Social investment theory aims to provide a conceptual framework for understanding social investment as a practice. It is important for establishing social investment as a professional knowledge domain which can then be used for empirical research and critical judgment of investment practices. The theory brings value to investors in three aspects: 1) by broadening investors’ horizons to consider more factors, improving their ability to predict outcomes; 2) providing testable propositions for social research; 3) encouraging investors to be more self-critical about investment as an institutional activity.
Creative conflict and reconciliation of opposites drive social development
Social investment theory sees economic development as driven by the dynamic interplay and reconciliation of opposing forces or contradictions. Key opposing principles are self-governance versus external direction, and competition versus cooperation. The theory argues that activating the principle of mutuality, whereby people solve problems through reciprocal, equitable participation in economic governance, allows for realizing higher levels of autonomy. Investors face the issue of finding creative connections between these principles of governance to promote social economic development.
Social governance principles shape direction of capital allocation
The theory outlines four key principles of social governance in economic systems: self-governance, external direction, mutuality, and competition versus cooperation. It contends that increased autonomy and mutuality provide leading edges for development. Investors aim to combine financial returns with these governance principles when making capital allocation decisions.
Social versus material development both crucial for progress
A core dialectic highlighted is between cultivation of human resources versus material resources. The theory argues both are essential and interdependent for progress. Investors face the constant issue of how an investment increases both human capacities and material capacities simultaneously.
Broad view of economy needed encompassing nonprofits
The theory advocates viewing the economy not as an independent entity detached from society but rather as an institutional part of society. This includes cooperatives, nonprofits, community organizations, etc. along with for-profit corporations. Investors are seen as participating in shaping the social development path of the economy.
In summary, social investment theory aims to establish a conceptual basis for guiding capital allocation decisions by elucidating key social governance principles and dilemmas that investors navigate in seeking to combine financial returns with social impacts.