Investors’ Aspirations toward Social Impact: A Portfolio-Based Analysis

Abstract

In the last ten years, we have witnessed a proliferation of investors claiming blended value strategies, i.e., pursuing both economic and social returns in their investments. Aside from this rush for self-selecting in a blended value finance context, we still do not know to what extent the investors’ claims actually reflect investment decisions. Evidence suggests that, in some cases, such investors tend to maximize the social performance over the financial performance; in some others, the effect is reverted, but literature currently lacks studies aligning the analysis of the investment decisions with the investment portfolios. Yet, it is still unclear whether blended value investment decisions are enacted as a result of investors’ deliberate strategies and what influences this relationship. In this paper we tackle this issue, analyzing the extent to which investors’ finance firms pursuing goals aligned with their strategic aspirations. Specifically, adopting a Fractional Logistic Regression model, we test the effect of investors’ aspirations toward social impact on the extent to which their investees (i.e., the portfolio of firms in which they invest) pursue social returns. Results suggest the existence of a positive and significant investor–portfolio alignment effect (i.e., the higher the investors’ aspirations toward social impact, the higher the number of investees with higher social aspirations). Yet, this effect is influenced by contingencies at both investor and portfolio levels. Investors with strong aspirations toward social impact that: (i) invest in countries with high levels of social inequality, and (ii) are located in countries that support social progress and maximize, in their portfolios, the presence of businesses pursuing social impact. We discuss implications for future researchers, policymakers and practitioners.

Impact investing: Scientometric review and research agenda

“…This aligns with our cluster findings. The central theme of the articles grouped was an evaluation of financial (Bernal et al, 2021; Boni et al, 2021) and non‐financial returns (Ruff, 2021). Articles focused on analysing impact portfolios, trade‐offs in blended return and designing and building metrics for measuring social impact.…”

“…Impact investment may be described as a two-edged sword trying to achieve two extreme financial return goals along with social impact. As of 2023, the literature lacked an understanding of how do impact investors' trade-offs or align these conflicting objectives (Boni et al, 2021). Further, future studies need to explore the determinants affecting the mission-portfolio alignment relationship.…”

EU financial regulations and social impact measurement practices: A comprehensive framework on finance for sustainable development

“…Nowadays, the specific context of sustainable finance is characterized by multiple typologies of actors that can be distinguished mainly for their different integration of sustainability objectives within their investment approaches (Eurosif, 2018). There are indeed several facets of sustainable investment strategies that often co‐exist, mirroring the variety of aspirations that different types of investors have toward sustainability goals (Boni et al, 2021).…”

The identity of social impact venture capitalists: exploring social linguistic positioning and linguistic distinctiveness through text mining

“…Impact investing consists of a broad range of financial institutions that use a heterogeneous pool of financial tools (Boni et al, 2021;Revelli & Viviani, 2015). 8 Given its breadth, social impact finance has been recognized as a potential new financial paradigm (Nicholls, 2010) and has recently received significant attention from financial bodies, private and public companies, and the press (Fink, 2020(Fink, , 2018The Economist, 2017;Zingales, 2018).…”