New research from the Wharton School finds that “doing well by doing good” is a viable investment strategy. When researchers compared the financial performance of impact investing private equity funds with public market indices, they found that social impact investors do not necessarily need to lower their return expectations.
The report, Great Expectations: Mission Preservation and Financial Performance in Impact Investments, provides an objective, rigorous look at the two pillars of impact investing: financial returns and long-term impact. The study explores the assumption held by many financial advisors and investors that they have to choose between impact and market-rate financial performance. The report’s findings suggest that–in certain market segments–investors might not need to expect lower returns as a tradeoff for social impact.
Researchers at the Wharton School of the University of Pennsylvania evaluated the financial performance of 53 impact investing private equity funds relative to public market indices. The research found that impact funds in the sample that reported seeking market-rate return—one segment of the broad spectrum of impact funds—demonstrated that they can achieve results comparable to market indices.