IFin Seminar, Jessica Jeffers, Chicago Booth - "The Risk and Return of Impact Investing Funds"

Institute of Finance

Date: 9 June 2022 / 12:25 - 13:40

Speaker: Jessica Jeffers, Chicago Booth

Title:       "The Risk and Return of Impact Investing Funds"

Date:      June 9, 2022

Time:      12:25 - 13:40

Room:     A 13 Red Building

Lugano West Campus


We provide the first analysis of the risk exposure and consequent risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a new dataset of impact fund cash flows, and exploit distortions in existing measures of VC performance to characterize the risk profile of impact funds relative to benchmarks. We show that impact funds have a lower market ß than comparable private market strategies, especially VC funds. When accounting for market risk exposure, impact funds underperform the public market, though not more so than comparable private market strategies. Adding a public sustainability factor to our pricing model helps explain impact fund returns, though the correlation of impact fund cash flows with the public sustainability factor on its own is not necessarily positive. We explore how private market sustainable investing captures distinct risk exposures from both public sustainable investing and nonimpact private market investing.