Impact Investment

OMI Seminar Series

A class of investments called impact investment emerged during the recent period in response to the failure of the socially responsible investment movement to create a large influx of capital addressing social or environmental challenges. Impact investing stands in contrast to divestment, where investors sell investments in companies that engaged in objectionable practices (e.g., the divestment of South African companies during the period of apartheid). What distinguishes impact investment from previous SRI movements is its focus on the deployment of capital through private equity funds, which represents an increasing portion of the portfolio of many institutional investors. For example, US public pensions allocated 7% ($320B) of their assets to private equity as of June 2015.

Our primary goal in this paper is to provide evidence on the frictions of using private capital to address global issues, by the type of capital. We also have a broader agenda, which is to shed light on the general determinants of the demand for private equity funds for different classes of investors. We first estimate what factors affect the matching of investors (LPs) to funds. Our contributions document LP characteristics, fund characteristics, and fund-LP match characteristics that matter for interest in particular funds, with our focus being on how these factors load differentially across investor types. We then explore the factors that affect the demand for impact investments. We do so by analyzing a sample of 179 impact funds, which private equity general partners (GPs) launched over the period 1989-2013. We also investigate whether UN PRI signatories, who pledge to incorporate environmental, social, and governance issues into their investment processes, are more likely to invest in impact funds.


Ayako Yasuda (UC Davis)

Tuesday, November 10, 2015 - 12:30
to 13:30