Impact Investing

: analysing the potential trade-off between social impact and financial returns : evidence from private equity and venture capital funds

Abstract

In this thesis, I study the financial performance of 153 impact labelled funds (ILF) with vintageyears between 2000–2017 relative to 4,734 traditional funds. I show that no significant tradeoff exists between ILFs and traditional funds when controlling for the vintage year, fund sizeand the fund’s core industry. However, ILFs show a 3.37% lower return (IRR) when onlycontrolling for vintage year, fund size, and the fund’s domicile region. ILFs have a higherexposure to the “Energy & Utilities” and “Raw Materials & Natural Resources” industries,which see a significant underperformance of 6.22% and 11.96%, respectively, compared tofunds with diversified industry exposure. Furthermore, the analysis shows that larger fundsunderperform smaller funds by 1.05%–1.28% and that no significant difference in financialperformance exists between North American and European funds. Nonetheless, both areoutperformed by funds domiciled elsewhere by 2.7%. Moreover, the fund’s vintage year is significant in explaining fund performance, with later years (2015–2017) outperforming earlier vintage years (2000–2002) by 20.25%–21.04%. Lastly, I show that ILFs with a higher ImpactScore (ImS) outperform ILFs with lower ImS by 5.84%. I further show that this is not due to increased risk exposure to Environmental, Social, and Governmental (ESG) factors.

Date of Award	27 Jun 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)