A metric that quantifies the social and environmental return on investment alongside the financial return. It represents the beneficial effects generated for each dollar invested, providing a measure of the positive change attributed to a particular investment strategy. For instance, an investment in renewable energy that generates both financial profit and reduces carbon emissions would be assessed using this measure to understand the magnitude of its overall effect.
The significance lies in its ability to provide a more holistic assessment of investment performance. By incorporating social and environmental factors, it encourages investments that not only generate profit but also contribute to solving pressing global challenges. This perspective fosters greater accountability and transparency in investment decisions, driving capital toward ventures with demonstrably positive outcomes and aligning financial goals with societal betterment. Historically, the focus was primarily on financial returns; however, increasing awareness of sustainability and social responsibility has led to the development and growing adoption of this more comprehensive approach.
