) brings £3 million in private investment to the table.

While British Business Investments is 100% owned by the government, it is independently managed and its objective is to secure a return on its capital. In that respect, this variation on the public/private partnership theme operates under commercial disciplines. However, it is also helping to deliver on another key government goal - namely, to support the journey of British science from lab to marketplace. “The UK is keen to be a science superpower. This is putting patient capital into the ecosystem,” says Dr Matlock.

Cross-Discipline IP

There is a broad theme to the investment strategy. “The thesis is that we will invest in businesses where there has been a lot of research across disciplines,” says Dr Matlock. “This creates IP that can be protected.”

And while it’s not a requirement for companies to be revenue generating, Matlock says founders seeking investment should have moved beyond the blue-sky research phase. “There needs to be a proof of concept. We want companies with a clear forward-looking plan.”

Asel Sartbaeva, CEO of Ensilitech found says the company's mission was attractive to investors

He cites EnsiliTech as an example of what that looks like in practice. Spun out from the University of Bath in 2022, the company was established to solve the problem of transporting and storing biological materials such as vaccines that would normally require very low temperatures. The company’s approach is to coat the materials in silica “nanoshells.” This precludes the need for refrigeration.

“Our company is based on 12 years of research,” says CEO and co-founder, Asel Sartbaeva. “During the pandemic, it became clear that our technology needed to be taken to the marketplace.”

The technology was developed by a cross-disciplinary team and initially, the use case wasn’t apparent. However, as vaccines were developed to protect against COVID-19, it became clear that refrigeration requirements would prove restrictive in some circumstances. “We decided we should focus on antibodies,” says Sartbaeva. The concept is currently being proved through work on animal vaccines.

EnsilicaTech is a Science Angel Syndicate portfolio company that has also received support from innovation agency Innovate UK, the University of Bath and others. I was keen to get Sartbaeva’s overview of the funding landscape for early-stage science businesses.

“When I started I was a newbie as a CEO. People said I should prepare for a lot of rejections,” she says. “But what we found very rapidly was there were a lot of investors who cared about what we were doing and wanted to help us with our mission. There were also investors who - like Jonathan - are scientists. We had rejections but we had an oversubscribed investment round.”

You could argue, then, that funding needn’t be difficult to secure, but Sartbae’s experience does seem to point to two elements that will ease the flow of capital. The first is the presence of expert investors who can assess the science. The second is a company mission that aligns with the concerns of investors.

Dr Matlock also sees that as important. “I was interested in impact companies. Those whose commercial success would correlate with impact," he says.

Empirical Ventures is by no means the only fund or angel syndicate committed to investing in deep science. There are many others. Some are generalist but, nonetheless, have science startups in their portfolio. Others specialize in certain sectors, such as Cambridge Angels (cleantech, biotech) and Angels in Medcity (medtech).

Given the U.K. government’s focus on science, any initiative to increase investment should be welcomed. For its part, Empirical plans to make 10-15 investments in the next year or so.

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111 PMS schemes gave over 50% return in FY24; here’s what top money managers have to say

Three strategies gained over 100% during the year; invasset llp’s growth pro max strategy was the top gainer, delivering a 128.47% return to hnis..

• Updated Apr 12, 2024, 2:06 PM IST

Some money managers for rich investors delivered robust alpha to their high net-worth clients in financial year 2023-24 when the benchmark Nifty 50 TRI index gained 30.08% and the BSE 500 TRI advanced 40.16% during the year. Data collated by PMS Bazaar showed that at least 111 PMS strategies gained more than 50% in the last 12 months. Three strategies gained more than 100%. Invasset LLP’s Growth Pro Max strategy emerged as the top gainer on the chart, delivering a 128.47% return to HNIs in the previous financial year. Green Lantern Capital LLP’s Growth Fund and Asit C Mehta Investment Interrmediates’s ACE-Multicap also surged 110.79% and 102.73%, respectively, in FY24.

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• ASK Investment Managers launches its first satellite PMS; key things to know

Sharing his views on the outperformance Invasset LLP’s Growth Pro Max, Anirudh Garg, Partner and Fund Manager at Invasset said, “We follow four distinct styles of investments (value investing, growth investing, quality investing and the safety shells) designed into our Invasset AAID (Advanced Algorithm for Investment Decisions) model to cater to dynamic market conditions. This is called as the Invasset AAID shifter which helps us with step-by-step guidance to check in which stage the market is pivoting to so that we can proactively make prudent decisions for our valued Investors.”

He further explained that in value investing they seek out industry leaders who have been unduly affected by market downturns, causing their stock prices to fall below their intrinsic value. “Drawing inspiration from the methodology pioneered by Benjamin Graham, we aim to purchase these stocks at a bargain and sell them when their value surpasses the market's assessment,” Garg said adding they also focus on identifying companies that have recently experienced favourable tailwinds.

The money manager also highlighted that in times of market exuberance and unsustainable levels reminiscent of a bubble, they prioritise the protection of investor capital through hedged portfolios. “By adopting a defensive stance, we aim to shield against downside risks and navigate through volatile market phases with a focus on capital preservation,” he said.

Commenting on the performance of Asit C Mehta Investment Interrmediates’s ACE-Multicap, Prasanna Pathak, Director, Asit C Mehta Investment Interrmediates said, “Our primary investment aim is to provide the best risk-reward ratio to our investors, recognising that equity inherently carries high risk. We’ve devised the Scientific Investing Framework to accomplish this goal, employing quantitative techniques to mitigate portfolio risk.

Additionally, we use fundamental and qualitative methods through vector-based investing strategies to enhance returns. The composite investment framework helps us identify mispriced stocks and hidden investment themes. Identifying a theme at the take-off stage is the key to generating supernormal returns. We could identify themes like capex-cycle, defence, railways and PSU which is reflected in the significant outperformance of our schemes.”

Samvitti Capital’s PMS Active Alpha Multicap (up 98.40%), Asit C Mehta Investment Intermediates’ ACE-Midcap (up 95.58%), Ambit Global Private Client’ Alpha Growth (up 94.80%) and Carnelian Asset Management and Advisors’ YNG Strategy (up 92.64%) stood among other major movers. Categorywise, multicap, flexicap, smallcap and midcap focused strategies emerged as the top gainers in FY24.

Prabhakar Kudva, Director and Portfolio Manager, Samvitti Capital said, “Active Alpha Multicap strategy is to look for changes in earnings tailwinds or change in perception of earnings over the next 4-6 quarters. Then we build a basket of such opportunities and review them periodically. The return has been a function of three things that is the overall market performance, the overweight stance to mid and small caps as well as the stock selection.”

Sharing his views on YnG strategy, Vikas Khemani, Founder, Carnelian Asset Management & Advisors said that they focus on bottom-up stock picking while selecting stocks. These are all high-quality companies with a good dividend yield and decent growth. The stocks they bought in the past one year turned out to be in our favour. Companies like HAL, HCL Technologies, Phillips Carbon, NTPC and CESC delivered robust returns to them in the last one year.

Investors need a minimum corpus of Rs 50 lakh for investment in PMS. Until 2019, this amount was restricted to Rs 25 lakh.  

With a rally of 92.16%, Investsavvy Portfolio Management LLP’ Alpha Fund is next on the list. It was by Bonanza Portfolio’s Value (up 89.87%) and Equitree Capital Advisors’s Emerging Opportunities (up 89.63%).

Asked how Bonanza Portfolio pick stocks for their schemes, Achin Goel, Vice President, Bonanza Portfolio said, “We have our internal proprietary screeners and processes which assist us to identify strong stocks. From this bucket, we scout for emerging sectors and stocks which meet our strategy approach. This is followed by manual assessment and validation by our internal research team. We thoroughly assess the margin of safety before taking any position in a stock and continuously revalidate our thesis post-investment.” Goel is bullish on sectors such as healthcare, information technology, renewable energy, manufacturing, infrastructure and defence.

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