The risk and return of impact investing funds

Jessica Jeffers, Tianshu Lyu and Kelly Posenau

Journal of Financial Economics, 2024, vol. 161, issue C

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; Venture capital; ESG (search for similar items in EconPapers)
JEL-codes: G11 G24 H41 M14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:161:y:2024:i:c:s0304405x2400151x

DOI: 10.1016/j.jfineco.2024.103928

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