On Evaluating Socially Responsible Investment Projects-Creation of an Index of “Goodness”

Abstract

Many philanthropists, charitable foundations, and aid agencies are interested in impact investing, a method of investing that focuses on return to society, as opposed to return on investment. Investment projects that cater to societal needs are abundant, but there is no accepted yardstick, like an ROI, for such “impact†projects. In this paper, we create a mechanism that can help decision makers evaluate investments with a social benefit. We develop an index of the “goodness†of a project that can help investors rank projects. This “index of goodness†is easily understood, with its number representing the percentage of human population that will benefit from such an investment. By providing a comprehensive method for selecting among social projects, we help in allocating capital to its most socially beneficial purposes.