‘Do-good’ Companies Can Do Well for Investors, Wharton Researchers Say

Monday, April 27, 2015

Impact investing is a nice idea — and for many critics that’s precisely the problem.

The relatively young industry, which focuses on social or environmental returns in addition to financial ones, has until now lacked performance data. So how can you tell if investors are truly “doing well by doing good,” as the saying goes?

New research may shed light on the financial viability of such mission-driven investments, indicating returns similar to comparable investments in stock index funds.

Impact investors back companies that specialize in areas such as micro-finance, basic healthcare or education. Some Chicago-based examples are Reliefwatch, a platform for tracking supplies and disease through the developing world, and Shift, which gives low-income women in underdeveloped countries micro-finance opportunities.

Academics and investors discussed early findings from a University of PennsylvaniaWharton School of Business study Wednesday afternoon at the two-day Impact Capitalism Summit at the Union League Club of Chicago. The study is still in progress.

Led by moderator Matthew Weatherley-White, managing director of The Caprock Group, the panelists sought to convince the audience of investors and entrepreneurs of the strength of impact investments. A study of dozens of private equity impact funds showed strong financial returns, researchers said.

David Musto, Wharton’s department of finance chair, and Jacob Gray, senior director of the Wharton Social Impact Initiative, examined funds that sought market-rate returns and particularly looked at exits of mission-aligned companies.

Source: Chicago Tribune (link opens in a new window)

Impact Assessment, Investing
impact investing, venture capital