R U N N E R - U P

Impact Investing

A B S T R A C T

Barber, Morse, and Yasuda document that investors are willing to accept lower financial returns when investing in dual-objective venture/growth equity funds as a trade-off for beneficial social and environmental returns. They find that ex post financial returns of impact funds are 4.7% lower than those earned by traditional venture capital funds, after controlling for effects such as alternative interpretations of risk, liquidity, and naiveté. Development organizations, banks, public pension funds, European investors, and UNPRI signatories have high willingness to pay, or willingness to accept lower returns for impact, whereas endowments and private pension funds have zero willingness to pay. Mission-oriented objectives and high political pressure increase an organization’s willingness to pay, and legal restrictions, such as ERISA in the United States, decrease the willingness to pay.

A U T H O R S

Brad M. Barber

Professor of Finance

Graduate School of Management, UC Davis

Adair Morse

Associate Professor of Finance

Graduate School of Management,
UC Berkeley & NBER Haas School of Business

Ayako Yasuda

Professor of Finance

Graduate School of Management, UC Davis