Impact Investing

Brad Barber, Adair Morse and Ayako Yasuda

No 26582, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and UNPRI signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., ERISA) exhibit low WTP.

JEL-codes: A13 G11 G23 G24 G41 Z1 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-upt
Note: AP CF
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Published as Brad M. Barber & Adair Morse & Ayako Yasuda, 2020. "Impact Investing," Journal of Financial Economics, .

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Journal Article: Impact investing (2021)
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