The Risk and Return of Impact Investing Funds
64 Pages Posted: 26 Oct 2021 Last revised: 11 Nov 2021
Date Written: November 7, 2021
We provide the first analysis of the risk exposure and consequent risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a new dataset of impact fund cash flows constructed from financial statements. When accounting for market risk exposure, impact funds underperform the market, though not more so that comparable private market strategies. We exploit known distortions in measures of VC performance to characterize the risk profile of impact funds. Impact funds have substantially lower market beta than VC funds, contradicting the idea of sustainability as a “luxury good.” We find that impact fund cash flows do not exhibit positive correlation with a public market sustainability factor, consistent with the idea that private and public market sustainability strategies capture distinct exposures.
Keywords: impact investing, private equity, venture capital
JEL Classification: G11, G24, H41, M14
Suggested Citation: Suggested Citation