Enabling Ambiguity: How Impact Investors Balance Social and Financial Returns in Practice

This dissertation illuminates the marketization process of moral markets. By virtue of its claim to a dual return, the new market of impact investing requires participants to manage an inherent tension between financial returns and the social or environmental impact generated through investments. This tension is evident in investor valuations, which inform social and financial thresholds for their impact investments. Through this project I explain 1) how thresholds of success and failure for financial and social impacts are established through individual and field level valuations 2) the counterbalance that certainty and ambiguity play at this stage in the moral market, and 3) the external economic and legal forces influencing impact investing’s marketization. Data obtained from impact investing conference presentations and documents, as well as in-depth interviews with foundation investors and impact investing field builders inform this project’s analysis. Examination of field level valuations at conferences, reveals tension between presentation of the market’s growth-centric vision and the locally executed strategies and tools of impact investment. Similar tension is also evident in conversations with foundation impact investors and field builders. While speaking of financial thresholds, respondents consistently define returns in relation to the “market rate” —importing financial market thresholds into impact investing. However, social thresholds are not only diversely conceived, many respondents resist labeling social impact as successful or failing entirely. These differing thresholds are functional for market growth; together they enable the scale-centric ideology articulated at the field level by permitting comparability with outside market investment performance. Similarly, maintaining ambiguity for social ‘returns’ allows a wide variety of social and environmental impact to ‘count’. This balance is influenced by the legal forces informing fiduciary duty, or those duties which require investors to act as “prudent investors” on behalf of investing organizations or individuals. As modern portfolio theory informs the notion of prudent investment, the performance of economic theory via legal regulation is evident. While past literature considers the role of pacified goods (Çalışkan and Callon 2009;2010) in marketization, this dissertation demonstrates that these pacified goods exist in relation to separate, ambiguous goods, which balance the tension introduced by moral markets, and illuminate the broader economic forces that influence legal and market boundaries. In so doing, this project provides insight into how both micro-level valuation processes and macro-level forces influence the marketization process of moral markets like impact investing.