The Risk and Return of Impact Investing Funds

116 Pages Posted: 26 Oct 2021 Last revised: 23 Feb 2024

See all articles by Jessica Jeffers

Jessica Jeffers

HEC Paris

Tianshu Lyu

Yale School of Management

Kelly Posenau

Cornell University - SC Johnson Graduate School of Business

Date Written: January 1, 2024

Abstract

We provide the first analysis of the risk exposure and risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a dataset of impact fund cash flows and exploit distortions in VC performance measures to characterize risk profiles. Impact funds have a lower market β than comparable private market strategies. Accounting for β, impact funds underperform the public market, though not necessarily more so than comparable strategies. We consider alternative pricing models, accounting for sustainability and emerging markets risk. We show investors’ wealth portfolios and taste change the perceived financial merit of impact investing.

Keywords: impact investing, sustainable investing, risk, private equity, venture capital, ESG

JEL Classification: G11, G24, H41, M14

Suggested Citation

Jeffers, Jessica and Lyu, Tianshu and Posenau, Kelly, The Risk and Return of Impact Investing Funds (January 1, 2024). Available at SSRN: https://ssrn.com/abstract=3949530 or http://dx.doi.org/10.2139/ssrn.3949530

Jessica Jeffers (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

HOME PAGE: http://https://sites.google.com/view/jessicajeffers/

Tianshu Lyu

Yale School of Management ( email )

165 Whitney Ave
New Haven, CT 06511

Kelly Posenau

Cornell University - SC Johnson Graduate School of Business ( email )

Ithaca, NY 14850
United States

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