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Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in Impact Measurement

Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in... Although the importance of measuring and reporting the social and environmental impact of organisational action is increas- ingly well recognised by both organisations and society at large, existing approaches to impact measurement are still far from being universally accepted. In this context, the stakeholder dynamics within the nascent field of impact investing demonstrate the complexity of resolving potentially differing perspectives on key impact measurement issues such as materiality. This paper argues, from an organisational perspective, that such arenas of contestation can be conceptualised in terms of social justice. Specifically, we draw upon Sen’s notions of ‘arrangement and realisation’ to explore the dynamics of contestation across a range of stakeholders concerning materiality judgements to suggest that such ‘arrangements’ may lead to suboptimal impact outcomes as ‘realisations.’ Our analysis of the nature of materiality contestations in impact measurement reveals the conflicts, tensions and paradoxes evident in this field of action. Empirically, we examine data drawn from 19 cases and 33 interviews. The analysis suggests three arenas of contestation around the materiality of impact measurement: the power dynamics between economically powerful investors and objectified investees; the conflicts between materiality norms and standards; and the interactions between all stakeholders with differing motivations towards radical or incremental materiality. Building upon this analysis, we then discuss how arenas of contested materiality may be mediated by drawing upon Sen’s notions of transcending the individual interests of the invested parties for the greater good via processes of contextualisation and case-specificity. Keywords Impact investing · Impact measurement · Materiality · Senian justice Introduction Global Reporting Initiative, the Principles for Responsible Investment and the Sustainability Accounting Standards The nascent field of impact measurement (IM) aims both Board), the IM field has emerged as a specific response to to account for the material non-financial value creation of the growing interest in impact investing globally, which now organisations and to offer principles for the effective man- constitutes over $500 billion of assets under management agement of impact creation processes (Agrawal & Hockerts, (Brandstetter & Lehner, 2015; GIIN, 2019; Ormiston et al., 2019; GIIN, 2020; IMP, 2018). Whilst various accounting 2015). recommendations for impact models already exist (e.g. the According to the literature the IM field is still under- institutionalised, in theory as well as practice (Höchstädter & Scheck, 2015). Competing methodologies and a lack of * Othmar Manfred Lehner accounting regulations are symptoms of this (though see othmar.lehner@hanken.fi EU (2019) for a proposed regulated structure around ESG Alex Nicholls reporting and UNDP (2020) for a proposed set of measure- alex.nicholls@sbs.ox.ac.uk ment and reporting standards for the Sustainable Develop- Sarah Beatrice Kapplmüller ment Goals (SDGs)). As such, it remains unclear how effec- SS4044@live.mdx.ac.uk tively the impact investing market actually creates social and environmental value (Nicholls, 2009, p. 755). Hanken School of Economics, Helsinki, Finland Research on the practice of IM has demonstrated that Said Business School, University of Oxford, Oxford, UK it is difficult to agree on a common set of material (i.e. Middlesex University, London, UK Vol.:(0123456789) 1 3 972 O. M. Lehner et al. contextually relevant) metrics with which to measure and that the interpretations and implications of the concept of report the short-term, as well as long-term, impacts of materiality in IM remain ambiguous and diverse. Building impact investments. The contestation over materiality in IM upon this previous research, we suggest that this ambiguity can be seen as a product of the dynamics across the complex is not simply a consequence of the dynamics typical of a nas- relationships between investors, investees and beneficiaries cent field (Lehner et al., 2019; Nicholls, 2018), but, rather, in the impact investing field (Lehner et al., 2019; Nicholls, reflects the diverse worldviews (Burrell & Morgan, 2019) of 2018). This paper argues that such contestations may create the key actors in the impact investing field. systems of procedural and—as a result distributive—injus- This approach is also supported by Higgins et al. (2018), tice between the relevant stakeholders over time. who also found patterns of discursive power and isomor- From a Business Ethics perspective, we suggest that there phism around materiality in sustainability measurement and is analytic value in new research on IM in impact investing reporting. They noted that sustainability accounting, as a that engages with Sen’s theory of social justice (Sen, 2009) whole, is far from being an institutionalised practice and in an organisational context (Joyner & Payne, 2002; Lewis, is, rather, still an issues-based field (Zietsma et al., 2017 ). 1985; Woiceshyn, 2011). In this paper we use this approach What is more, compared to the focus on the retrospective to provide new insights into the materiality of capital alloca- impact ‘outputs’ on the environment and its stakeholders tion that aims not only to create a financial return but also typical of sustainability accounting, in IM, combinations of to create positive impact in terms of beneficiaries’ lives, cross-sectoral organisations (Cloutier & Langley, 2015) typi- health, income and, even, the wider environment (Melé & cally negotiate and construct materiality—reified in agreed Armengou, 2016). To this end, this paper aims to advance methodologies and metrics—within both an anticipatory business ethics research by positioning effective IM within planning, and ongoing performance, management process a social justice framework for the first time (Fia & Sacconi, focussed on ‘outcomes ab initio’. This outcomes focus in IM 2018; Fortin, 2015; Sen, 1985, 2009), specifically in terms also attempts to capture complex longer -term social impacts of a Senian, outcome-driven, social justice approach (Sen, than is usual in sustainability accounting (Höchstädter & 2009; Shrivastava et al., 2016). Moreover, this paper aims Scheck, 2015; Millar & Hall, 2013). to extend existing normative theory concerning IM (Crane In summary, the nascent IM field has a number of dis- et al., 2016), which is typically based upon notions of the tinctive features that are relevant for a Senian social justice ‘purpose’ of capital and the social responsibility of organisa- analysis. First, IM processes typically engage with a variety tions in our society (Brown & Forster, 2013; Mayer, 2019). of actors with clear differentials in power, experience and A social justice perspective also extends the current knowledge—this is particularly the case since many impact debates on the social accountability of the firm (Gilbert investments flow to social, rather than purely commercial, & Rasche, 2007; Laufer, 2003), consistent with Zadek's investees who, in turn, often work with highly marginalised (1998) argument that such accountability helps ‘integrate populations of beneficiaries (Lehner et al., 2019; Nicholls new patterns of civil accountability and governance with a & Ziegler, 2019). Second, issues of materiality remain business success model focussed on deepening stakeholder contested as the IM field lacks regulated impact reporting relationships around core non-financial as well as financial structures or standards. In this context, the power dynamics values and interests’. This paper also builds upon a range across the stakeholders who are negotiating the meaning of of more recent research on the contested nature of the nas- materiality in a given investment context become highly sig- cent IM field (Burritt & Schaltegger, 2010; Höchstädter & nificant (Puroila & Mäkelä, 2019; Taubken & Feld, 2018). Scheck, 2015; Lehner et al., 2019; Molecke & Pinkse, 2017; This raises the question over who decides what constitutes Nicholls, 2018; Rawhouser et al., 2019). Early insights from ‘good’ impact (Nicholls, 2009). Given these issues, this Lehner et al. (2019) and Nicholls (2018), for example, iden- paper proposes that the processes by which materiality is tified the lack of institutionalisation of the impact investing determined in IM are typically highly contextualised and field as driving a discursive power struggle over its legiti- necessarily complex across key stakeholders with different macy between the key actors in the field, resulting in com- levels of power (Markman et al., 2019). peting conceptualisations of materiality and good practice. To explore these issues empirically, this paper provides ‘Materiality’ is a fundamental—and clearly delineated— a preliminary study that draws upon data from 19 cases and financial accounting concept (Frishkoff, 1970) that signifies 33 interviews. The analysis, first, explores the contested the relevance of information for influencing the decision- nature of materiality and, second, considers the drivers for making process of key stakeholders, typically investors this contestation. Specifically, we analysed 157 documents (Burrowes & Karayan, 2017; Green & Cheng, 2019; Messier from these cases to establish their approach to constructing et al., 2005). However, in IM, a variety of materiality defi- materiality. After this, we discussed these preliminary find- nitions can be observed (Green & Cheng, 2019; Nicholls, ings with the interviewees in an iterative process of data 2018). Puroila and Mäkelä (2019), for example, proposed triangulation. Using a Senian realisation, outcome-driven, 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 973 perspective on social justice we suggest that Sen's (2009) the nature of impact—and the attendant metrics and data ‘functioning and capability’ approach offers important points—research suggests that there remains significant insights into how materiality contestations may be framed diversity in terms of definitions and models of IM (Kroeger to reveal the power dynamics across competing world views. & Weber, 2014; Nicholls, 2018; Rawhouser et al., 2019). As a novel contribution to the field, we further discuss how Despite this heterogeneity, it remains the case that measur- arenas of contested materiality can be mediated by draw- ing and reporting impact is clearly strategically important ing upon Sen's (2009) notions of ‘transcending’ the indi- for all the actors in the impact investing field and—at the vidual interests of the invested parties (Fia & Sacconi, 2018; aggregate level—for society at large (Combs, 2014; Emer- Shrivastava et al., 2016) for the greater good via processes son, 2003; Hehenberger & Harling, 2015). of open impartiality, contextualisation and case-specificity The range of actors in the field of impact investing (Fortin et al., 2015). We propose that acknowledging these has recently been the subject of significant research. For power dynamics may, ultimately, produce more ee ff ctive IM example, Brandstetter and Lehner (2015) noted that inter- systems capable of better optimising the impact of impact mediaries and enablers (standard setters, funds, advisors, investments (Crane et al., 2016; Hahn et al., 2017; Nicholls, governmental institutions, NGOs) are especially important 2018). Following a Senian logic, this paper also demon- actors in the impact investing market bringing together the strates how dominant, partisan materiality judgements in supply side (institutional investors, foundations, banks, IM may generate arrangements that lead to poor and unjust funds, philanthropists) and demand side actors (social and realisations of impact investments. This is in stark contrast environmental investees, charities, community development to the stated intent of impact investing to create only posi- institutions). Following this, Lehner et al. (2019) further tive social impact and social justice. As a consequence, we identified the dysfunctions of the impact investing market also suggest that developing more empowering processes as a consequence of the differences in rhetoric and legiti- for investees and beneficiaries—to allow equal influences— misation strategies between investors and investees. It is, around determining materiality may increase the total impact thus, perhaps inevitable that the perceptions of the optimal of impact investing across all stakeholders (Nicholls, 2018). measurement and reporting conventions of IM will differ The remainder of this paper is structured as follows. Next, signic fi antly between investors and investees in a e fi ld that is we set out the context of impact investing, the emergence yet to be fully institutionalised (Cooper et al., 2016; Kroeger of IM, and conceptualisations of materiality. After this, & Weber, 2014; Wood et al., 2013). we introduce the ideas of social justice framed in Senian Despite important research on the field to date, IM still thinking. We then set out the methodology used here with a remains under-conceptualised (Molecke & Pinkse, 2017). detailed description of the sampling and the methods used For example, little agreement exists over the appropriate and present our key findings. Finally, the paper discusses temporal dimensions (when and for how long impact should how these findings may be interpreted from a Senian social be measured and reported), the scope of analysis (who and justice perspective leading to normative suggestions on how what should be included or excluded), the role of externali- these research insights may enhance IM practice. We also ties (positive and negative), the relevance of impact attri- acknowledge the limitations of our study and set out some bution, causality and attrition of social and environmental lines of future research built upon our work. impact (how much can be claimed by the investment), and the inherent downside risks on each of these issues (Ebrahim The Dynamics of Measuring Impact and Materiality et al., 2014; Molecke & Pinkse, 2017; Nicholls, 2009). Considerations To date, various approaches to optimising IM have been proposed in theory as well as in practice (Rawhouser et al., Improving the effectiveness of measuring and reporting 2019). These can be categorised in terms of: micro- or impact is recognised as being one of the key challenges in macro-levels of analysis (Nicholls, 2009); their specific the field of impact investing (Ebrahim & Rangan, 2014; target audience; the use of quantitative or qualitative data GIIN, 2020; Jackson, 2013). Impact investing can be defined (Kroeger & Weber, 2017); and the level of generalisation as an investment approach in which capital is invested in (industry-wide or context-specific) (Costa & Pesci, 2016). ventures with the intention to generate positive—and meas- In addition, it has also been suggested that IM needs to urable—social and/or environmental impact (i.e. value) measure and report on the whole range of the impact value alongside a financial return (Bugg-Levine & Goldstein, chain (capturing the so-called Theory of Change model), 2009; Cahill, 2010; Cheney et al., 2013). Thus, a central which comprises inputs, activities, outputs, outcomes and tenet of impact investing is effective measurement, report- finally, long-term impact (Clark et  al., 2004; Godeke & ing and management of intended, unintended, and achieved Pomares, 2009; Hornsby, 2012). It is also the case that the impacts (Brest & Born, 2013; Höchstädter & Scheck, 2015; term ‘impact’ itself is used differently in various research Ormiston et al., 2015). However, when it comes to defining contexts. Thus, while in sustainability accounting, impact 1 3 974 O. M. Lehner et al. can also be seen as negative influence, for example, on the as a measure of a firm’s performance. Financial metrics and environment, in impact investing, impact is typically seen data are said to be of material relevance for investors and are as positive ‘social value creation’ (Höchstädter & Scheck, regulated as such (Frishkoff, 1970). Sometimes non-financial 2015). data are also reported for other stakeholders as material but Nevertheless, as noted above, in contrast to financial this is voluntary (Green & Cheng, 2019). The International accounting, there are currently no regulatory structures in Accounting Standards Board (IASB) defines materiality as: place for IM and the existing frameworks typically conform “Information is material if omitting, misstating or to an investor worldview rather than focus on more partici- obscuring it could reasonably be expected to influence patory measurement and reporting systems that engage a the decisions that the primary users of general-purpose wide range of stakeholders including frontline beneficiaries financial statements make on the basis of those finan- (Molecke & Pinkse, 2017; Nicholls, 2018; Rawhouser et al., cial statements, which provide financial information 2019). For example, Lisi (2018) considered IM in terms of about a specific reporting entity” (Tysiac, 2018). three fundamental drivers of corporate social strategy: busi- ness motivations, perceived stakeholder pressures, and the To date, a number of overlapping, yet distinct material- social commitment of management. From this perspective, ity definitions exist in the sphere of sustainability account- IM combines the positivist metrics and the cognitive prefer- ing, most from the perspective of a single organisation and ences of financial accounting despite a focus on social and its key stakeholders (Baumüller & Schaffhauser-Linzatti, environmental goals. 2018; Green & Cheng, 2019; Taubken & Feld, 2018). The More recent research has suggested, first, that IM is Sustainability Accounting Standards Board (SASB) echoes typified by a specific set of assumptions on the rationality the above definition of the IASB and defines materiality as: and capability of the investees and, second, that different “Information that could be viewed by the reasonable actors have differing expectations of impact with respect investor as having significantly altered the total mix of to the existing institutional status-quo in society (Lehner information made available” (SASB, 2014). et al., 2019). Thus, while many impact investors (such as banks, funds or institutional investors) do not focus on the While the SASB’s definition of materiality focuses on materiality of IM in terms of disruptive changes in society, the investors as the target audience, the focus of the Global impact investees, as ‘changemakers’, may have a more radi- Reporting Initiative’s (GRI) definition is on all stakeholders: cal view (Antadze & Westley, 2012; Drayton, 2006; Zahra Information that could substantively influence the et al., 2009). assessments and decisions of stakeholders (GRI, In summary, the complex and competing IM perspec- 2016). tives on materiality and their underlying worldviews remain under-researched. This is, perhaps, surprising given that The International Integrated Reporting Council (IIRC) materiality represents a key factor in terms of understand- expands the boundaries of materiality and brings in notions ing the justification, consolidation and standardisation of of value creation beyond the purely financial. Here materi- differing models of IM going forward (Akehurst et  al., ality is: 2011; Bates & Jenkins, 2007; Jennings et al., 2005). Fol- Information that could substantively affect an organi- lowing Agrawal and Hockerts (2019), this paper suggests sation’s ability to create value (IIRC, 2013). that understanding the power and social justice dynamics of the contested logics and legitimacies typical of under- Despite these definitions, the IM field currently lacks an institutionalised arenas provides a useful lens with which to agreed definition of impact materiality. Research has sug- explore the evolution of IM. gested that the defining features of impact materiality should As mentioned above, this arena of contestation is par- include a recognition of the uncertainty and partiality of ticularly reified in debates about materiality, specifically: impact data and the relevance of multiple stakeholder per- what type of impact ‘matters’, what is good or bad, and who ceptions in terms of addressing this (Nicholls, 2018). Given decides. Materiality is of central significance to all finan- the current lack of consensus on impact materiality, we argue cial accounting practices and can be seen as a fundamental that a social justice perspective might offer a different and concept in this sphere (Burrowes & Karayan, 2017; Green promising approach to discuss the nature of materiality in & Cheng, 2019). Broadly speaking, materiality refers to the IM from a normative perspective. Such an approach suggests relevance of information concerning the decision-making of that effective IM needs to enact materiality systems that are a specific target audience—usually investors—for a specific attentive both to the complexity and contextuality of social investment (Messier et al., 2005). Materiality in financial and environmental data and that acknowledge the diversity accounting and audit holds that all this information needs to of stakeholders for whom impact data is relevant (Edgley be measured and reported in the annual financial statements et al., 2015; Lai et al., 2017; Meyers, 2019). However, in 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 975 practice—as our data analysis below suggests—this multi- or procedural justice (i.e. fair allocation procedures). The dimensionality of perspective creates an arena of contesta- latter has also been characterised as ‘interactional’ justice tion over what is material in a specific impact investment (Greenberg, 1990; Wang et al., 2017) focussed on inter- (Puroila & Mäkelä, 2019). Moreover, because the impact personal and informational aspects. Sen (2009) rejected metrics are subject to interpretation according to idiosyn- Rawls (1985) idea of ‘impartiality’ between the actors cratic worldviews and a range of discourses of performance (meaning the absence of vested interests in those involved (Nicholls, 2018), the institutional-power dynamics between in setting up the principles). Instead, Sen (2009) proposed the key stakeholders may well create conflicts, tensions and that it would be a delusion to think that only one perfect paradoxes over the dominant materiality logics and models set of principles could define universal justice since com- in the IM field. In turn this may lead to procedural injustice peting rationales of justice may have equally compelling as we discuss next. claims of being impartial. As an alternative, Sen (2009) proposed a focus on realised outcomes that recognises the A Senian Social Justice Perspective potential injustices from a process perspective, rather than striving for an agreement on a unitary notion of justice ‘ab Sen’s work, as whole, provides a distinctive economic per- initio’. That is not to say that in this view a workable, just, spective on social issues (Batterbury & Fernando, 2004). solution cannot be achieved. On the contrary, Sen (2009) In addition to his important earlier work on the economic argues that a rational society can be expected to reach just causes of famine, Sen's (2009) research within development solutions through reasoning, transparency and account- economics has also had considerable influence—for exam- ability, with the deliberate inclusion of multiple arguments ple in the formulation of the United Nations Sustainable from multiple perspectives in what he calls ‘open impar- Development Goals. Sen was awarded the Nobel price for tiality’. Senian thinking provides an alternative to Rawls economics in 1998 for his work on determining the most ‘veil of ignorance’ by including the voices of outsiders as important and fundamental resources in a community—and ‘impartial spectators’ who make judgement from a neutral how these should be divided. A fundamental focus of his position of ‘open impartiality’ (Sen, 2009). research is how individuals' values can be considered in a Building on this theory of reasoning (in the sense of a collective decision-making and how welfare and poverty can meaningful comparison of alternatives of materiality consid- be aptly measured—a timely fit to the pressing questions in erations) and following Shrivastava et al. (2016), this paper this article. suggests that Sen's (2009) concept of ‘functioning’, as a state In this paper, we suggest that the arenas of contested in which people are free to be or do whatever it is they value materiality in IM can be conceptualised in terms of Sen's (Sen, 1985) may be particularly relevant in exploring the (2009) notions of transcending the individual interests of optimal judgement processes on materiality in IM leading. the invested parties (Fia & Sacconi, 2018; Shrivastava et al., Functionings are closely linked to Sen’s central notion of the 2016) for the greater good via processes of contextualisation individual capabilities of a person (for example, of the bene- and case-specificity (Fortin et al., 2015). Specifically, bring- ficiaries of impact investing projects) that are defined as a set ing Sen's (2009) conception of social justice into an analysis of options from which a person can choose in terms of their of the organisational setting of IM (Shrivastava et al., 2016), own life chances (Sen, 1985, 1999). Following Sen (2009), provides some useful new insights. This is because this as Shrivastava et al., (2016, p. 103) put it: “The freedom to theory synthesises the dimensions of distributive and pro- choose the kind of lives we may wish to live—irrespective cedural justice (Celestine et al., 2018; Colquitt, 2001) into of the choice we actually end up making—is critical to our a notion of a comprehensive justice that focuses on realisa- sense of well-being, which is in itself a functioning.” This tions, as lived experiences, and actual outcomes. Sen (1999, approach creates effective transparency to allow relevant p. 13) believed that individuals tackling social problems use stakeholders to make a meaningful comparison and rank- ‘evaluative systems’, which are rooted in contrasting social ing of the competing materiality alternatives based on the justice theories representing a ‘plurality of unbiased prin- capabilities and functionings for all involved stakeholders. ciples’ that may have ‘have quite distinct manifestations.’ Sen (2009) also emphasised the importance of free will In his book ‘The Idea of Justice’ (2009), Sen argued that in making life choices based on individual ‘functionings’ as traditional thinking in political philosophy, which aims to a pre-requisite for accountability and set out four contingen- identify a set of ‘just’ principles that can then be used to cies that may impede an individual’s functionings and ability design ‘perfectly just’ institutions for governing society, to flourish in terms of: personal heterogeneities; diversities discloses very little about how we can actually identify and in the physical environment; variations in social climate; subsequently reduce injustices in the existing institutions. and differences in relational perspectives. This framing of Justice, in the traditional Rawlsian tradition, is usually accountability supports the analytic approach of our research framed either in terms of distributive (i.e. fair outcomes) on materiality in IM since it examines the competing 1 3 976 O. M. Lehner et al. worldviews, contexts and power-differences across the key measurement and reporting in the texts. Forbes Magazine stakeholders. was chosen as a focal publication in terms of its cover- In summary, by bringing in a Senian social justice per- age of the global impact investing field. In summary, the spective for the first time in this research field, this paper case selection was based upon the purposefully informed provides new insights into the processes of contestation criteria of salience (via the ranking) and being exemplary within IM, particularly in terms of framing materiality. Next (impact focussed business models) (Riff et al., 2019) for we move on to our methodology and empirical contributions. IM. The resulting sample covered a variety of impact investing organisations, including banks, venture philan- Methodology thropists, investment funds, Non-Governmental Organi- sations and (social) investees. The sample investors were Sampling and Data Collection predominantly from the US and Europe, since these are the most developed impact investing markets currently, The research design followed in this paper used a two-step but the investment projects of these investors were distrib- comparative case-study approach with parallel and subse- uted globally. Based on these 19 cases, we collected 157 quent interviews for triangulation and a thematic coding for documents in the form of reports, investment agreements, interpretation (Denzin & Lincoln, 2011). With this abduc- publicly available interviews and brochures on approaches tive research design we do not want to ‘generalise’ findings to IM. This data was augmented by email-based commu- in a statistical sense but promote ‘analytical generalisation’ nications with some founders and CEOs to clarify our (Parker & Northcott, 2016; Yin, 2018). However, an abduc- assumptions. Table 1 provides an overview of the cases tive strategy fits well here as the maturity of the IM literature with web-links, the numbers of relevant documents on IM does not allow for purely deductive approaches (Edmond- from each and the number of meaningful units for analysis son & McManus, 2007). In an abductive approach, research (meaning topic relevant complete statements) from them starts with looking at surprising facts, puzzles or paradoxes (Braun & Clarke, 2006). and the research process itself is then devoted to finding an As a second step, for triangulation and further thematic explanation (Thagard & Shelley, 1997). Following Tsang development, we invited experts on impact investing from (2014), we look to explain relationships and build categories industry and relevant scholars in a purposeful sampling pro- from cases to inform future research and derive normative cess to discuss IM and comment on our initial case analysis suggestions (Crane et al., 2016). in terms of IM, generally, and materiality, specifically. In First, we sampled a total of 19 organisations represent- total, we conducted 33 semi-structured interviews with 25 ing impact investors, investees, beneficiaries and interme - respondents over the 3 years (2017 to 2019) some in-per- diaries were purposefully sampled (Morse, 2007). This son and some via Skype. Two interviews were sometimes provided a baseline snapshot of the dynamics of the IM conducted with one interviewee to gain additional insights field. The sample organisations were selected according on the themes that emerged while working with the case to their representation in Forbes Magazine—from 2016 data. Each interview lasted between 45 min and 2 h and was to 2018—as ‘impact investing’ (www. forbes. com). They recorded and then transcribed. Table 2 provides an overview were ranked by the number of explicit references to impact of the interviewees and their organisations. Table 1 Case organisations Acumen Fund (11 docs/61 units) https:// acu- Triple Jump (9 docs/32 units) https:// tripl Triodos Bank (8 docs/35 units) https:// www. men. orgejump. eutriod os. com Bill and Melinda Gates Foundation (10 docs/63 BNP Paribas (9 docs/24 units) https:// www. Big Society Capital (9 docs/30 units) https:// units) https:// www. gates found ation. orgwealt hmana gement. bnppa ribas/ en. htmlwww. bigso ciety capit al. com Bridges Fund Management (7 docs/37 units) JP Morgan (8 docs/23 units) https:// www. Global Impact Investing Network (6 docs/20 https:// www. bridg esfun dmana gement. comjpmor ganch ase. com/ units)https:// thegi in. org Rockefeller foundation (11 docs/55 units) Sonen Capital (10 docs/42 units) https:// www. Social Finance (5 docs/29 units) https:// www. https:// www. rocke felle rfoun dation. orgsonen capit al. comsocia lfina nce. org. uk Uncharted (8 docs/28 units) https:// uncha rted. Babington Group (5 docs/28 units) https:// Toniic (12 docs/35 units) https:// www. toniic. orgbabin gton. co. uk com Capital Good Fund (7 docs/43 units) https:// Indian School Finance (6 docs/22 units) https:// Peterborough Prison Bond (9 docs/38 units) capit algoo dfund. orgisfc. inhttps:// www. socia lfina nce. org. uk/ what- we- do/ social- impact- bonds Jibu (7 docs/26 units) https:// jibuco. com 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 977 Table 2 Interviewees in the purposeful sample Position Organisation Year Interviews Deputy chief investment officer CDC Group, previously Omidar 2018 2 CEO Impact management project 2019 1 Director of data science S&P global market intelligence 2018/2019 2 Founder Manarine LLC 2017/2019 2 Chairman and CEO Impact fund, Said business school, Oxford University, American 2017/2018 2 Capital Chief responsible investment officer PRI 2019 1 Consultant Impact investing measurement 2018 2 Associate Goldman sachs 2019 1 Consultant Strategic advisor to impact investors 2017/2018 2 Managing partner Bridge point capital 2019 1 Director and chairman Peoples bancopr 2018 1 Advisory council member World CSR 2018 1 Relationship manager Santander UK 2017/2018 2 Founder Serial social entrepreneur 2018 1 Director of sustainability Nuveen 2019 1 CEO Carbon tracker initiative 2017 1 Senior manager McKinsey 2018 1 Head IRIS intermediary working group IRIS/GIIN 2019 1 Project lead impact investing OECD 2018 1 Deputy director EVPA 2018 1 Director Ashoka Europe, Dafne Donors and Foundations Network 2017/2019 2 Head South Africa Task force for Impact Investing 2018 1 Associate director Big Society Capital UK 2017 1 Founder and CEO Village Invest, former World Bank 2018 1 Partner Bridges Ventures 2018 1 the whole data set. The intention was to facilitate a deep Data Evaluation analysis of materiality constructs and their various (con- tested) contexts. Following Puroila and Mäkelä (2019), our first step in the It is important to point out at this stage that Braun and evaluation of the data was based on a close reading of the Clarke (2006) additionally cautioned that such research may documents to conduct a qualitative content analysis (Denzin be strongly influenced by the researchers’ own judgements. & Lincoln, 2011), in which the materiality considerations To prevent this, we used several measures to enhance the were analysed through several rounds of reading. Following qualitative validity of this study and included various checks our research focus described above, we specifically looked and balances (Bluhm et al., 2011). For example, we used for data on materiality practices and their relevance for protocolled inter-coder reliability measures. For this, all investors, the role of investees and stakeholders as mean- authors read and coded the data and, in cases of substantial ingful participants in negotiating materiality, and potential disagreement, the coding manual was revisited together and areas of contestation. Based on the 19 cases and interviews, revised for overall consistency. Any disputed topic was then a total of 671 meaningful units of analysis were extracted for discussed again until a coding convergence was reached. further analysis from the 157 documents and 33 interview During the first rounds of reading, memos were writ- transcriptions using ATLAS.TI. software. ten based on emerging questions about potential patterns In terms of wider epistemology, we followed Braun and drivers of materiality contestations (Puroila & Mäkelä, and Clarke's (2006) holistic approach to thematic analy- 2019). These memos were then used in the open interviews sis. Seeing language as constitutive of social meaning, with the interviewees to come to a deeper understanding of this approach identifies patterns of data as stories or the identified patterns and to confirm the early coding. This meaningful ‘units’. In other words, rather than comparing method of data analysis involved comparing and contrasting individual reports, our analysis focussed on looking for a variety of expressions and manifestations of materiality, similarities/dissimilarities and resulting patterns across 1 3 978 O. M. Lehner et al. which allowed us to, recursively, develop a richer and more analysed our empirical data, we found evidence supporting comprehensive picture of the materiality in the sample set. these assumptions, specifically that materiality is indeed a In total 2382 units of analysis were coded into first order contested concept in IM. In the next three sections, we pre- concepts, which were then combined into larger second and sent our data analysis and findings in terms of the three are- third order concepts as we gradually developed a more holis- nas of contestation: power dynamics; materiality norms and tic understanding of the first order concepts. standards; and radical or incremental views of materiality. We then clustered and aggregated the concepts (Parker & Each section describes the details of the relevant sub-fields Northcott, 2016) in order to structure the data around three and how we derived each composite theme based on the major themes as emergent ‘arenas of contestation’: power aggregation of second and third order concepts. dynamics; materiality norms and standards; and radical or incremental views of materiality. Power Dynamics Findings Table 3 illustrates how we aggregated and derived this the- matic cluster based on the meaningful units and the sources This paper aims to offer new research insights into the nas- of contestation. These sources will now be looked at in detail cent field of IM based link to Senian theories of social jus- and atomic excerpts from the documents will help link the tice. Specifically, we focus on arenas of contestation in terms aggregated findings to the data. of the materiality of impact data from differing stakeholder The first arena of contestation identified from the data perspectives. As noted above, the literature suggests that was around differentials of power across stakeholders. As the distinctive features of IM, when compared to financial noted above, in Senian terms this represents a potential pro- accounting, include a diversity of relevant units of analy- cess of procedural injustice. This was particularly evident sis and a wide range of stakeholders for whom these data in terms of the different types of impact data categorised matter. We have also suggested that power is not equally as material by investors—as powerful actors with extensive shared across these stakeholders with investors—as the own- resources and administrative capabilities—compared with ers of capital—typically being more powerful than inves- typically less well-resourced, small-sized, investee organisa- tees or beneficiaries. Given this, we propose bringing in a tions. The data revealed the dominance of investors in these novel theoretical perspective to the analysis of materiality contestations in terms of prioritising a focus on financial in IM based upon notions of Senian social justice. When we performance from their investees, for example: Table 3 Thematic aggregation of meaningful units: power dynamics Arena of contestation: power dynamics Aggregated sources of contestation Identified mechanisms in the meaningful units Differentials of power across stakeholders Overburdening of investees in terms of reporting requirements Indifference to firm size and capabilities Potential mission drift Divergent focus on financial versus impact data Misalignment between social and environmental mission and fundamental business success Missing linkage of revenues to the social and environmental activities of the investee Trust Lack of robustness of data No audit or assurance Poor levels of Transparency Risk distribution Risk transfer lacking proper measurement or aggregation methods Unfair distribution based on bounded rationality and opportunism Vulnerability of investees Problems with the enactment of accountability mechanisms Disenfranchisement of beneficiary voice Objectifications of impact investees as ‘portfolio assets’ Information requirements and data mismatch Restriction of effective communication Additional information demands from investors for idiosyncratic portfolio building Efficiency rather than effectiveness as guiding principle Lack of administrative capacity to produce decision-relevant impact data because of investor focus 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 979 An investor will want to see how your products, ser- The enactment of accountability mechanisms also high- vices and interventions are linked to your ability to lighted these power differentials, leading to a potential generate revenue from the social activities that you disenfranchisement of beneficiary voice in materiality deliver. Your impact plan not only has to show how contestations: your activities respond to the beneficiary needs identi- The flaws in the traditional approach to impact meas- fied but how this links into your fundamental business urement have led to an accountability gap. Social success and growth. However, you need to make sure entrepreneurs have fallen into the habit of conducting that these activities are congruent with your mission as evaluations that meet the needs of upward account- a social purpose organisation (Babington Group, Doc ability. They collect data to meet the requirements of Nr. 128, Unit Nr. 539). their investors. And investors, in turn, often set those A second issue that emerged was the importance of trust in requirements in response to the reporting expectations the negotiation of materiality and performance information. of their limited partners. What is often missing is a From a trust perspective defining IM materiality prioritises commitment to downward accountability – to making the identification of data that are relevant to all key stake - sure that social enterprises are using data to improve holders rather than emphasising data robustness, audit or the lives of their intended beneficiaries (Acumen Fund, assurance. In the absence of audit or assurance mechanisms Doc Nr. 6, Unit Nr. 43). in IM—as is typical of all nascent markets—the need for A related issue of contestation that emerged from the transparency was stressed too in lieu of trust. There was also data was the objectification of impact investees as ‘port- an underlying distrust concerning the potential for mission folio assets’ rather than as actors who identify, create and drift across stakeholders. Investors feared a mission drift exploit social and environmental opportunities to participate away from social or environmental goals based on a pri- actively in defining materiality: mary focus on profit maximisation, whilst investees were concerned that they may be forced to reduce their social And classifying assets as either impact or non-impact activities in order to drive up financial returns for investors.: must be considered in the context of an investor’s intentions (Sonen Capital, Doc Nr. 70, Unit Nr. 308). Given that the Social Impact Bond contract transfers all or part of the implementation risk to investors, who This objectification restricted effective communication and are only paid when expected outcomes are achieved, was reflected in demands for additional information on the all stakeholders need to trust that the outcome metrics side of investors to facilitate their portfolio building without can be measured effectively and objectively (Social an explicit impact focus. Central to these problematic—and Finance, Doc Nr. 103, Unit Nr. 450). asymmetric—framings of the materiality of impact data was Transparency is crucial […], as fuller disclosure helps a misaligned focus on process efficiency rather than outcome win more trust from the investor. Reliable information effectiveness between investors and investees: represents less risk to investors, which translates into For a portfolio of enterprises, a complete impact report a lower cost of capital and thus higher valuations (Big or impact statement includes data about an enterprise’s Society Capital, Doc. Nr. 90, Unit Nr. 396). total impacts […]. Since this may often result in too In addition, there was an overarching suspicion that impact much data for an investor to review, especially in cases risks were not equally distributed across stakeholders. where investment products have hundreds of underly- Without proper measurement and attribution of social and ing assets, the intermediary managing the portfolio of environmental risks, such disputes over the materiality of enterprises may choose to create a consolidated impact risk measures were hard to resolve. Given the power domi- statement that highlights the impacts that are relevant nance of investors, even when mechanisms of trust were in to the investor’s goals […] (Global Impact Investing place, the evidence also revealed a sense of vulnerability in Network, Doc Nr. 98, Unit Nr. 422). investees: Moreover, this set of issues revealed an interesting para- You’ve got to be someone who is willing to share every dox. Namely, investees typically recognised the benefit of part of your business, the soft underbelly, the vulner- having sufficient capacity and resources to produce robust able side, the weaknesses with your business. To build- and material impact data as a management tool for their ing that trust with an investor is the number one thing own decision-making, but were often constrained in terms that matters in building a relationship […] (Uncharted, of their administrative capacity by the conflicting impact Doc Nr. 123, Unit Nr. 514). information demands of their investors. Consequently, effec- tive decision-making on the ground could be diminished because the resources deployed to provide impact data that 1 3 980 O. M. Lehner et al. were deemed material to investors restricted the options for The second arena of contestation that emerged from our investee material (management) data also to be collected and data focussed on the social construction of the term ‘mate- acted upon. This misaligned incentive could, therefore, lead riality’ itself. In financial accounting, materiality is typi- to sub-optimal impact outcomes—something that, ironically, cally defined in terms of its relevance based upon a positiv - investors in the field are unlikely to want: ist logic, what one interviewee called a ‘techno-rationality’ (though note the critique of this positivist logic assumption The level and detail of reporting should reflect the from Edgley (2014)). As a result, it is conceptualised as a size and complexity of your organisation and a good mechanism for objective judgement by professional account- investor should not burden you with reporting require- ants and auditors. ments that detract from your core purpose and mission However, our data—notably from the intermediar- (Babington Group, Doc Nr. 128 Unit Nr. 541). ies—demonstrates that materiality in IM was framed as In summary, these data demonstrate the power dynamics best based upon normative, rather than techno-rational- within the contestations of materiality between impact inves- ist, judgements. This view suggests that materiality can- tors and investees, with the former having dominance in the not easily be objectively measured and reported but is, discourse of data relevance, largely due to their economic instead, a function of various judgements, across a range power. Such dynamics may undermine social justice, in of stakeholders, based on a more subjective morality, for process terms, between the stakeholders. In this context, a example: Senian analysis argues for the introduction of a more open To understand which effects are material, we look at (public) impartiality—as is discussed below. These dis- whether they relate to important positive or negative equilibria of power could potentially also be mitigated by outcomes for people or the planet, how significant trust mechanisms. But our data suggest that they also lead they are and whether they occur for groups of people to misaligned and paradoxical outcomes where claims on and/or the planet who are in need of the outcome. materiality were not focused on optimising impact or engag- We then consider whether the expected effect – ing beneficiary voice. even if it is material and positive – represents an improvement on what would have happened anyway Materiality Norms and Standards (Bridges Fund Management, Doc Nr. 22, Unit Nr. 133). In terms of the second theme, Table 4 illustrates how this arena of contestation emerged from our data. It focusses on However, such normative approaches, whilst potentially the norms and standards of materiality. providing richer and more ‘accurate’ impact data also Table 4 Thematic aggregation of meaningful units: materiality norms and standards Arena of contestation: materiality norms and standards Aggregated sources of contestation Identified mechanisms in the meaningful units Social construction of the term materiality Positivist logics and techno-rationality clash with normative statements and judgments Epistemological problems based on a subjective morality Uncertainty in the IM process Sometimes diametral opposite perspectives on positive and negative impacts between social and environmental impacts Indirect outcomes and long-term impact notoriously difficult to demonstrate Lack of consistency of data and measurement Data availability and quality problems Data often absent, incomplete or simply wrong Methods and analysis of impact not mutually accepted, for example between long- and short- term perspectives Power dynamics in the institutionalisation of IM Locus of power lies with the intermediary actors Intermediaries are framing the IM in terms of emerging standards and codes of practise Competing discourses of legitimisation and de-legitimisation of others Competition between standard setters based on internal logics Vested interests of rating and ranking organisations with proprietary IM standards as source of income Rationalisation based only on idiosyncratic assumptions Lack of an agreed-upon audit function Failure to admitting multiple voices and interpretation of what is good or bad Multiple relevant time-horizons 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 981 introduce limitations and uncertainty into the IM pro- systems. In this case, one dominant IM set of standards cess, for example concerning the optimal time frame for would necessarily exclude more complex, dynamic and measurement or over the consistency of data: contextual conceptualizations of what constitutes material data—for example, that admits multiple voices and interpre- Since this impact is inherently indirect and occurs tation of what is ‘good’ or ‘bad’ impact as well as multiple through the investments we make […], we are depend- time-horizons for effective data collection or analysis (such ent on the information available about these entities as a focus on longer-term ‘impacts’ rather than short-term and their potential effects, whether positive or negative ‘outputs’). (BNP Paribas, Doc Nr. 51, Unit Nr. 253). What is more, following the trajectory of financial But data availability and quality are still less than accounting, the introduction of a regulated set of IM and satisfactory, one of the biggest issues being a lack of materiality measurement and reporting standards may well consistency. Scope, definition, data depth and informa- also require an audit function. This would likely institution- tion are often absent, incomplete or simply wrong. All alise one dominant materiality perspective further by the of which makes analysis an imperfect science to the addition of a process of a professional rationalisation. In point where calculating impact can sometimes become turn, this would challenge alternative models of materiality superficial (BNP Paribas, Doc Nr. 51, Unit Nr. 254). that were more complex, shifting and interpretive and, at With respect to resolving these contesting epistemologies times, subjective to different actors. Such processes of assur - of IM materiality, our data also demonstrates another set ance and audit were viewed with concern by many investees of power dynamics beyond those noted above—between as well as philanthropic investors. investors and investees. In this case, the locus of power lies Another important driver towards IM standards and audit with the intermediary actors who are framing the IM field in was found to be purely commercial as a potential new source terms of emergent standards and codes of practice. The data of income for rating agencies, auditors and other intermedi- highlighted the influential role being played by standard- ary professional services firms, for example: setting organisations with regard to the institutionalisation In addition to or in lieu of company-specific impact of IM practices, processes and reporting frameworks (for metrics, the parties may agree to assess social and example, see the Impact Management Project: IMP (2018)). environmental performance against standards set by a These data also suggested that there were competing claims third party organization such as GIIRS (Global Impact of self-reinforcing legitimacy across the contested models, Investing Rating Service), a ratings tool that assesses for example: overall social and environmental performance (Toniic, This easy-to-use tool allows an investor to classify Doc Nr. 104, Unit Nr. 453). every underlying investment by its intended impact, Entrepreneurs and investors may agree that a com- as well as other variables that investors take into con- pany’s overall social and environmental performance sideration when designing their portfolios – such as be assessed and certified according to a recognized liquidity, expected returns, geography, management third-party standard. Companies with a B Corp certi- structures, and more. The outputs of the tool are visual fication, for example, must measure their performance representations of the individual portfolios, as well as against a set of standards […] (Toniic, Doc Nr. 104, investment data (Toniic, Doc Nr. 110, Unit Nr. 479). Unit Nr. 454). Our Outcomes Matrix has 21,000 unique users […] In summary, this second arena of contestation within out (Big Society Capital, Doc Nr. 91, Unit Nr. 398). data revealed the institutional dynamics around the current Furthermore, the contestations over who controls the stand- processes of standardisation around IM. The data particu- ardisation of materiality norms also reveal the processes by larly highlighted the conflicting and contested epistemolo- which specific actors aim to establish a dominant position in gies and framings of what constitutes ‘good’ or relevant the field of IM that will, typically, serve their own internal data for different stakeholders. While standardisation may logics of performance. For example—as one interviewee be closely linked to what Sen sees as ‘public negotiation’, pointed out—coalitions of actors may attempt to influence the inherent institutional-power dynamics within the field of standard setters such as the European Union to prioritise impact investing involving a third-party ‘impartial spectator’ (and, perhaps, regulate) one form of IM in favour of others. may be problematic, as we will discuss further below. If successful, such processes reify (and, as a consequence, potentially commercialise) idiosyncratic definitions of mate- Radical or Incremental Materiality riality as a norm to the benefit of some actors over others. Moreover, by definition, once institutional norms become The third arena of contestation that emerged from our data established, they exclude the legitimacy claims of alternative focussed on identifying the differing worldviews of the key 1 3 982 O. M. Lehner et al. actors who are negotiating the defining features and bounda- the impact of impact investment (Nicholls, 2018). Moreo- ries of materiality in IM. Central to our data analysis here ver, the failure to manage this tension lead to criticisms of was the contestation between conceptualizations of the potential social- and/or green-washing from other IM actors materiality of ‘impact’ as either a process of radical or more who aim at a more radical approach to impact by rejecting incremental change—in essence either working against or the market status-quo: within the existing institutional structures. Table 5. shows an Our vision is of a world where financial markets overview with examples of how the meaningful units were serve all members of society and where finance plays linked to the aggregated sources of contestation. a central role in solving the social and environmen- This set of data revealed an arena of contestation around tal challenges facing the global community. In this how best to mobilise impact investment to optimise impact future, investors integrate impact considerations into without being captured by the existing status-quo of finan- all decisions, building strong communities, a healthy cial markets. This theme was salient in several discussions environment, and a sustainable future for all people with investors and investees. From a materiality perspec- (Global Impact Investing Network, Doc Nr. 93, Unit tive, this contestation opposes the stakeholder relevance Nr. 403). of short-term outputs versus longer-term impacts, with the former typically being measured internally within the logics However, the data also suggest—in a Kuhnian sense— of an existing system and the latter externally challenging that we can also observe that the ‘paradigmatic wars’ over the institutional status-quo. This bifurcation also maps onto materiality in the IM field may be approaching an end the power analyses set out above, given that the material (Kuhn, 1970). This appears to reflect a pragmatic turn relevance of IM performance to the powerful actors who in the contestation over materiality driven by a broaden- own and invest capital—and who have likely benefitted from ing acceptance that embracing the status-quo of financial the existing institutional status-quo—is likely to be very markets and their attendant logics may, ultimately, opti- different from the investees or beneficiaries for whom the mise the flows of impact investing capital by widening the status-quo may well be sub-optimal and a structural driver investor base to include more traditional finance institu- of social issues. tions such as investment banks (see IMP (2018)).The argu- The argument brought up by many investees for a greater ment here is that this approach will create more net impact beneficiary participation in setting IM norms and stand- over time than attempting to reform or dismantle the exist- ards—creating a more powerful ‘voice’ over determining ing financial system. This was particularly evidenced in the boundaries of materiality—is based upon a recognition an acceptance that impact data needed to conform to the of this institutional-power critique. At its most radical, this normative (and positivist) expectations of impact investors view also suggests that the beneficiary voice is the most as economic actors, for example: important determinant of effective materiality to optimise Table 5 Thematic aggregation of meaningful units: radical or incremental materiality Arena of contestation: radical or incremental materiality Aggregated sources of contestation Identified mechanisms in the meaningful units Differing worldviews Radical or incremental perspective on impact as social change Differing views of existing institutional structures Difficulties to establish systematic impact Impact investing being captured by the financial markets Conflicting stakeholder perspectives Problems to find balance between internal measures of short-term outcomes and external views on long-term impact Power dynamics in terms of standard setting and norms Too little beneficiary participation in setting IM norms and standards Definition of boundaries of materiality are based on powerful systemic actors Social and greenwashing Investors following financial market logics Seeing IM as a form of corporate reputa- tion management Blurry investor IM definitions open to multiple interpretation Limitations of traditional financial markets and investors Traditional institutional investors do not focus on impact that is directed at challeng- ing the financial system Impact data does not conform to normative expectations of traditional financial investors Difficulties in risk management concerning impact causality and attribution 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 983 You should set realistic targets and indicators that standardisation of IM processes (e.g. IMP (2018), GIIN help you to track progress over time and improve. (2020)) and some others toward regulation (e.g. EU (2019)), This usually means that you gather a range of both the IM field remains nascent and under-institutionalised qualitative and quantitative indicators […] (Babing- (Burritt & Schaltegger, 2010; Molecke & Pinkse, 2017; ton Group, Doc Nr. 128, Unit Nr. 540). Rawhouser et al., 2019). Research has also identified the The lack of compelling case studies and data (both power dynamics within the institutionalisation processes of quantitative and qualitative) have been cited as pri- IM as a part of the wider of emergence of the impact invest- mary reasons impact investors and traditional investors ing market (Agrawal & Hockerts, 2019; Lehner et al., 2019; stay on the side-lines (Toniic, Doc Nr. 106, Unit Nr. Nicholls, 2018), with investors, investees and beneficiaries 458). differentiated by their levels of power. This paper has pre- sented an empirical study of the key actors in the emergent A second set of issues emerged concerning impact risk, spe- IM field to make new contributions in terms of our under - cifically around causality and attribution, for example: standing of the power dynamics, trust, standards and norms, Is your product and/or service actually having a mean- and emergent versus radical perspectives on materiality. ingful impact on your customers’ lives? (Acumen Next, we return to our earlier discussion of a Senian Fund, Doc Nr. 3, Unit Nr. 10). social justice perspective in an organisational context to Then the final dimension is about assessing the likeli- reflect upon the key findings from our data (Fia & Sacconi, hood that the impact will be materially different from 2018; James, 2005; Shrivastava et al., 2016). In particular, our expectation. For instance, there might be a lack of we look at how Sen’s perspectives on social justice may evidence to support the strategy, or there might be a mediate some of the arenas of contestations revealed in our risk around execution, or there might be other external data and how a capabilities approach to establishing impact factors at work […] (Bridges Fund Management, Doc. materiality may lead to a more just—an ultimately more Nr. 22, Unit Nr. 133). effective—system in terms of impact. This leads us, in this section, to make a series of normative suggestions on the The material relevance of the externalities or negative future development of IM and materiality within it, explor- impacts of impact investing was also highlighted as an ing possible resolutions to some of the arenas of contesta- important issue, revealing a potential tension between purely tion of materiality noted above (Crane et al., 2016; Hahn financial and IM assessments of performance: et al., 2017), which will hopefully lead to favourable, ‘just’ But we highlight the need to collect and learn from arrangements in terms of the intended beneficiaries. this information continuously – since the experience of people and planet may not reflect our intentions and goals, either because they don’t experience the Senian Justice and Power intended impact, or end up worse off (Bridges Fund Management, Doc Nr. 22, Unit Nr. 133). This paper has demonstrated that conceptualisations of materiality in IM are contested and structured by the power This third arena of contestation based on the data analy- relationships between impact investors, intermediaries— sis has suggested a range of differing conceptualizations of such as standard setters or auditors—and investees. We also materiality based upon the differing institutional position- noted that such dynamics typically marginalise beneficiary ings and worldviews of key actors. Specifically, we have voice and, as such, can lead to sub-optimal or even, negative highlighted the contestation between radical and incremental impact outcomes. From our data analysis, we identified three conceptualizations of materiality, either internal or external arenas of contestation over materiality: power dynamics, to the institutional (market) status-quo. trust, and misaligned incentives between economically pow- Next, we return to our Senian social justice framework to erful investors and objectified investees; conflicting views discuss our findings. over materiality norms and standards; and the interactions between stakeholders with differing motivations towards radical or incremental materiality. Discussion These findings support Nicholls (2018), who suggested that a clearer conceptualisation of IM—combined with the Mediating Materiality Contestations type of novel empirical research offered in this paper—is needed if the impact investing market is both to increase the As we have noted above, currently, the field of IM remains flows of capital into the market and optimise its impact. Our highly contested specifically around issues of material- data also identified processes by which investees became ity. Whilst there are several initiatives moving towards a objectified as ‘assets’ separated from decision-making over 1 3 984 O. M. Lehner et al. materiality by investors. This served to negate any negotia- Comprehensive Justice and Participation tion over the meanings of, and discourses around, materiality across stakeholders. Sen (2009) work on comprehensive justice focusses pri- As we have suggested, an alternative perspective on marily on lived experiences or actual realisations. He sug- these relationships can be taken from Sen's (2009) theories gested that, “A full characterization of realizations should of social justice. This approach reframes key IM stakehold- have room to include the exact processes through which the ers as partners, rather than antagonists, linked holistically eventual states of affairs emerge” (p. 9). This brings in the within a form of temporary organisation for a given pro- perspectives of procedural—and with it interactional—jus- ject and as ‘equals’ in constructing and negotiating impact tice based on public reasoning and open impartiality that materiality. Moreover, such a perspective reframes mate- were outlined in the previous section. riality judgements away from short-term outputs towards Sen's (2009) model of a neutral and just agreement on long-term outcomes and would likely prioritise beneficiary the processes of realisation is also relevant to our findings voice and participation in a more radical view of the rel- concerning the contestations between positivist and more evance of impact data. Additionally, Sen's (2009) theories interpretive approaches to impact materiality (Lisi, 2018; also reveal the potential injustices inherent in any move Nicholls, 2018). The interpretive approach is contingent towards a standardised and static model of IM materiality. upon re-embedding an a priori normative and idiosyncratic From this point of view, truly effective IM can be seen as construction of materiality as an actor-specific concept based necessarily dynamic with the construction of materiality in on subjective moralities and value judgements within IM. a constant state of re-negotiation across stakeholder groups, However, contra this, the IM field today is moving towards a each of equal power and voice, shaped by evidence of impact positivist approach with more formalised, and narrow, mate- outcomes over time. riality prescriptions (e.g., IMP, 2018). Such a trajectory is in Moreover, Sen (2009) argued that a ‘rational’ society opposition to Sen's (2009) notion of comprehensive justice would be expected to reach just solutions through reason- and open impartiality. This is consistent with Puroila and ing, transparency, accountability and the deliberate inclusion Mäkelä (2019), who suggested that: “the technic-rational of multiple arguments from multiple perspectives (Shriv- approach to the materiality assessment, reinforced with the astava et  al., 2016). In contrast to the Rawlsian view, in use of the [materiality] matrix is a value-laden judgement of which citizens justify their decisions to each other (Rawls, what matters in corporate sustainability and narrows down 1985), Senian thinking prioritises the voices of outsiders as rather than opens up the complexity of the assessment of ‘impartial spectators’: to assess competing sentiments from material sustainability issues, stakeholder engagement and a distant and neutral position to reach an ‘open impartial- the societal pursuit of sustainable development” (p. 1043). ity’ (Sen, 2009). In terms of IM, third-party intermediaries Consequently, following Sen (2009), we advocate that in could play such a role in moderating and framing materiality order to construct materiality to optimise impact in IM, a (re-)negotiations. This could be actioned, for example, in priori standardisation is inherently problematic, as it would participatory processes of setting and revising standards of favour only some actor-specific moralities (see above) and best practice. Third-party intermediaries in impact invest- discourage/discount others (Fortin et al., 2015). We also sug- ing (Lehner et al., 2019) can act as ‘translators’ between the gest that it would be more effective to model IM materiality conflicting rhetorics of investors and investees since they in terms of agreements based on a common morality (Fortin know and understand both sides. Such intermediaries could, et al., 2015) across key stakeholders for a specific intended therefore, play an important role in settling a consensus on impact outcome. In practice, this would mean bringing in contested claims of materiality by mediating the demands the voices of beneficiaries to take account of their needs and and models across two parties. Such a consensus would converge towards a common value proposition as a guid- also build trust and further mitigate the potential for con- ing principle between investors and investees. At its most flict between investors and investees. What is more, impact granular, this process of consensus would be achieved at the investing intermediaries are often motivated by a primary individual investment level but, given the potential transac- focus on beneficiaries—making them impartial spectators tion costs, it is likely best to occur at the fund or portfolio of any conflicts between investors and investees. level assuming a common set of beneficiary groups. Moreover, at the investee level, Sen's (2009) logic of As we have already noted in other contexts above, a public reasoning would suggest the need for performance Senian process approach to negotiating materiality is most transparency via material reporting of actions and impact. effective if it is field-driven (participatory) in its moral Doing so would also develop interactional justice in the IM assumptions and includes all stakeholders’ voices and their field and enhance what Sen (2009) calls ‘comprehensive jus- value judgements (Carnegie, 2019; Deegan, 2019; Leh- tice’, which includes aspects of both distributional as well as ner et al., 2019). From a pragmatic perspective, such pro- procedural justice. We consider this next. cesses could also be audited as a proxy-measure of good IM 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 985 practice through evidence of meaningful beneficiary partici- transcendental institutionalism (Fia & Sacconi, 2018; James, pation (Maroun, 2018; Nicholls, 2018). 2005): In addition, from a Senian point of view, effective IM “When people across the world agitate to get more would avoid being rigid and dogmatic and, instead, reflect global justice […] they are not clamoring for some the necessary elements of procedural justice concerning kind of ‘minimal humanitarianism’. Nor are they agi- materiality. This, in turn, has the additional benefit of enact- tating for a ‘perfectly just’ world society, but merely ing processes that lead to the independence of the investee for the elimination of some outrageously unjust in the creation of impact—with the further consequence that arrangements to enhance global justice” (p. 16). they are empowered in terms of their own potential function- ings and capabilities (Sen, 1985). The concept of function- Here, Sen confirmed his interest in the marginal improve- ing represents a state in which people are free to be or do ments that are achievable from the ‘bottom’ of inherently whatever it is that they value. In terms of IM, this means unjust situations, rather than from the ‘top’, to create per- empowering the investee to define materiality in terms of fectly just institutional arrangements. Sen argued that whilst their own actions and beneficiary voice—to ensure equality access to basic goods and equal opportunities would con- of power in defining materiality. stitute a sensible pre-condition for any sort of justice, the Taking these insights from Sen (2009) back to our data same set of goods would not have the same implications for analysis above, we suggest that to optimise the effectiveness individuals across different ‘cultural, political, and socioeco- of impact investing in terms of its beneficiaries, materiality nomic systems.’ This is because such contextual differences is best left under-specified to allow a maximum of function- affect individual functionings and capabilities. Senian think - ings based on free will (Sen, 1985; Shrivastava et al., 2016) ing reduces the conflict between actors of different world- for investees and beneficiaries. This would empower both views by offering a pragmatic process of building consensus groups in terms of their capability to flourish. However, from from the bottom up. In practice, however, it might be more a critical justice perspective, even under-specified construc- pragmatic to build deals between investor and investees that tions of materiality would still need a process of negotia- share a common worldview in terms of emergent or radical tion across key stakeholders. Again, such action would cast materiality. third-party intermediaries as ‘impartial spectators’ in the In summary, by framing our findings with respect to IM process (Sen, 2009). A pre-prescribed and negotiated materiality in IM with a Senian focus on social justice, indi- IM materiality—managed by an intermediary and based on vidual functioning and capabilities, we suggest that three a previously agreed set of impact goals—may also reduce arenas of contestation we identified can be recast as oppor - the possibility of subsequent mission drift. To some degree tunities to negotiate materiality dynamically across areas of the principles-based approach of the Impact Management mutual interest in terms of the optimising overall impact. Project reflects these perspectives. Sen's (2009) insistence on the importance of free will in such Our findings also identified contestations between posi- negotiations brings with it an obligation for transparency and tivist and interpretivist positions on, and emergent versus accountability across all stakeholders leading to structures of radical framings of, impact materiality. Conflicting objective open impartiality and comprehensive justice. In pragmatic and subjective views on data gathering may be reconciled terms, this requires both investors and investees to be espe- by finding and focusing on the overarching communality of cially open and self-reflexive about their a priori materiality desired impacts—for example, by codifying them in contrac- judgements, rationales and logics. As Sen (2009) put it, “If tual terms (Bebbington et al., 2017). However, the contesta- it turns out, for example, that in order to safeguard the liber- tions between emergent and radical materiality in IM are ties of all, we have to cultivate tolerance of each other in our more problematic and may sometimes be beyond reconcili- respective values, then that is a public reasoning justification ation since these are based on fundamentally contradicting for cultivating tolerance” (p. 111). worldviews. As a consequence, in such cases, the divergent logics for action may well prevent effective investor-investee relationships, lead to social- or green-washing (Agrawal & Conclusion Hockerts, 2019; Lehner et al., 2019) and, potentially, dam- age the reputation and legitimacy of the actors involved with As an abductive study within a novel theoretical framework further negative consequences for the wider field of impact based on Senian social justice in an organisational setting, investing (Suddaby et al., 2017; Tost, 2011). Moreover, these this paper acknowledges several limitations. First, as a quali- conflicts could also introduce significant investment risk tative study, this paper inevitably has some limitations based for both investor and investee and could increase financing upon its research design. Although our analysis encom- costs. This resonates with Sen’s (2009) criticism of Rawls passes 671 data points from 157 documents, 19 purpose- fully selected cases, and 33 interviews, this still represents 1 3 986 O. M. Lehner et al. Funding Open Access funding provided by Hanken School of Eco- only a small sample of what is going on in the field of impact nomics. No external funding was received for this work. investing. As such, this work should be seen as a preliminary analysis that provides insights and proposes ways forward Declarations but does not test theory per se. Second, the coding process relied upon the subjective evaluations, reading and subse- Conflict of interest The authors declare that they have no conflict of quent interpretation of the authors. To counteract any poten- interest and it is solely the work of the above-mentionedauthors. tial bias and misinterpretations, several measures, such as Ethical approval Ethical approval was waived by the Ethics Commit- inter-coder reliability and a critical reflection on the evalu- tee of the Hanken School of Economics, Helsinki in view ofthe retro- ation by constantly moving forwards and backwards in the spective nature of the study. We have followed best practises for data documents and the interviews were employed to enhance protection and have receivedinformed consent from all interviewees. the qualitative validity of this research. However, such sub- jectivity must still remain present and is acknowledged in Open Access This article is licensed under a Creative Commons Attri- the data and findings. Third, given the increasing pace of bution 4.0 International License, which permits use, sharing, adapta- institutionalisation of the field of impact investing and, with tion, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, it, IM, our study will necessarily be temporally contingent. provide a link to the Creative Commons licence, and indicate if changes Nevertheless, despite these limitations, we believe our were made. The images or other third party material in this article are paper has been consistent with our initial stated aims to pro- included in the article's Creative Commons licence, unless indicated vide new data, propositions and framings of materiality in otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not IM to evaluate and generate normative recommendations permitted by statutory regulation or exceeds the permitted use, you will based on a Senian social justice perspective that can then need to obtain permission directly from the copyright holder. To view a be subject to further research and testing within the com- copy of this licence, visit http://cr eativ ecommons. or g/licen ses/ b y/4.0/ . munity of business ethics scholars. Specifically, from our data analysis, we have identified three distinctive arenas of contestation over impact materiality in IM. We have also References suggested the significance of each arena of contestation in terms of negative implications for the effectiveness of the Agrawal, A., & Hockerts, K. (2019). 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Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in Impact Measurement

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Abstract

Although the importance of measuring and reporting the social and environmental impact of organisational action is increas- ingly well recognised by both organisations and society at large, existing approaches to impact measurement are still far from being universally accepted. In this context, the stakeholder dynamics within the nascent field of impact investing demonstrate the complexity of resolving potentially differing perspectives on key impact measurement issues such as materiality. This paper argues, from an organisational perspective, that such arenas of contestation can be conceptualised in terms of social justice. Specifically, we draw upon Sen’s notions of ‘arrangement and realisation’ to explore the dynamics of contestation across a range of stakeholders concerning materiality judgements to suggest that such ‘arrangements’ may lead to suboptimal impact outcomes as ‘realisations.’ Our analysis of the nature of materiality contestations in impact measurement reveals the conflicts, tensions and paradoxes evident in this field of action. Empirically, we examine data drawn from 19 cases and 33 interviews. The analysis suggests three arenas of contestation around the materiality of impact measurement: the power dynamics between economically powerful investors and objectified investees; the conflicts between materiality norms and standards; and the interactions between all stakeholders with differing motivations towards radical or incremental materiality. Building upon this analysis, we then discuss how arenas of contested materiality may be mediated by drawing upon Sen’s notions of transcending the individual interests of the invested parties for the greater good via processes of contextualisation and case-specificity. Keywords Impact investing · Impact measurement · Materiality · Senian justice Introduction Global Reporting Initiative, the Principles for Responsible Investment and the Sustainability Accounting Standards The nascent field of impact measurement (IM) aims both Board), the IM field has emerged as a specific response to to account for the material non-financial value creation of the growing interest in impact investing globally, which now organisations and to offer principles for the effective man- constitutes over $500 billion of assets under management agement of impact creation processes (Agrawal & Hockerts, (Brandstetter & Lehner, 2015; GIIN, 2019; Ormiston et al., 2019; GIIN, 2020; IMP, 2018). Whilst various accounting 2015). recommendations for impact models already exist (e.g. the According to the literature the IM field is still under- institutionalised, in theory as well as practice (Höchstädter & Scheck, 2015). Competing methodologies and a lack of * Othmar Manfred Lehner accounting regulations are symptoms of this (though see othmar.lehner@hanken.fi EU (2019) for a proposed regulated structure around ESG Alex Nicholls reporting and UNDP (2020) for a proposed set of measure- alex.nicholls@sbs.ox.ac.uk ment and reporting standards for the Sustainable Develop- Sarah Beatrice Kapplmüller ment Goals (SDGs)). As such, it remains unclear how effec- SS4044@live.mdx.ac.uk tively the impact investing market actually creates social and environmental value (Nicholls, 2009, p. 755). Hanken School of Economics, Helsinki, Finland Research on the practice of IM has demonstrated that Said Business School, University of Oxford, Oxford, UK it is difficult to agree on a common set of material (i.e. Middlesex University, London, UK Vol.:(0123456789) 1 3 972 O. M. Lehner et al. contextually relevant) metrics with which to measure and that the interpretations and implications of the concept of report the short-term, as well as long-term, impacts of materiality in IM remain ambiguous and diverse. Building impact investments. The contestation over materiality in IM upon this previous research, we suggest that this ambiguity can be seen as a product of the dynamics across the complex is not simply a consequence of the dynamics typical of a nas- relationships between investors, investees and beneficiaries cent field (Lehner et al., 2019; Nicholls, 2018), but, rather, in the impact investing field (Lehner et al., 2019; Nicholls, reflects the diverse worldviews (Burrell & Morgan, 2019) of 2018). This paper argues that such contestations may create the key actors in the impact investing field. systems of procedural and—as a result distributive—injus- This approach is also supported by Higgins et al. (2018), tice between the relevant stakeholders over time. who also found patterns of discursive power and isomor- From a Business Ethics perspective, we suggest that there phism around materiality in sustainability measurement and is analytic value in new research on IM in impact investing reporting. They noted that sustainability accounting, as a that engages with Sen’s theory of social justice (Sen, 2009) whole, is far from being an institutionalised practice and in an organisational context (Joyner & Payne, 2002; Lewis, is, rather, still an issues-based field (Zietsma et al., 2017 ). 1985; Woiceshyn, 2011). In this paper we use this approach What is more, compared to the focus on the retrospective to provide new insights into the materiality of capital alloca- impact ‘outputs’ on the environment and its stakeholders tion that aims not only to create a financial return but also typical of sustainability accounting, in IM, combinations of to create positive impact in terms of beneficiaries’ lives, cross-sectoral organisations (Cloutier & Langley, 2015) typi- health, income and, even, the wider environment (Melé & cally negotiate and construct materiality—reified in agreed Armengou, 2016). To this end, this paper aims to advance methodologies and metrics—within both an anticipatory business ethics research by positioning effective IM within planning, and ongoing performance, management process a social justice framework for the first time (Fia & Sacconi, focussed on ‘outcomes ab initio’. This outcomes focus in IM 2018; Fortin, 2015; Sen, 1985, 2009), specifically in terms also attempts to capture complex longer -term social impacts of a Senian, outcome-driven, social justice approach (Sen, than is usual in sustainability accounting (Höchstädter & 2009; Shrivastava et al., 2016). Moreover, this paper aims Scheck, 2015; Millar & Hall, 2013). to extend existing normative theory concerning IM (Crane In summary, the nascent IM field has a number of dis- et al., 2016), which is typically based upon notions of the tinctive features that are relevant for a Senian social justice ‘purpose’ of capital and the social responsibility of organisa- analysis. First, IM processes typically engage with a variety tions in our society (Brown & Forster, 2013; Mayer, 2019). of actors with clear differentials in power, experience and A social justice perspective also extends the current knowledge—this is particularly the case since many impact debates on the social accountability of the firm (Gilbert investments flow to social, rather than purely commercial, & Rasche, 2007; Laufer, 2003), consistent with Zadek's investees who, in turn, often work with highly marginalised (1998) argument that such accountability helps ‘integrate populations of beneficiaries (Lehner et al., 2019; Nicholls new patterns of civil accountability and governance with a & Ziegler, 2019). Second, issues of materiality remain business success model focussed on deepening stakeholder contested as the IM field lacks regulated impact reporting relationships around core non-financial as well as financial structures or standards. In this context, the power dynamics values and interests’. This paper also builds upon a range across the stakeholders who are negotiating the meaning of of more recent research on the contested nature of the nas- materiality in a given investment context become highly sig- cent IM field (Burritt & Schaltegger, 2010; Höchstädter & nificant (Puroila & Mäkelä, 2019; Taubken & Feld, 2018). Scheck, 2015; Lehner et al., 2019; Molecke & Pinkse, 2017; This raises the question over who decides what constitutes Nicholls, 2018; Rawhouser et al., 2019). Early insights from ‘good’ impact (Nicholls, 2009). Given these issues, this Lehner et al. (2019) and Nicholls (2018), for example, iden- paper proposes that the processes by which materiality is tified the lack of institutionalisation of the impact investing determined in IM are typically highly contextualised and field as driving a discursive power struggle over its legiti- necessarily complex across key stakeholders with different macy between the key actors in the field, resulting in com- levels of power (Markman et al., 2019). peting conceptualisations of materiality and good practice. To explore these issues empirically, this paper provides ‘Materiality’ is a fundamental—and clearly delineated— a preliminary study that draws upon data from 19 cases and financial accounting concept (Frishkoff, 1970) that signifies 33 interviews. The analysis, first, explores the contested the relevance of information for influencing the decision- nature of materiality and, second, considers the drivers for making process of key stakeholders, typically investors this contestation. Specifically, we analysed 157 documents (Burrowes & Karayan, 2017; Green & Cheng, 2019; Messier from these cases to establish their approach to constructing et al., 2005). However, in IM, a variety of materiality defi- materiality. After this, we discussed these preliminary find- nitions can be observed (Green & Cheng, 2019; Nicholls, ings with the interviewees in an iterative process of data 2018). Puroila and Mäkelä (2019), for example, proposed triangulation. Using a Senian realisation, outcome-driven, 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 973 perspective on social justice we suggest that Sen's (2009) the nature of impact—and the attendant metrics and data ‘functioning and capability’ approach offers important points—research suggests that there remains significant insights into how materiality contestations may be framed diversity in terms of definitions and models of IM (Kroeger to reveal the power dynamics across competing world views. & Weber, 2014; Nicholls, 2018; Rawhouser et al., 2019). As a novel contribution to the field, we further discuss how Despite this heterogeneity, it remains the case that measur- arenas of contested materiality can be mediated by draw- ing and reporting impact is clearly strategically important ing upon Sen's (2009) notions of ‘transcending’ the indi- for all the actors in the impact investing field and—at the vidual interests of the invested parties (Fia & Sacconi, 2018; aggregate level—for society at large (Combs, 2014; Emer- Shrivastava et al., 2016) for the greater good via processes son, 2003; Hehenberger & Harling, 2015). of open impartiality, contextualisation and case-specificity The range of actors in the field of impact investing (Fortin et al., 2015). We propose that acknowledging these has recently been the subject of significant research. For power dynamics may, ultimately, produce more ee ff ctive IM example, Brandstetter and Lehner (2015) noted that inter- systems capable of better optimising the impact of impact mediaries and enablers (standard setters, funds, advisors, investments (Crane et al., 2016; Hahn et al., 2017; Nicholls, governmental institutions, NGOs) are especially important 2018). Following a Senian logic, this paper also demon- actors in the impact investing market bringing together the strates how dominant, partisan materiality judgements in supply side (institutional investors, foundations, banks, IM may generate arrangements that lead to poor and unjust funds, philanthropists) and demand side actors (social and realisations of impact investments. This is in stark contrast environmental investees, charities, community development to the stated intent of impact investing to create only posi- institutions). Following this, Lehner et al. (2019) further tive social impact and social justice. As a consequence, we identified the dysfunctions of the impact investing market also suggest that developing more empowering processes as a consequence of the differences in rhetoric and legiti- for investees and beneficiaries—to allow equal influences— misation strategies between investors and investees. It is, around determining materiality may increase the total impact thus, perhaps inevitable that the perceptions of the optimal of impact investing across all stakeholders (Nicholls, 2018). measurement and reporting conventions of IM will differ The remainder of this paper is structured as follows. Next, signic fi antly between investors and investees in a e fi ld that is we set out the context of impact investing, the emergence yet to be fully institutionalised (Cooper et al., 2016; Kroeger of IM, and conceptualisations of materiality. After this, & Weber, 2014; Wood et al., 2013). we introduce the ideas of social justice framed in Senian Despite important research on the field to date, IM still thinking. We then set out the methodology used here with a remains under-conceptualised (Molecke & Pinkse, 2017). detailed description of the sampling and the methods used For example, little agreement exists over the appropriate and present our key findings. Finally, the paper discusses temporal dimensions (when and for how long impact should how these findings may be interpreted from a Senian social be measured and reported), the scope of analysis (who and justice perspective leading to normative suggestions on how what should be included or excluded), the role of externali- these research insights may enhance IM practice. We also ties (positive and negative), the relevance of impact attri- acknowledge the limitations of our study and set out some bution, causality and attrition of social and environmental lines of future research built upon our work. impact (how much can be claimed by the investment), and the inherent downside risks on each of these issues (Ebrahim The Dynamics of Measuring Impact and Materiality et al., 2014; Molecke & Pinkse, 2017; Nicholls, 2009). Considerations To date, various approaches to optimising IM have been proposed in theory as well as in practice (Rawhouser et al., Improving the effectiveness of measuring and reporting 2019). These can be categorised in terms of: micro- or impact is recognised as being one of the key challenges in macro-levels of analysis (Nicholls, 2009); their specific the field of impact investing (Ebrahim & Rangan, 2014; target audience; the use of quantitative or qualitative data GIIN, 2020; Jackson, 2013). Impact investing can be defined (Kroeger & Weber, 2017); and the level of generalisation as an investment approach in which capital is invested in (industry-wide or context-specific) (Costa & Pesci, 2016). ventures with the intention to generate positive—and meas- In addition, it has also been suggested that IM needs to urable—social and/or environmental impact (i.e. value) measure and report on the whole range of the impact value alongside a financial return (Bugg-Levine & Goldstein, chain (capturing the so-called Theory of Change model), 2009; Cahill, 2010; Cheney et al., 2013). Thus, a central which comprises inputs, activities, outputs, outcomes and tenet of impact investing is effective measurement, report- finally, long-term impact (Clark et  al., 2004; Godeke & ing and management of intended, unintended, and achieved Pomares, 2009; Hornsby, 2012). It is also the case that the impacts (Brest & Born, 2013; Höchstädter & Scheck, 2015; term ‘impact’ itself is used differently in various research Ormiston et al., 2015). However, when it comes to defining contexts. Thus, while in sustainability accounting, impact 1 3 974 O. M. Lehner et al. can also be seen as negative influence, for example, on the as a measure of a firm’s performance. Financial metrics and environment, in impact investing, impact is typically seen data are said to be of material relevance for investors and are as positive ‘social value creation’ (Höchstädter & Scheck, regulated as such (Frishkoff, 1970). Sometimes non-financial 2015). data are also reported for other stakeholders as material but Nevertheless, as noted above, in contrast to financial this is voluntary (Green & Cheng, 2019). The International accounting, there are currently no regulatory structures in Accounting Standards Board (IASB) defines materiality as: place for IM and the existing frameworks typically conform “Information is material if omitting, misstating or to an investor worldview rather than focus on more partici- obscuring it could reasonably be expected to influence patory measurement and reporting systems that engage a the decisions that the primary users of general-purpose wide range of stakeholders including frontline beneficiaries financial statements make on the basis of those finan- (Molecke & Pinkse, 2017; Nicholls, 2018; Rawhouser et al., cial statements, which provide financial information 2019). For example, Lisi (2018) considered IM in terms of about a specific reporting entity” (Tysiac, 2018). three fundamental drivers of corporate social strategy: busi- ness motivations, perceived stakeholder pressures, and the To date, a number of overlapping, yet distinct material- social commitment of management. From this perspective, ity definitions exist in the sphere of sustainability account- IM combines the positivist metrics and the cognitive prefer- ing, most from the perspective of a single organisation and ences of financial accounting despite a focus on social and its key stakeholders (Baumüller & Schaffhauser-Linzatti, environmental goals. 2018; Green & Cheng, 2019; Taubken & Feld, 2018). The More recent research has suggested, first, that IM is Sustainability Accounting Standards Board (SASB) echoes typified by a specific set of assumptions on the rationality the above definition of the IASB and defines materiality as: and capability of the investees and, second, that different “Information that could be viewed by the reasonable actors have differing expectations of impact with respect investor as having significantly altered the total mix of to the existing institutional status-quo in society (Lehner information made available” (SASB, 2014). et al., 2019). Thus, while many impact investors (such as banks, funds or institutional investors) do not focus on the While the SASB’s definition of materiality focuses on materiality of IM in terms of disruptive changes in society, the investors as the target audience, the focus of the Global impact investees, as ‘changemakers’, may have a more radi- Reporting Initiative’s (GRI) definition is on all stakeholders: cal view (Antadze & Westley, 2012; Drayton, 2006; Zahra Information that could substantively influence the et al., 2009). assessments and decisions of stakeholders (GRI, In summary, the complex and competing IM perspec- 2016). tives on materiality and their underlying worldviews remain under-researched. This is, perhaps, surprising given that The International Integrated Reporting Council (IIRC) materiality represents a key factor in terms of understand- expands the boundaries of materiality and brings in notions ing the justification, consolidation and standardisation of of value creation beyond the purely financial. Here materi- differing models of IM going forward (Akehurst et  al., ality is: 2011; Bates & Jenkins, 2007; Jennings et al., 2005). Fol- Information that could substantively affect an organi- lowing Agrawal and Hockerts (2019), this paper suggests sation’s ability to create value (IIRC, 2013). that understanding the power and social justice dynamics of the contested logics and legitimacies typical of under- Despite these definitions, the IM field currently lacks an institutionalised arenas provides a useful lens with which to agreed definition of impact materiality. Research has sug- explore the evolution of IM. gested that the defining features of impact materiality should As mentioned above, this arena of contestation is par- include a recognition of the uncertainty and partiality of ticularly reified in debates about materiality, specifically: impact data and the relevance of multiple stakeholder per- what type of impact ‘matters’, what is good or bad, and who ceptions in terms of addressing this (Nicholls, 2018). Given decides. Materiality is of central significance to all finan- the current lack of consensus on impact materiality, we argue cial accounting practices and can be seen as a fundamental that a social justice perspective might offer a different and concept in this sphere (Burrowes & Karayan, 2017; Green promising approach to discuss the nature of materiality in & Cheng, 2019). Broadly speaking, materiality refers to the IM from a normative perspective. Such an approach suggests relevance of information concerning the decision-making of that effective IM needs to enact materiality systems that are a specific target audience—usually investors—for a specific attentive both to the complexity and contextuality of social investment (Messier et al., 2005). Materiality in financial and environmental data and that acknowledge the diversity accounting and audit holds that all this information needs to of stakeholders for whom impact data is relevant (Edgley be measured and reported in the annual financial statements et al., 2015; Lai et al., 2017; Meyers, 2019). However, in 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 975 practice—as our data analysis below suggests—this multi- or procedural justice (i.e. fair allocation procedures). The dimensionality of perspective creates an arena of contesta- latter has also been characterised as ‘interactional’ justice tion over what is material in a specific impact investment (Greenberg, 1990; Wang et al., 2017) focussed on inter- (Puroila & Mäkelä, 2019). Moreover, because the impact personal and informational aspects. Sen (2009) rejected metrics are subject to interpretation according to idiosyn- Rawls (1985) idea of ‘impartiality’ between the actors cratic worldviews and a range of discourses of performance (meaning the absence of vested interests in those involved (Nicholls, 2018), the institutional-power dynamics between in setting up the principles). Instead, Sen (2009) proposed the key stakeholders may well create conflicts, tensions and that it would be a delusion to think that only one perfect paradoxes over the dominant materiality logics and models set of principles could define universal justice since com- in the IM field. In turn this may lead to procedural injustice peting rationales of justice may have equally compelling as we discuss next. claims of being impartial. As an alternative, Sen (2009) proposed a focus on realised outcomes that recognises the A Senian Social Justice Perspective potential injustices from a process perspective, rather than striving for an agreement on a unitary notion of justice ‘ab Sen’s work, as whole, provides a distinctive economic per- initio’. That is not to say that in this view a workable, just, spective on social issues (Batterbury & Fernando, 2004). solution cannot be achieved. On the contrary, Sen (2009) In addition to his important earlier work on the economic argues that a rational society can be expected to reach just causes of famine, Sen's (2009) research within development solutions through reasoning, transparency and account- economics has also had considerable influence—for exam- ability, with the deliberate inclusion of multiple arguments ple in the formulation of the United Nations Sustainable from multiple perspectives in what he calls ‘open impar- Development Goals. Sen was awarded the Nobel price for tiality’. Senian thinking provides an alternative to Rawls economics in 1998 for his work on determining the most ‘veil of ignorance’ by including the voices of outsiders as important and fundamental resources in a community—and ‘impartial spectators’ who make judgement from a neutral how these should be divided. A fundamental focus of his position of ‘open impartiality’ (Sen, 2009). research is how individuals' values can be considered in a Building on this theory of reasoning (in the sense of a collective decision-making and how welfare and poverty can meaningful comparison of alternatives of materiality consid- be aptly measured—a timely fit to the pressing questions in erations) and following Shrivastava et al. (2016), this paper this article. suggests that Sen's (2009) concept of ‘functioning’, as a state In this paper, we suggest that the arenas of contested in which people are free to be or do whatever it is they value materiality in IM can be conceptualised in terms of Sen's (Sen, 1985) may be particularly relevant in exploring the (2009) notions of transcending the individual interests of optimal judgement processes on materiality in IM leading. the invested parties (Fia & Sacconi, 2018; Shrivastava et al., Functionings are closely linked to Sen’s central notion of the 2016) for the greater good via processes of contextualisation individual capabilities of a person (for example, of the bene- and case-specificity (Fortin et al., 2015). Specifically, bring- ficiaries of impact investing projects) that are defined as a set ing Sen's (2009) conception of social justice into an analysis of options from which a person can choose in terms of their of the organisational setting of IM (Shrivastava et al., 2016), own life chances (Sen, 1985, 1999). Following Sen (2009), provides some useful new insights. This is because this as Shrivastava et al., (2016, p. 103) put it: “The freedom to theory synthesises the dimensions of distributive and pro- choose the kind of lives we may wish to live—irrespective cedural justice (Celestine et al., 2018; Colquitt, 2001) into of the choice we actually end up making—is critical to our a notion of a comprehensive justice that focuses on realisa- sense of well-being, which is in itself a functioning.” This tions, as lived experiences, and actual outcomes. Sen (1999, approach creates effective transparency to allow relevant p. 13) believed that individuals tackling social problems use stakeholders to make a meaningful comparison and rank- ‘evaluative systems’, which are rooted in contrasting social ing of the competing materiality alternatives based on the justice theories representing a ‘plurality of unbiased prin- capabilities and functionings for all involved stakeholders. ciples’ that may have ‘have quite distinct manifestations.’ Sen (2009) also emphasised the importance of free will In his book ‘The Idea of Justice’ (2009), Sen argued that in making life choices based on individual ‘functionings’ as traditional thinking in political philosophy, which aims to a pre-requisite for accountability and set out four contingen- identify a set of ‘just’ principles that can then be used to cies that may impede an individual’s functionings and ability design ‘perfectly just’ institutions for governing society, to flourish in terms of: personal heterogeneities; diversities discloses very little about how we can actually identify and in the physical environment; variations in social climate; subsequently reduce injustices in the existing institutions. and differences in relational perspectives. This framing of Justice, in the traditional Rawlsian tradition, is usually accountability supports the analytic approach of our research framed either in terms of distributive (i.e. fair outcomes) on materiality in IM since it examines the competing 1 3 976 O. M. Lehner et al. worldviews, contexts and power-differences across the key measurement and reporting in the texts. Forbes Magazine stakeholders. was chosen as a focal publication in terms of its cover- In summary, by bringing in a Senian social justice per- age of the global impact investing field. In summary, the spective for the first time in this research field, this paper case selection was based upon the purposefully informed provides new insights into the processes of contestation criteria of salience (via the ranking) and being exemplary within IM, particularly in terms of framing materiality. Next (impact focussed business models) (Riff et al., 2019) for we move on to our methodology and empirical contributions. IM. The resulting sample covered a variety of impact investing organisations, including banks, venture philan- Methodology thropists, investment funds, Non-Governmental Organi- sations and (social) investees. The sample investors were Sampling and Data Collection predominantly from the US and Europe, since these are the most developed impact investing markets currently, The research design followed in this paper used a two-step but the investment projects of these investors were distrib- comparative case-study approach with parallel and subse- uted globally. Based on these 19 cases, we collected 157 quent interviews for triangulation and a thematic coding for documents in the form of reports, investment agreements, interpretation (Denzin & Lincoln, 2011). With this abduc- publicly available interviews and brochures on approaches tive research design we do not want to ‘generalise’ findings to IM. This data was augmented by email-based commu- in a statistical sense but promote ‘analytical generalisation’ nications with some founders and CEOs to clarify our (Parker & Northcott, 2016; Yin, 2018). However, an abduc- assumptions. Table 1 provides an overview of the cases tive strategy fits well here as the maturity of the IM literature with web-links, the numbers of relevant documents on IM does not allow for purely deductive approaches (Edmond- from each and the number of meaningful units for analysis son & McManus, 2007). In an abductive approach, research (meaning topic relevant complete statements) from them starts with looking at surprising facts, puzzles or paradoxes (Braun & Clarke, 2006). and the research process itself is then devoted to finding an As a second step, for triangulation and further thematic explanation (Thagard & Shelley, 1997). Following Tsang development, we invited experts on impact investing from (2014), we look to explain relationships and build categories industry and relevant scholars in a purposeful sampling pro- from cases to inform future research and derive normative cess to discuss IM and comment on our initial case analysis suggestions (Crane et al., 2016). in terms of IM, generally, and materiality, specifically. In First, we sampled a total of 19 organisations represent- total, we conducted 33 semi-structured interviews with 25 ing impact investors, investees, beneficiaries and interme - respondents over the 3 years (2017 to 2019) some in-per- diaries were purposefully sampled (Morse, 2007). This son and some via Skype. Two interviews were sometimes provided a baseline snapshot of the dynamics of the IM conducted with one interviewee to gain additional insights field. The sample organisations were selected according on the themes that emerged while working with the case to their representation in Forbes Magazine—from 2016 data. Each interview lasted between 45 min and 2 h and was to 2018—as ‘impact investing’ (www. forbes. com). They recorded and then transcribed. Table 2 provides an overview were ranked by the number of explicit references to impact of the interviewees and their organisations. Table 1 Case organisations Acumen Fund (11 docs/61 units) https:// acu- Triple Jump (9 docs/32 units) https:// tripl Triodos Bank (8 docs/35 units) https:// www. men. orgejump. eutriod os. com Bill and Melinda Gates Foundation (10 docs/63 BNP Paribas (9 docs/24 units) https:// www. Big Society Capital (9 docs/30 units) https:// units) https:// www. gates found ation. orgwealt hmana gement. bnppa ribas/ en. htmlwww. bigso ciety capit al. com Bridges Fund Management (7 docs/37 units) JP Morgan (8 docs/23 units) https:// www. Global Impact Investing Network (6 docs/20 https:// www. bridg esfun dmana gement. comjpmor ganch ase. com/ units)https:// thegi in. org Rockefeller foundation (11 docs/55 units) Sonen Capital (10 docs/42 units) https:// www. Social Finance (5 docs/29 units) https:// www. https:// www. rocke felle rfoun dation. orgsonen capit al. comsocia lfina nce. org. uk Uncharted (8 docs/28 units) https:// uncha rted. Babington Group (5 docs/28 units) https:// Toniic (12 docs/35 units) https:// www. toniic. orgbabin gton. co. uk com Capital Good Fund (7 docs/43 units) https:// Indian School Finance (6 docs/22 units) https:// Peterborough Prison Bond (9 docs/38 units) capit algoo dfund. orgisfc. inhttps:// www. socia lfina nce. org. uk/ what- we- do/ social- impact- bonds Jibu (7 docs/26 units) https:// jibuco. com 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 977 Table 2 Interviewees in the purposeful sample Position Organisation Year Interviews Deputy chief investment officer CDC Group, previously Omidar 2018 2 CEO Impact management project 2019 1 Director of data science S&P global market intelligence 2018/2019 2 Founder Manarine LLC 2017/2019 2 Chairman and CEO Impact fund, Said business school, Oxford University, American 2017/2018 2 Capital Chief responsible investment officer PRI 2019 1 Consultant Impact investing measurement 2018 2 Associate Goldman sachs 2019 1 Consultant Strategic advisor to impact investors 2017/2018 2 Managing partner Bridge point capital 2019 1 Director and chairman Peoples bancopr 2018 1 Advisory council member World CSR 2018 1 Relationship manager Santander UK 2017/2018 2 Founder Serial social entrepreneur 2018 1 Director of sustainability Nuveen 2019 1 CEO Carbon tracker initiative 2017 1 Senior manager McKinsey 2018 1 Head IRIS intermediary working group IRIS/GIIN 2019 1 Project lead impact investing OECD 2018 1 Deputy director EVPA 2018 1 Director Ashoka Europe, Dafne Donors and Foundations Network 2017/2019 2 Head South Africa Task force for Impact Investing 2018 1 Associate director Big Society Capital UK 2017 1 Founder and CEO Village Invest, former World Bank 2018 1 Partner Bridges Ventures 2018 1 the whole data set. The intention was to facilitate a deep Data Evaluation analysis of materiality constructs and their various (con- tested) contexts. Following Puroila and Mäkelä (2019), our first step in the It is important to point out at this stage that Braun and evaluation of the data was based on a close reading of the Clarke (2006) additionally cautioned that such research may documents to conduct a qualitative content analysis (Denzin be strongly influenced by the researchers’ own judgements. & Lincoln, 2011), in which the materiality considerations To prevent this, we used several measures to enhance the were analysed through several rounds of reading. Following qualitative validity of this study and included various checks our research focus described above, we specifically looked and balances (Bluhm et al., 2011). For example, we used for data on materiality practices and their relevance for protocolled inter-coder reliability measures. For this, all investors, the role of investees and stakeholders as mean- authors read and coded the data and, in cases of substantial ingful participants in negotiating materiality, and potential disagreement, the coding manual was revisited together and areas of contestation. Based on the 19 cases and interviews, revised for overall consistency. Any disputed topic was then a total of 671 meaningful units of analysis were extracted for discussed again until a coding convergence was reached. further analysis from the 157 documents and 33 interview During the first rounds of reading, memos were writ- transcriptions using ATLAS.TI. software. ten based on emerging questions about potential patterns In terms of wider epistemology, we followed Braun and drivers of materiality contestations (Puroila & Mäkelä, and Clarke's (2006) holistic approach to thematic analy- 2019). These memos were then used in the open interviews sis. Seeing language as constitutive of social meaning, with the interviewees to come to a deeper understanding of this approach identifies patterns of data as stories or the identified patterns and to confirm the early coding. This meaningful ‘units’. In other words, rather than comparing method of data analysis involved comparing and contrasting individual reports, our analysis focussed on looking for a variety of expressions and manifestations of materiality, similarities/dissimilarities and resulting patterns across 1 3 978 O. M. Lehner et al. which allowed us to, recursively, develop a richer and more analysed our empirical data, we found evidence supporting comprehensive picture of the materiality in the sample set. these assumptions, specifically that materiality is indeed a In total 2382 units of analysis were coded into first order contested concept in IM. In the next three sections, we pre- concepts, which were then combined into larger second and sent our data analysis and findings in terms of the three are- third order concepts as we gradually developed a more holis- nas of contestation: power dynamics; materiality norms and tic understanding of the first order concepts. standards; and radical or incremental views of materiality. We then clustered and aggregated the concepts (Parker & Each section describes the details of the relevant sub-fields Northcott, 2016) in order to structure the data around three and how we derived each composite theme based on the major themes as emergent ‘arenas of contestation’: power aggregation of second and third order concepts. dynamics; materiality norms and standards; and radical or incremental views of materiality. Power Dynamics Findings Table 3 illustrates how we aggregated and derived this the- matic cluster based on the meaningful units and the sources This paper aims to offer new research insights into the nas- of contestation. These sources will now be looked at in detail cent field of IM based link to Senian theories of social jus- and atomic excerpts from the documents will help link the tice. Specifically, we focus on arenas of contestation in terms aggregated findings to the data. of the materiality of impact data from differing stakeholder The first arena of contestation identified from the data perspectives. As noted above, the literature suggests that was around differentials of power across stakeholders. As the distinctive features of IM, when compared to financial noted above, in Senian terms this represents a potential pro- accounting, include a diversity of relevant units of analy- cess of procedural injustice. This was particularly evident sis and a wide range of stakeholders for whom these data in terms of the different types of impact data categorised matter. We have also suggested that power is not equally as material by investors—as powerful actors with extensive shared across these stakeholders with investors—as the own- resources and administrative capabilities—compared with ers of capital—typically being more powerful than inves- typically less well-resourced, small-sized, investee organisa- tees or beneficiaries. Given this, we propose bringing in a tions. The data revealed the dominance of investors in these novel theoretical perspective to the analysis of materiality contestations in terms of prioritising a focus on financial in IM based upon notions of Senian social justice. When we performance from their investees, for example: Table 3 Thematic aggregation of meaningful units: power dynamics Arena of contestation: power dynamics Aggregated sources of contestation Identified mechanisms in the meaningful units Differentials of power across stakeholders Overburdening of investees in terms of reporting requirements Indifference to firm size and capabilities Potential mission drift Divergent focus on financial versus impact data Misalignment between social and environmental mission and fundamental business success Missing linkage of revenues to the social and environmental activities of the investee Trust Lack of robustness of data No audit or assurance Poor levels of Transparency Risk distribution Risk transfer lacking proper measurement or aggregation methods Unfair distribution based on bounded rationality and opportunism Vulnerability of investees Problems with the enactment of accountability mechanisms Disenfranchisement of beneficiary voice Objectifications of impact investees as ‘portfolio assets’ Information requirements and data mismatch Restriction of effective communication Additional information demands from investors for idiosyncratic portfolio building Efficiency rather than effectiveness as guiding principle Lack of administrative capacity to produce decision-relevant impact data because of investor focus 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 979 An investor will want to see how your products, ser- The enactment of accountability mechanisms also high- vices and interventions are linked to your ability to lighted these power differentials, leading to a potential generate revenue from the social activities that you disenfranchisement of beneficiary voice in materiality deliver. Your impact plan not only has to show how contestations: your activities respond to the beneficiary needs identi- The flaws in the traditional approach to impact meas- fied but how this links into your fundamental business urement have led to an accountability gap. Social success and growth. However, you need to make sure entrepreneurs have fallen into the habit of conducting that these activities are congruent with your mission as evaluations that meet the needs of upward account- a social purpose organisation (Babington Group, Doc ability. They collect data to meet the requirements of Nr. 128, Unit Nr. 539). their investors. And investors, in turn, often set those A second issue that emerged was the importance of trust in requirements in response to the reporting expectations the negotiation of materiality and performance information. of their limited partners. What is often missing is a From a trust perspective defining IM materiality prioritises commitment to downward accountability – to making the identification of data that are relevant to all key stake - sure that social enterprises are using data to improve holders rather than emphasising data robustness, audit or the lives of their intended beneficiaries (Acumen Fund, assurance. In the absence of audit or assurance mechanisms Doc Nr. 6, Unit Nr. 43). in IM—as is typical of all nascent markets—the need for A related issue of contestation that emerged from the transparency was stressed too in lieu of trust. There was also data was the objectification of impact investees as ‘port- an underlying distrust concerning the potential for mission folio assets’ rather than as actors who identify, create and drift across stakeholders. Investors feared a mission drift exploit social and environmental opportunities to participate away from social or environmental goals based on a pri- actively in defining materiality: mary focus on profit maximisation, whilst investees were concerned that they may be forced to reduce their social And classifying assets as either impact or non-impact activities in order to drive up financial returns for investors.: must be considered in the context of an investor’s intentions (Sonen Capital, Doc Nr. 70, Unit Nr. 308). Given that the Social Impact Bond contract transfers all or part of the implementation risk to investors, who This objectification restricted effective communication and are only paid when expected outcomes are achieved, was reflected in demands for additional information on the all stakeholders need to trust that the outcome metrics side of investors to facilitate their portfolio building without can be measured effectively and objectively (Social an explicit impact focus. Central to these problematic—and Finance, Doc Nr. 103, Unit Nr. 450). asymmetric—framings of the materiality of impact data was Transparency is crucial […], as fuller disclosure helps a misaligned focus on process efficiency rather than outcome win more trust from the investor. Reliable information effectiveness between investors and investees: represents less risk to investors, which translates into For a portfolio of enterprises, a complete impact report a lower cost of capital and thus higher valuations (Big or impact statement includes data about an enterprise’s Society Capital, Doc. Nr. 90, Unit Nr. 396). total impacts […]. Since this may often result in too In addition, there was an overarching suspicion that impact much data for an investor to review, especially in cases risks were not equally distributed across stakeholders. where investment products have hundreds of underly- Without proper measurement and attribution of social and ing assets, the intermediary managing the portfolio of environmental risks, such disputes over the materiality of enterprises may choose to create a consolidated impact risk measures were hard to resolve. Given the power domi- statement that highlights the impacts that are relevant nance of investors, even when mechanisms of trust were in to the investor’s goals […] (Global Impact Investing place, the evidence also revealed a sense of vulnerability in Network, Doc Nr. 98, Unit Nr. 422). investees: Moreover, this set of issues revealed an interesting para- You’ve got to be someone who is willing to share every dox. Namely, investees typically recognised the benefit of part of your business, the soft underbelly, the vulner- having sufficient capacity and resources to produce robust able side, the weaknesses with your business. To build- and material impact data as a management tool for their ing that trust with an investor is the number one thing own decision-making, but were often constrained in terms that matters in building a relationship […] (Uncharted, of their administrative capacity by the conflicting impact Doc Nr. 123, Unit Nr. 514). information demands of their investors. Consequently, effec- tive decision-making on the ground could be diminished because the resources deployed to provide impact data that 1 3 980 O. M. Lehner et al. were deemed material to investors restricted the options for The second arena of contestation that emerged from our investee material (management) data also to be collected and data focussed on the social construction of the term ‘mate- acted upon. This misaligned incentive could, therefore, lead riality’ itself. In financial accounting, materiality is typi- to sub-optimal impact outcomes—something that, ironically, cally defined in terms of its relevance based upon a positiv - investors in the field are unlikely to want: ist logic, what one interviewee called a ‘techno-rationality’ (though note the critique of this positivist logic assumption The level and detail of reporting should reflect the from Edgley (2014)). As a result, it is conceptualised as a size and complexity of your organisation and a good mechanism for objective judgement by professional account- investor should not burden you with reporting require- ants and auditors. ments that detract from your core purpose and mission However, our data—notably from the intermediar- (Babington Group, Doc Nr. 128 Unit Nr. 541). ies—demonstrates that materiality in IM was framed as In summary, these data demonstrate the power dynamics best based upon normative, rather than techno-rational- within the contestations of materiality between impact inves- ist, judgements. This view suggests that materiality can- tors and investees, with the former having dominance in the not easily be objectively measured and reported but is, discourse of data relevance, largely due to their economic instead, a function of various judgements, across a range power. Such dynamics may undermine social justice, in of stakeholders, based on a more subjective morality, for process terms, between the stakeholders. In this context, a example: Senian analysis argues for the introduction of a more open To understand which effects are material, we look at (public) impartiality—as is discussed below. These dis- whether they relate to important positive or negative equilibria of power could potentially also be mitigated by outcomes for people or the planet, how significant trust mechanisms. But our data suggest that they also lead they are and whether they occur for groups of people to misaligned and paradoxical outcomes where claims on and/or the planet who are in need of the outcome. materiality were not focused on optimising impact or engag- We then consider whether the expected effect – ing beneficiary voice. even if it is material and positive – represents an improvement on what would have happened anyway Materiality Norms and Standards (Bridges Fund Management, Doc Nr. 22, Unit Nr. 133). In terms of the second theme, Table 4 illustrates how this arena of contestation emerged from our data. It focusses on However, such normative approaches, whilst potentially the norms and standards of materiality. providing richer and more ‘accurate’ impact data also Table 4 Thematic aggregation of meaningful units: materiality norms and standards Arena of contestation: materiality norms and standards Aggregated sources of contestation Identified mechanisms in the meaningful units Social construction of the term materiality Positivist logics and techno-rationality clash with normative statements and judgments Epistemological problems based on a subjective morality Uncertainty in the IM process Sometimes diametral opposite perspectives on positive and negative impacts between social and environmental impacts Indirect outcomes and long-term impact notoriously difficult to demonstrate Lack of consistency of data and measurement Data availability and quality problems Data often absent, incomplete or simply wrong Methods and analysis of impact not mutually accepted, for example between long- and short- term perspectives Power dynamics in the institutionalisation of IM Locus of power lies with the intermediary actors Intermediaries are framing the IM in terms of emerging standards and codes of practise Competing discourses of legitimisation and de-legitimisation of others Competition between standard setters based on internal logics Vested interests of rating and ranking organisations with proprietary IM standards as source of income Rationalisation based only on idiosyncratic assumptions Lack of an agreed-upon audit function Failure to admitting multiple voices and interpretation of what is good or bad Multiple relevant time-horizons 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 981 introduce limitations and uncertainty into the IM pro- systems. In this case, one dominant IM set of standards cess, for example concerning the optimal time frame for would necessarily exclude more complex, dynamic and measurement or over the consistency of data: contextual conceptualizations of what constitutes material data—for example, that admits multiple voices and interpre- Since this impact is inherently indirect and occurs tation of what is ‘good’ or ‘bad’ impact as well as multiple through the investments we make […], we are depend- time-horizons for effective data collection or analysis (such ent on the information available about these entities as a focus on longer-term ‘impacts’ rather than short-term and their potential effects, whether positive or negative ‘outputs’). (BNP Paribas, Doc Nr. 51, Unit Nr. 253). What is more, following the trajectory of financial But data availability and quality are still less than accounting, the introduction of a regulated set of IM and satisfactory, one of the biggest issues being a lack of materiality measurement and reporting standards may well consistency. Scope, definition, data depth and informa- also require an audit function. This would likely institution- tion are often absent, incomplete or simply wrong. All alise one dominant materiality perspective further by the of which makes analysis an imperfect science to the addition of a process of a professional rationalisation. In point where calculating impact can sometimes become turn, this would challenge alternative models of materiality superficial (BNP Paribas, Doc Nr. 51, Unit Nr. 254). that were more complex, shifting and interpretive and, at With respect to resolving these contesting epistemologies times, subjective to different actors. Such processes of assur - of IM materiality, our data also demonstrates another set ance and audit were viewed with concern by many investees of power dynamics beyond those noted above—between as well as philanthropic investors. investors and investees. In this case, the locus of power lies Another important driver towards IM standards and audit with the intermediary actors who are framing the IM field in was found to be purely commercial as a potential new source terms of emergent standards and codes of practice. The data of income for rating agencies, auditors and other intermedi- highlighted the influential role being played by standard- ary professional services firms, for example: setting organisations with regard to the institutionalisation In addition to or in lieu of company-specific impact of IM practices, processes and reporting frameworks (for metrics, the parties may agree to assess social and example, see the Impact Management Project: IMP (2018)). environmental performance against standards set by a These data also suggested that there were competing claims third party organization such as GIIRS (Global Impact of self-reinforcing legitimacy across the contested models, Investing Rating Service), a ratings tool that assesses for example: overall social and environmental performance (Toniic, This easy-to-use tool allows an investor to classify Doc Nr. 104, Unit Nr. 453). every underlying investment by its intended impact, Entrepreneurs and investors may agree that a com- as well as other variables that investors take into con- pany’s overall social and environmental performance sideration when designing their portfolios – such as be assessed and certified according to a recognized liquidity, expected returns, geography, management third-party standard. Companies with a B Corp certi- structures, and more. The outputs of the tool are visual fication, for example, must measure their performance representations of the individual portfolios, as well as against a set of standards […] (Toniic, Doc Nr. 104, investment data (Toniic, Doc Nr. 110, Unit Nr. 479). Unit Nr. 454). Our Outcomes Matrix has 21,000 unique users […] In summary, this second arena of contestation within out (Big Society Capital, Doc Nr. 91, Unit Nr. 398). data revealed the institutional dynamics around the current Furthermore, the contestations over who controls the stand- processes of standardisation around IM. The data particu- ardisation of materiality norms also reveal the processes by larly highlighted the conflicting and contested epistemolo- which specific actors aim to establish a dominant position in gies and framings of what constitutes ‘good’ or relevant the field of IM that will, typically, serve their own internal data for different stakeholders. While standardisation may logics of performance. For example—as one interviewee be closely linked to what Sen sees as ‘public negotiation’, pointed out—coalitions of actors may attempt to influence the inherent institutional-power dynamics within the field of standard setters such as the European Union to prioritise impact investing involving a third-party ‘impartial spectator’ (and, perhaps, regulate) one form of IM in favour of others. may be problematic, as we will discuss further below. If successful, such processes reify (and, as a consequence, potentially commercialise) idiosyncratic definitions of mate- Radical or Incremental Materiality riality as a norm to the benefit of some actors over others. Moreover, by definition, once institutional norms become The third arena of contestation that emerged from our data established, they exclude the legitimacy claims of alternative focussed on identifying the differing worldviews of the key 1 3 982 O. M. Lehner et al. actors who are negotiating the defining features and bounda- the impact of impact investment (Nicholls, 2018). Moreo- ries of materiality in IM. Central to our data analysis here ver, the failure to manage this tension lead to criticisms of was the contestation between conceptualizations of the potential social- and/or green-washing from other IM actors materiality of ‘impact’ as either a process of radical or more who aim at a more radical approach to impact by rejecting incremental change—in essence either working against or the market status-quo: within the existing institutional structures. Table 5. shows an Our vision is of a world where financial markets overview with examples of how the meaningful units were serve all members of society and where finance plays linked to the aggregated sources of contestation. a central role in solving the social and environmen- This set of data revealed an arena of contestation around tal challenges facing the global community. In this how best to mobilise impact investment to optimise impact future, investors integrate impact considerations into without being captured by the existing status-quo of finan- all decisions, building strong communities, a healthy cial markets. This theme was salient in several discussions environment, and a sustainable future for all people with investors and investees. From a materiality perspec- (Global Impact Investing Network, Doc Nr. 93, Unit tive, this contestation opposes the stakeholder relevance Nr. 403). of short-term outputs versus longer-term impacts, with the former typically being measured internally within the logics However, the data also suggest—in a Kuhnian sense— of an existing system and the latter externally challenging that we can also observe that the ‘paradigmatic wars’ over the institutional status-quo. This bifurcation also maps onto materiality in the IM field may be approaching an end the power analyses set out above, given that the material (Kuhn, 1970). This appears to reflect a pragmatic turn relevance of IM performance to the powerful actors who in the contestation over materiality driven by a broaden- own and invest capital—and who have likely benefitted from ing acceptance that embracing the status-quo of financial the existing institutional status-quo—is likely to be very markets and their attendant logics may, ultimately, opti- different from the investees or beneficiaries for whom the mise the flows of impact investing capital by widening the status-quo may well be sub-optimal and a structural driver investor base to include more traditional finance institu- of social issues. tions such as investment banks (see IMP (2018)).The argu- The argument brought up by many investees for a greater ment here is that this approach will create more net impact beneficiary participation in setting IM norms and stand- over time than attempting to reform or dismantle the exist- ards—creating a more powerful ‘voice’ over determining ing financial system. This was particularly evidenced in the boundaries of materiality—is based upon a recognition an acceptance that impact data needed to conform to the of this institutional-power critique. At its most radical, this normative (and positivist) expectations of impact investors view also suggests that the beneficiary voice is the most as economic actors, for example: important determinant of effective materiality to optimise Table 5 Thematic aggregation of meaningful units: radical or incremental materiality Arena of contestation: radical or incremental materiality Aggregated sources of contestation Identified mechanisms in the meaningful units Differing worldviews Radical or incremental perspective on impact as social change Differing views of existing institutional structures Difficulties to establish systematic impact Impact investing being captured by the financial markets Conflicting stakeholder perspectives Problems to find balance between internal measures of short-term outcomes and external views on long-term impact Power dynamics in terms of standard setting and norms Too little beneficiary participation in setting IM norms and standards Definition of boundaries of materiality are based on powerful systemic actors Social and greenwashing Investors following financial market logics Seeing IM as a form of corporate reputa- tion management Blurry investor IM definitions open to multiple interpretation Limitations of traditional financial markets and investors Traditional institutional investors do not focus on impact that is directed at challeng- ing the financial system Impact data does not conform to normative expectations of traditional financial investors Difficulties in risk management concerning impact causality and attribution 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 983 You should set realistic targets and indicators that standardisation of IM processes (e.g. IMP (2018), GIIN help you to track progress over time and improve. (2020)) and some others toward regulation (e.g. EU (2019)), This usually means that you gather a range of both the IM field remains nascent and under-institutionalised qualitative and quantitative indicators […] (Babing- (Burritt & Schaltegger, 2010; Molecke & Pinkse, 2017; ton Group, Doc Nr. 128, Unit Nr. 540). Rawhouser et al., 2019). Research has also identified the The lack of compelling case studies and data (both power dynamics within the institutionalisation processes of quantitative and qualitative) have been cited as pri- IM as a part of the wider of emergence of the impact invest- mary reasons impact investors and traditional investors ing market (Agrawal & Hockerts, 2019; Lehner et al., 2019; stay on the side-lines (Toniic, Doc Nr. 106, Unit Nr. Nicholls, 2018), with investors, investees and beneficiaries 458). differentiated by their levels of power. This paper has pre- sented an empirical study of the key actors in the emergent A second set of issues emerged concerning impact risk, spe- IM field to make new contributions in terms of our under - cifically around causality and attribution, for example: standing of the power dynamics, trust, standards and norms, Is your product and/or service actually having a mean- and emergent versus radical perspectives on materiality. ingful impact on your customers’ lives? (Acumen Next, we return to our earlier discussion of a Senian Fund, Doc Nr. 3, Unit Nr. 10). social justice perspective in an organisational context to Then the final dimension is about assessing the likeli- reflect upon the key findings from our data (Fia & Sacconi, hood that the impact will be materially different from 2018; James, 2005; Shrivastava et al., 2016). In particular, our expectation. For instance, there might be a lack of we look at how Sen’s perspectives on social justice may evidence to support the strategy, or there might be a mediate some of the arenas of contestations revealed in our risk around execution, or there might be other external data and how a capabilities approach to establishing impact factors at work […] (Bridges Fund Management, Doc. materiality may lead to a more just—an ultimately more Nr. 22, Unit Nr. 133). effective—system in terms of impact. This leads us, in this section, to make a series of normative suggestions on the The material relevance of the externalities or negative future development of IM and materiality within it, explor- impacts of impact investing was also highlighted as an ing possible resolutions to some of the arenas of contesta- important issue, revealing a potential tension between purely tion of materiality noted above (Crane et al., 2016; Hahn financial and IM assessments of performance: et al., 2017), which will hopefully lead to favourable, ‘just’ But we highlight the need to collect and learn from arrangements in terms of the intended beneficiaries. this information continuously – since the experience of people and planet may not reflect our intentions and goals, either because they don’t experience the Senian Justice and Power intended impact, or end up worse off (Bridges Fund Management, Doc Nr. 22, Unit Nr. 133). This paper has demonstrated that conceptualisations of materiality in IM are contested and structured by the power This third arena of contestation based on the data analy- relationships between impact investors, intermediaries— sis has suggested a range of differing conceptualizations of such as standard setters or auditors—and investees. We also materiality based upon the differing institutional position- noted that such dynamics typically marginalise beneficiary ings and worldviews of key actors. Specifically, we have voice and, as such, can lead to sub-optimal or even, negative highlighted the contestation between radical and incremental impact outcomes. From our data analysis, we identified three conceptualizations of materiality, either internal or external arenas of contestation over materiality: power dynamics, to the institutional (market) status-quo. trust, and misaligned incentives between economically pow- Next, we return to our Senian social justice framework to erful investors and objectified investees; conflicting views discuss our findings. over materiality norms and standards; and the interactions between stakeholders with differing motivations towards radical or incremental materiality. Discussion These findings support Nicholls (2018), who suggested that a clearer conceptualisation of IM—combined with the Mediating Materiality Contestations type of novel empirical research offered in this paper—is needed if the impact investing market is both to increase the As we have noted above, currently, the field of IM remains flows of capital into the market and optimise its impact. Our highly contested specifically around issues of material- data also identified processes by which investees became ity. Whilst there are several initiatives moving towards a objectified as ‘assets’ separated from decision-making over 1 3 984 O. M. Lehner et al. materiality by investors. This served to negate any negotia- Comprehensive Justice and Participation tion over the meanings of, and discourses around, materiality across stakeholders. Sen (2009) work on comprehensive justice focusses pri- As we have suggested, an alternative perspective on marily on lived experiences or actual realisations. He sug- these relationships can be taken from Sen's (2009) theories gested that, “A full characterization of realizations should of social justice. This approach reframes key IM stakehold- have room to include the exact processes through which the ers as partners, rather than antagonists, linked holistically eventual states of affairs emerge” (p. 9). This brings in the within a form of temporary organisation for a given pro- perspectives of procedural—and with it interactional—jus- ject and as ‘equals’ in constructing and negotiating impact tice based on public reasoning and open impartiality that materiality. Moreover, such a perspective reframes mate- were outlined in the previous section. riality judgements away from short-term outputs towards Sen's (2009) model of a neutral and just agreement on long-term outcomes and would likely prioritise beneficiary the processes of realisation is also relevant to our findings voice and participation in a more radical view of the rel- concerning the contestations between positivist and more evance of impact data. Additionally, Sen's (2009) theories interpretive approaches to impact materiality (Lisi, 2018; also reveal the potential injustices inherent in any move Nicholls, 2018). The interpretive approach is contingent towards a standardised and static model of IM materiality. upon re-embedding an a priori normative and idiosyncratic From this point of view, truly effective IM can be seen as construction of materiality as an actor-specific concept based necessarily dynamic with the construction of materiality in on subjective moralities and value judgements within IM. a constant state of re-negotiation across stakeholder groups, However, contra this, the IM field today is moving towards a each of equal power and voice, shaped by evidence of impact positivist approach with more formalised, and narrow, mate- outcomes over time. riality prescriptions (e.g., IMP, 2018). Such a trajectory is in Moreover, Sen (2009) argued that a ‘rational’ society opposition to Sen's (2009) notion of comprehensive justice would be expected to reach just solutions through reason- and open impartiality. This is consistent with Puroila and ing, transparency, accountability and the deliberate inclusion Mäkelä (2019), who suggested that: “the technic-rational of multiple arguments from multiple perspectives (Shriv- approach to the materiality assessment, reinforced with the astava et  al., 2016). In contrast to the Rawlsian view, in use of the [materiality] matrix is a value-laden judgement of which citizens justify their decisions to each other (Rawls, what matters in corporate sustainability and narrows down 1985), Senian thinking prioritises the voices of outsiders as rather than opens up the complexity of the assessment of ‘impartial spectators’: to assess competing sentiments from material sustainability issues, stakeholder engagement and a distant and neutral position to reach an ‘open impartial- the societal pursuit of sustainable development” (p. 1043). ity’ (Sen, 2009). In terms of IM, third-party intermediaries Consequently, following Sen (2009), we advocate that in could play such a role in moderating and framing materiality order to construct materiality to optimise impact in IM, a (re-)negotiations. This could be actioned, for example, in priori standardisation is inherently problematic, as it would participatory processes of setting and revising standards of favour only some actor-specific moralities (see above) and best practice. Third-party intermediaries in impact invest- discourage/discount others (Fortin et al., 2015). We also sug- ing (Lehner et al., 2019) can act as ‘translators’ between the gest that it would be more effective to model IM materiality conflicting rhetorics of investors and investees since they in terms of agreements based on a common morality (Fortin know and understand both sides. Such intermediaries could, et al., 2015) across key stakeholders for a specific intended therefore, play an important role in settling a consensus on impact outcome. In practice, this would mean bringing in contested claims of materiality by mediating the demands the voices of beneficiaries to take account of their needs and and models across two parties. Such a consensus would converge towards a common value proposition as a guid- also build trust and further mitigate the potential for con- ing principle between investors and investees. At its most flict between investors and investees. What is more, impact granular, this process of consensus would be achieved at the investing intermediaries are often motivated by a primary individual investment level but, given the potential transac- focus on beneficiaries—making them impartial spectators tion costs, it is likely best to occur at the fund or portfolio of any conflicts between investors and investees. level assuming a common set of beneficiary groups. Moreover, at the investee level, Sen's (2009) logic of As we have already noted in other contexts above, a public reasoning would suggest the need for performance Senian process approach to negotiating materiality is most transparency via material reporting of actions and impact. effective if it is field-driven (participatory) in its moral Doing so would also develop interactional justice in the IM assumptions and includes all stakeholders’ voices and their field and enhance what Sen (2009) calls ‘comprehensive jus- value judgements (Carnegie, 2019; Deegan, 2019; Leh- tice’, which includes aspects of both distributional as well as ner et al., 2019). From a pragmatic perspective, such pro- procedural justice. We consider this next. cesses could also be audited as a proxy-measure of good IM 1 3 Arenas of Contestation: A Senian Social Justice Perspective on the Nature of Materiality in… 985 practice through evidence of meaningful beneficiary partici- transcendental institutionalism (Fia & Sacconi, 2018; James, pation (Maroun, 2018; Nicholls, 2018). 2005): In addition, from a Senian point of view, effective IM “When people across the world agitate to get more would avoid being rigid and dogmatic and, instead, reflect global justice […] they are not clamoring for some the necessary elements of procedural justice concerning kind of ‘minimal humanitarianism’. Nor are they agi- materiality. This, in turn, has the additional benefit of enact- tating for a ‘perfectly just’ world society, but merely ing processes that lead to the independence of the investee for the elimination of some outrageously unjust in the creation of impact—with the further consequence that arrangements to enhance global justice” (p. 16). they are empowered in terms of their own potential function- ings and capabilities (Sen, 1985). The concept of function- Here, Sen confirmed his interest in the marginal improve- ing represents a state in which people are free to be or do ments that are achievable from the ‘bottom’ of inherently whatever it is that they value. In terms of IM, this means unjust situations, rather than from the ‘top’, to create per- empowering the investee to define materiality in terms of fectly just institutional arrangements. Sen argued that whilst their own actions and beneficiary voice—to ensure equality access to basic goods and equal opportunities would con- of power in defining materiality. stitute a sensible pre-condition for any sort of justice, the Taking these insights from Sen (2009) back to our data same set of goods would not have the same implications for analysis above, we suggest that to optimise the effectiveness individuals across different ‘cultural, political, and socioeco- of impact investing in terms of its beneficiaries, materiality nomic systems.’ This is because such contextual differences is best left under-specified to allow a maximum of function- affect individual functionings and capabilities. Senian think - ings based on free will (Sen, 1985; Shrivastava et al., 2016) ing reduces the conflict between actors of different world- for investees and beneficiaries. This would empower both views by offering a pragmatic process of building consensus groups in terms of their capability to flourish. However, from from the bottom up. In practice, however, it might be more a critical justice perspective, even under-specified construc- pragmatic to build deals between investor and investees that tions of materiality would still need a process of negotia- share a common worldview in terms of emergent or radical tion across key stakeholders. Again, such action would cast materiality. third-party intermediaries as ‘impartial spectators’ in the In summary, by framing our findings with respect to IM process (Sen, 2009). A pre-prescribed and negotiated materiality in IM with a Senian focus on social justice, indi- IM materiality—managed by an intermediary and based on vidual functioning and capabilities, we suggest that three a previously agreed set of impact goals—may also reduce arenas of contestation we identified can be recast as oppor - the possibility of subsequent mission drift. To some degree tunities to negotiate materiality dynamically across areas of the principles-based approach of the Impact Management mutual interest in terms of the optimising overall impact. Project reflects these perspectives. Sen's (2009) insistence on the importance of free will in such Our findings also identified contestations between posi- negotiations brings with it an obligation for transparency and tivist and interpretivist positions on, and emergent versus accountability across all stakeholders leading to structures of radical framings of, impact materiality. Conflicting objective open impartiality and comprehensive justice. In pragmatic and subjective views on data gathering may be reconciled terms, this requires both investors and investees to be espe- by finding and focusing on the overarching communality of cially open and self-reflexive about their a priori materiality desired impacts—for example, by codifying them in contrac- judgements, rationales and logics. As Sen (2009) put it, “If tual terms (Bebbington et al., 2017). However, the contesta- it turns out, for example, that in order to safeguard the liber- tions between emergent and radical materiality in IM are ties of all, we have to cultivate tolerance of each other in our more problematic and may sometimes be beyond reconcili- respective values, then that is a public reasoning justification ation since these are based on fundamentally contradicting for cultivating tolerance” (p. 111). worldviews. As a consequence, in such cases, the divergent logics for action may well prevent effective investor-investee relationships, lead to social- or green-washing (Agrawal & Conclusion Hockerts, 2019; Lehner et al., 2019) and, potentially, dam- age the reputation and legitimacy of the actors involved with As an abductive study within a novel theoretical framework further negative consequences for the wider field of impact based on Senian social justice in an organisational setting, investing (Suddaby et al., 2017; Tost, 2011). Moreover, these this paper acknowledges several limitations. First, as a quali- conflicts could also introduce significant investment risk tative study, this paper inevitably has some limitations based for both investor and investee and could increase financing upon its research design. Although our analysis encom- costs. This resonates with Sen’s (2009) criticism of Rawls passes 671 data points from 157 documents, 19 purpose- fully selected cases, and 33 interviews, this still represents 1 3 986 O. M. Lehner et al. Funding Open Access funding provided by Hanken School of Eco- only a small sample of what is going on in the field of impact nomics. No external funding was received for this work. investing. As such, this work should be seen as a preliminary analysis that provides insights and proposes ways forward Declarations but does not test theory per se. Second, the coding process relied upon the subjective evaluations, reading and subse- Conflict of interest The authors declare that they have no conflict of quent interpretation of the authors. To counteract any poten- interest and it is solely the work of the above-mentionedauthors. tial bias and misinterpretations, several measures, such as Ethical approval Ethical approval was waived by the Ethics Commit- inter-coder reliability and a critical reflection on the evalu- tee of the Hanken School of Economics, Helsinki in view ofthe retro- ation by constantly moving forwards and backwards in the spective nature of the study. We have followed best practises for data documents and the interviews were employed to enhance protection and have receivedinformed consent from all interviewees. the qualitative validity of this research. However, such sub- jectivity must still remain present and is acknowledged in Open Access This article is licensed under a Creative Commons Attri- the data and findings. Third, given the increasing pace of bution 4.0 International License, which permits use, sharing, adapta- institutionalisation of the field of impact investing and, with tion, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, it, IM, our study will necessarily be temporally contingent. provide a link to the Creative Commons licence, and indicate if changes Nevertheless, despite these limitations, we believe our were made. The images or other third party material in this article are paper has been consistent with our initial stated aims to pro- included in the article's Creative Commons licence, unless indicated vide new data, propositions and framings of materiality in otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not IM to evaluate and generate normative recommendations permitted by statutory regulation or exceeds the permitted use, you will based on a Senian social justice perspective that can then need to obtain permission directly from the copyright holder. To view a be subject to further research and testing within the com- copy of this licence, visit http://cr eativ ecommons. or g/licen ses/ b y/4.0/ . munity of business ethics scholars. Specifically, from our data analysis, we have identified three distinctive arenas of contestation over impact materiality in IM. We have also References suggested the significance of each arena of contestation in terms of negative implications for the effectiveness of the Agrawal, A., & Hockerts, K. (2019). 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Journal of Business EthicsSpringer Journals

Published: Sep 1, 2022

Keywords: Impact investing; Impact measurement; Materiality; Senian justice

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