Environmental, social and governance (ESG) concerns have been growing in recent years and changing the behaviour of both companies and consumers. The financial sector is not immune to this evolution and there has been a bigger emphasis on social finance, which are financial products linked with two main objectives: financial and ESG-linked returns. Social finance englobes various types of financial products. However, this work focuses on the investment part of social finance, which will be referred to as sustainable investments. Sustainable investments can take many forms depending on the degree of importance that non-financial returns have for investors as well as on the investors’ relationship with the investee. However, there is still some confusion about the differences how to distinguish them. There is also the belief that these generate relatively lower financial returns, because of their concerns on ESG factors. This work will focus on Impact Investing which is one of the many types of sustainable investments, which is characterized by requiring non-financial returns as a main goal and it implies a more active approach by the investor, compared to other types of sustainable investments. In this work, interviews were conducted to different venture capital funds to show the differences in financial returns, the importance of non-financial returns and the difficulty of following the EU legislature between Impact Investing and PRI (Principles for Responsible Investment). After analysing the results, it can be concluded that financial returns are slightly lower in Impact Investing but, contrary to common belief, both do not differ significantly from the overall market returns. Comparing with PRI, Impact Investing has a bigger concern with non-financial returns and tries to actively mitigate ESG problems and this is reflected on their screening process of investees. Finally, Impact Investing demands a deeper type of reporting to follow the EU legislation which is more demanding, time consuming and costs more than PRI.
Date of Award | 17 Jul 2024 |
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Original language | English |
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Awarding Institution | - Universidade Católica Portuguesa
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Supervisor | João Pinto (Supervisor) |
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- Social finance
- Sustainable investment
- Impact investing
- ESG
- Non-financial returns
- EU SFDR
A theoretical and empirical analysis of impact investing: a comparison between impact investing and other sustainable investments
Martins, D. T. (Student). 17 Jul 2024
Student thesis: Master's Thesis