The Risk and Return of Impact Investing Funds
113 Pages Posted: 26 Oct 2021 Last revised: 5 Jan 2023
Date Written: December 9, 2022
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 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: Suggested Citation