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Book part
Publication date: 7 July 2014

Harry Hummels and Marieke de Leede

This chapter sketches a new development in responsible investing, namely impact investing. Impact investing, which we define as the entire spectrum of investments

Abstract

Purpose

This chapter sketches a new development in responsible investing, namely impact investing. Impact investing, which we define as the entire spectrum of investments deliberately aiming to create shared value, can be seen as an integrative approach to wealth creation through investments. The case of microfinance is used to illustrate this new development.

Methodology/approach

The chapter combines a viewpoint and a case study that serves to illustrate the practical relevance of the viewpoint.

Findings

The chapter starts with a brief overview of the origin and rise of responsible investments, followed by a description of mission-related investments and impact investing as its latest development. Microfinance is presented as a special case, thereby focusing on the investors, the asset allocation and the meaning – and application – of the notion of impact.

Practical implications

The chapter shows that a focus on social and financial returns can be combined without having to make serious financial sacrifices. It also demonstrates that investments can come from investors as diverse as pension funds, foundations or high net-worth individuals.

Social implications

If impact investing really takes off – particularly supported by institutional money – there will be much more opportunity to tackle social and environmental innovation than without those investments.

Originality/value of chapter

The chapter challenges (institutional) investors to evaluate their responsible investment strategy and to rethink their asset allocation. Impact investing can become an important addition to the responsible investment landscape.

Details

Socially Responsible Investment in the 21st Century: Does it Make a Difference for Society?
Type: Book
ISBN: 978-1-78350-467-1

Keywords

Article
Publication date: 14 June 2019

Philip T. Roundy

Impact investing, a type of values-based investing that combines financial investment with philanthropic goals, is receiving heightened scholarly and practitioner…

Abstract

Purpose

Impact investing, a type of values-based investing that combines financial investment with philanthropic goals, is receiving heightened scholarly and practitioner attention. The geography of impact investing, however, is largely unexamined, and it is not clear why some regional impact-investing communities are more vibrant than other communities. Regional differences in entrepreneurial activities are increasingly explained by differences in the vitality of entrepreneurial ecosystems, the set of interconnected forces that promote and sustain regional entrepreneurship. The purpose of this paper is to leverage insights from entrepreneurial ecosystems studies to understand the dynamics of communities that encourage and support impact investing.

Design/methodology/approach

To explain inter-regional differences in the prevalence and intensity of impact investing, this conceptual paper draws from research on entrepreneurial ecosystems and impact investment to theorize about the ecosystem attributes and components that drive vibrant impact investing communities.

Findings

It is theorized that vibrant impact investing ecosystems have three system-level attributes – diversity, cohesion and coordination – that are influenced by the core components of the ecosystems, including the characteristics of investors, the presence of social impact support organizations and cultural values that promote blending logics.

Originality/value

The theoretical model contributes to research on impact investing and hybrid organizing, produces concrete implications for ecosystem builders and sets an agenda for future research.

Details

Social Responsibility Journal, vol. 16 no. 4
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 7 August 2017

Philip Roundy, Hunter Holzhauer and Ye Dai

The growing prevalence of social entrepreneurship has been coupled with an increasing number of so-called “impact investors”. However, much remains to be learned about…

1858

Abstract

Purpose

The growing prevalence of social entrepreneurship has been coupled with an increasing number of so-called “impact investors”. However, much remains to be learned about this nascent class of investors. To address the dearth of scholarly attention to impact investing, this study seeks to answer four questions that are central to understanding the phenomenon. What are the defining characteristics of impact investing? Do impact investors differ from traditional classes of investors and, if so, how? What are the motivations that drive impact investment? And, what criteria do impact investors use when evaluating potential investments?

Design/methodology/approach

A partially inductive study based on semi-structured interviews with 31 investors and ethnographic observation was conducted to explore how impact investors differ from other classes of investors in their motivations and unique criteria used to evaluate ventures seeking investment.

Findings

This study reveals that impact investors represent a unique class of investors that differs from socially responsible investing, from other types of for-profit investors, such as venture capitalists and angel investors, and from traditional philanthropists. The varied motivations of impact investors and the criteria they use to evaluate investments are identified.

Originality/value

Despite the growing practitioner and media attention to impact investing, several foundational issues remain unaddressed. This study takes the first steps toward shedding light on this new realm of early-stage venture investing and clarifying its role in larger efforts of social responsibility.

Details

Social Responsibility Journal, vol. 13 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

Abstract

Details

Developing Africa’s Financial Services
Type: Book
ISBN: 978-1-78714-186-5

Article
Publication date: 18 August 2021

Sarah Louise Carroux, Timo Busch and Falko Paetzold

This paper aims to empirically describe the general characteristics and the investment behavior of high-net-worth individuals (HNWIs) who pursue impact investing.

Abstract

Purpose

This paper aims to empirically describe the general characteristics and the investment behavior of high-net-worth individuals (HNWIs) who pursue impact investing.

Design/methodology/approach

Data was collected from members of a global impact investor network, using an online questionnaire, a portfolio-data collection tool and semi-structured interviews.

Findings

Wealthy private impact investors are largely similar in terms of their general characteristics and investment behavior, but they diverge in their interest in specific Sustainable Development Goals (SDGs). They tend to be strongly values-driven and to adopt an investment time horizon of 7+ years for their impact investments, which they expect to yield financial returns that are no different from those of traditional investments. Interestingly, these investors perceive the well-established sustainable investing strategies of exclusion, environmental, social and governance (ESG) integration and best-in-class as not having high impact-generating potential.

Practical implications

Suggestions are provided about how wealthy private investors could use the findings to improve their impact investment decisions. Advice is offered to investment professionals on how to optimize impact investment products and services for this economically and societally highly relevant target group.

Originality/value

To the best of the authors’ knowledge, this is the first scientific study to investigate the general characteristics and investment behavior of HNWIs who pursue impact investing. HNWIs have great relevance for financial markets yet they are out of reach for most researchers. As a result, they are poorly understood, and apparently also often misunderstood, which has substantial economic and social implications that this paper helps mitigate.

Details

Qualitative Research in Financial Markets, vol. 14 no. 1
Type: Research Article
ISSN: 1755-4179

Keywords

Book part
Publication date: 26 November 2020

Timothy R. Hannigan and Guillermo Casasnovas

Field emergence poses an intriguing problem for institutional theorists. New issue fields often arise at the intersection of different sectors, amidst extant structures of…

Abstract

Field emergence poses an intriguing problem for institutional theorists. New issue fields often arise at the intersection of different sectors, amidst extant structures of meanings and actors. Such nascent fields are fragmented and lack clear guides for action; making it unclear how they ever coalesce. The authors propose that provisional social structures provide actors with macrosocial presuppositions that shape ongoing field-configuration; bootstrapping the field. The authors explore this empirically in the context of social impact investing in the UK, 2000–2013, a period in which this field moved from clear fragmentation to relative alignment. The authors combine different computational text analysis methods, and data from an extensive field-level study, to uncover meaningful patterns of interaction and structuration. Our results show that across various periods, different types of actors were linked together in discourse through “actor–meaning couplets.” These emergent couplings of actors and meanings provided actors with social cues, or macrofoundations, which guided their local activities. The authors thus theorize a recursive, co-constitutive process: as punctuated moments of interaction generate provisional structures of actor–meaning couplets, which then cue actors as they navigate and constitute the emerging field. Our model re-energizes the core tenets of new structuralism and contributes to current debates about institutional emergence and change.

Details

Macrofoundations: Exploring the Institutionally Situated Nature of Activity
Type: Book
ISBN: 978-1-83909-160-5

Keywords

Article
Publication date: 3 June 2019

Othmar M. Lehner, Theresia Harrer and Madeleine Quast

Impact investing denominates an investment logic that combines social and environmental goals, financial returns as well as personal values. The purpose of this paper is…

1689

Abstract

Purpose

Impact investing denominates an investment logic that combines social and environmental goals, financial returns as well as personal values. The purpose of this paper is to consider the concept of legitimacy to be an appropriate way to understand how actors in the impact investing market influence discourse in order to overcome the inherent liability of newness – based on hybrid institutional logics – through their financial and non-financial communication.

Design/methodology/approach

Based on two theoretically defined sets of codes, a thematic discourse analysis is conducted by analysing meaningful units derived from documents produced by case-selected actors in the impact investing industry, which are then categorised into rhetorical strategies for legitimacy building.

Findings

The paper finds that actors use diverse legitimisation strategies based on their relative positioning in the impact investing market. These strategies determine the actors’ main discursive foci and, in turn, are affected by the overall organisational activities, governance and mission. This study proposes and discusses eight legitimacy creating strategies of relevant archetypes of impact investing actors in their financial and non-financial communication. Following these interconnected discursive engagements, a communication gap can be demonstrated between investors, intermediaries and social entrepreneurs.

Originality/value

Such discursive engagement gaps can provide a theoretical lens to explain the almost non-functional market and, as practical implications, show the need for convergence and harmonisation in financial and non-financial reports and communiques. This research further contributes to theory by providing insights into the discursive creation of legitimacy, and by promoting a better understanding of the emerging field of impact investing.

Details

Journal of Applied Accounting Research, vol. 20 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 30 August 2018

Jeffrey Kappen, Matthew Mitchell and Kavilash Chawla

The purpose of this paper is to examine the institutionalization of screening and metrics in conventional finance and reflect upon the implications for Islamic finance.

Abstract

Purpose

The purpose of this paper is to examine the institutionalization of screening and metrics in conventional finance and reflect upon the implications for Islamic finance.

Design/methodology/approach

The study involves the analysis of archival data, interviews and fieldwork with current impact investors in North America and the European Union to trace the historical development of impact investing screening and metrics.

Findings

First, the paper explores how conventional investors have applied positive and negative screens in the creation of their values/mission-based investment strategies. This is followed by a historical analysis of the development and implementation of impact metrics and regulatory frameworks that influenced the growth of conventional impact investing. The possible benefits of learning from these experiences for the Islamic finance industry are then considered. The paper concludes with an analysis of the potential value of mission/values-based investing for the economic development of the Middle East and North Africa region.

Research limitations/implications

Though not a comprehensive study of institutionalization, this study supports recent calls for more intentional use of capital for blended returns within Islamic markets. To support these initiatives, it provides scholars and practitioners with multiple recommended points of entry into this growing market.

Originality/value

There has been scant organizational research examining the development of best practices within the impact investment community and how these might be applied to other contexts such as Islamic finance.

Details

International Journal of Social Economics, vol. 46 no. 2
Type: Research Article
ISSN: 0306-8293

Keywords

Article
Publication date: 21 November 2018

Suzanne Findlay and Michael Moran

As an emerging field of financing, impact investing is under-institutionalised and is in a legitimacy building phase. In an attempt to unpack how impact investing is…

2154

Abstract

Purpose

As an emerging field of financing, impact investing is under-institutionalised and is in a legitimacy building phase. In an attempt to unpack how impact investing is deployed in global markets, the key elements of its definition (intentionality, returns and measurement) are examined through a review of academic and practitioner literature. A refined definition is developed which emphasises the key elements of intentionality and measurement as separating impact investment from the established field of socially responsible investment (SRI).

Design/methodology/approach

Funds and products from a publicly available database are systematically analysed against the refined definition to determine the rigour with which intentionality and measurement are applied by self-identified market participants. These elements are used as a proxy to determine “purpose-washing” – a process where funds are presented as impact investments but do not satisfy a tightly applied definition. Purpose-washing enables the possibility of “retrofitting”, where funds originally defined as other products (e.g. SRI) retrospectively claim to be impact investments.

Findings

Having found evidence of purpose-washing but not retrofitting, actions are identified to enhance impact investment’s integrity, focussing on intentionality, measurement and transparency. Clarity of definition and purpose are important for a field in the market-building phase, as a lack of clarity could have negative implications for integrity and growth. The authors postulate that purpose-washing may be attributed to twin but distinctive motivations by market participants: interest in fee-generation among fund managers and attempts to bolster field legitimacy by demonstrating sector growth among impact investing proponents.

Originality value

This paper represents a unique analysis of impact investments against a robust and refined definition. By doing so, it offers a systematic appraisal of impact investments and an overall assessment of market integrity in its field-building phase.

Details

Social Responsibility Journal, vol. 15 no. 7
Type: Research Article
ISSN: 1747-1117

Keywords

Case study
Publication date: 16 August 2021

Yaryna Boychuk, Artem Kornetskyy, Liudmyla Kryzhanovska, Andrew Rozhdestvensky and Yaryna Stepanyuk

The learning outcomes of this paper is as follows: to structure the impact investing phenomenon and distinguish it from traditional investing or philanthropy, including…

Abstract

Learning outcomes

The learning outcomes of this paper is as follows: to structure the impact investing phenomenon and distinguish it from traditional investing or philanthropy, including the motivation of investors in impact investing projects; to analyse stakeholders in impact investing projects according to four main categories; to structure the implementation model of the theory of change in the context of impact investing; to build managerial decisions concerning the development of impact investing projects in crisis situations.

Case overview/synopsis

The case describes the development path of the Promprylad.Renovation project from its concept to the critical moment at the end of 2018. Yuriy Fyliuk – the case protagonist, acts as the main ideologist and leader of the project, the essence of which is the establishment of an innovation centre on the area of the old Promprylad plant in Ivano-Frankivsk. Impact investing was selected as the main project development tool, as it allows for attracting investors who share the aspiration for positive change of the city and potential financial benefit. The project is implemented in several stages as follows: partner involvement (Insha Osvita, MitOst, Pact Ukraine and LvBS), vision finalisation and research (together with Stanford Research Institute, Zotov & Co, FORMA Architects, Moris Group, etc.), the launch of the pilot floor (attracting more than $683,000 from allocated grants and more than $590,000 of private investments). Open equity crowdfunding and the purchase of the entire plant, with its subsequent renovation, should be the next stage. As of 2017, agreements have been reached to pay fully for the purchase of the plant by the end of 2019. After a successful pilot and lengthy negotiations, it was agreed that $1,000,000 should be paid by the end of 2018 and $2,000,000 by the end of 2019 to complete the buyout. However, as of the end of 2018, martial law was proclaimed in Ukraine. Hence, considering the risks, a major US investor refuses to contribute. The main dilemma is either to find a suitable solution to complete the buyout of the plant or to stop the project.

Complexity academic level

This case can be used in the master’s programmes of business schools (MBA, Executive MBA, Entrepreneurship, etc.), as well as in training programmes for public and state sector managers. The case study will be particularly useful for mixed groups with representatives from different sectors of the economy. This case study might be taught in the following disciplines: social entrepreneurship, social investing, leadership and crisis management. The subject of impact investing allows recognition of the benefits of combined cross-sectoral efforts over joint projects.

Supplementary materials

Teaching notes are available for educators only.

Subject code

CSS 7: Management science.

1 – 10 of over 75000