Many a Slip: The Challenge of Impact as Boundary Object in Social Finance

Abstract

This article considers the construction of the market of Impact Investing – financial investment with the intentional pursuit of “impact” alongside financial return – as one case of the broader turn to Social Finance. Impact Investing is championed by proponents for its ability to provide a sustainable and scalable market-based solution to societal and environmental problems, in contrast to the limited efforts of government and civil society. This article delineates the work of the market maker who motivated the construction of a judgment device to address the issue of quality uncertainty in this new market. I offer a genealogy of this rating system for firms as potential impact investments, showing that it was commissioned by proponents of Impact Investing who, having first engaged in boundary work to distinguish Impact Investing from other spaces of Social Finance, then sought to appeal to traditional investors by mimicking the calculative tools used in traditional capital markets. Yet, the adaptation of a financial rating system to the new field was complicated by the multivocal status of “impact” as a boundary object involving multiple, disparate actors committed to the common project of creating a judgement device for impact investment yet diverging on the question of how impact was to be created by businesses and for whose benefit. The result was a slippage between the conception of impact espoused by the market maker of Impact Investing and the type of impact gauged by the rating system itself, with likely reactive effects for impact investors and investees. I conclude by positing that the development of suitable judgement devices that capture and communicate the impact of socially or environmentally oriented financial activity is one critical yet understudied condition for the ability of social finance markets to achieve their promise.