Fund managers acting as impact investors: Strategies, practices, and tensions

Abstract

Using a multi case-study analysis, we shed light on the strategies, practices, and tensions of fund managers acting as impact investors. Results show that while some fund managers experience tension between the social and financial aspects of specific, although relevant, components of the business model, other fund managers experience challenges throughout the business model. The governance component emerges as the most relevant issue and this may help explain why impact washing is a key topic in the impact investing discussion. Relevant implications for practitioners and policy makers are also discussed.

Do impact investors live up to their promise? A systematic literature review on (im)proving investments' impacts

“…impact information (Bandini et al, 2022;Busch et al, 2021;Loorbach et al, 2020;Schoenmaker & Schramade, 2019). Managing impact 'involves intentionally weighing both impact and financial considerations at each step of the investment process' (Thornley & Locascio, 2018, p. 2).…”

“…Several authors point out that strategic improvements can be achieved when social and environmental impact are integrated in the investment process phases, where investors understand and use impact information (Bandini et al, 2022; Busch et al, 2021; Loorbach et al, 2020; Schoenmaker & Schramade, 2019). Managing impact ‘involves intentionally weighing both impact and financial considerations at each step of the investment process’ (Thornley & Locascio, 2018, p. 2).…”

“…Ironically, in that regard, impact investing is ‘“metrics‐rich” but “data‐poor” due to the limited uptake of these metrics amongst social impact investors (Watts & Scales, 2020, p. 6). Bandini et al (2022) put forward the managing of impact objectives throughout the investment process as a best practice and find that this is the case in only half of the case studies. Loorbach et al (2020) argue that investors need to assess integrated value by integrating this into investment processes, information systems and performance evaluation.…”

“…So far, scholars argue that impact investing research has mainly focussed on proving impact, rather than on how to improve it, although there is an increasing number of methods available to assess impact (Andrikopoulos, 2020; Castellas et al, 2018). Furthermore, scholars point out that for improvements of impacts, investors need to integrate impact in each step of the investment process (Bandini et al, 2022; Busch et al, 2021; Loorbach et al, 2020). Impact measurement as an integrated part of the investment process is what sets impact investors aside from, for example, venture capitalists and angel investors (Busch et al, 2021; Roundy, Holzhauer & Dai, 2017).…”

“…Impact measurement as an integrated part of the investment process is what sets impact investors aside from, for example, venture capitalists and angel investors (Busch et al, 2021; Roundy, Holzhauer & Dai, 2017). Bandini et al (2022) analysed practices of impact investors and conclude that to achieve impact, impact measurement should be integrated throughout an investor's business model: from value proposition, investment strategy and management of impacts once invested. Improvements in impacts are difficult to achieve without actual measurement of impact results as well as without integration in the process, but this does not mean that integration automatically leads to improvements.…”