When Does Impact Investing Make the Biggest Impact?


credit: USACE on Flickr

The concept of "impact investing" has taken off in recent years, with more than $1 trillion in assets under management.

But a new study out of Harvard Business School suggests that while impact investors do behave differently, the vast majority of their investments end up in companies that are able to raise capital from other, non-impact investors.

"If there were 20 other venture capital funds that would have been just as happy to give $1 million to that firm, then the capital isn't additional," says one of the study's authors.

"This seems to be the case for the majority of the portfolio companies we identify."

The study found that impact investors are more likely to invest in disadvantaged regions and industries, and they exhibit more risk tolerance and patience, but they are also more satisfied with their investments than traditional investors.

The study also found that employee satisfaction declines after an impact investment.

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