Which criteria matter when impact investors screen social enterprises?

Block, Joern; Hirschmann, Mirko; Fisch, Christian

doi:10.1016/j.jcorpfin.2020.101813

Cited by 70 publications

(69 citation statements)

References 66 publications

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“…At the organizational level, impact investors favorably judge investee companies that operate in their preferred investment sectors (e.g., health and social services sector) and that are located in more populous and advanced economic regions (Mersland et al, 2020;Rajan et al, 2014;López-Arceiz et al, 2017). Here, researchers also show that investee organizations' mission, the authenticity of their leadership team, their financial sustainability, and the importance of the societal problems being addressed are some of the most important evaluation criteria for impact investors (Block et al, 2021;Leborgne-Bonassié et al, 2019;McWade, 2012). Furthermore, researchers highlight the importance of designing an effective impact investing decision-making system by considering financial returns, social impact, and risks, as well as combining quantitative and qualitative data (e.g., Viviani and Maurel, 2019;Brandstetter and Lehner, 2015;King, 2017;Serrano-Cinca and Gutiérrez-Nieto, 2013).…”

Section: Theoretical Backgroundmentioning

confidence: 94%

“…At a broader level, the current study contributes to the growing literature on impact investing (e.g., Lee et al, 2020;Phillips and Johnson, 2021;Block et al, 2021;Islam, 2021a;Barber et al, 2021) by being the first to systematically investigate the match or mismatch between the demand and supply of impact investments in the global impact investing industry.…”

Section: More Specifically It Addresses the Following Research Questionmentioning

confidence: 99%

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Current demand and supply of impact investments across different geographic regions, sectors, and stages of business: Match or mismatch?

Islam

Scott

2021

Australian Journal of Management

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We examine the match/mismatch between the demand and supply of impact investments. We show that some geographic regions display an upward match, while others exhibit a downward match. We explain how regions with well-developed (or less-developed) economies are not necessarily equal to regions with well-developed (or less-developed) impact investment markets. We also highlight the sectors exhibiting a match or mismatch between the demand and supply of investments, and explain the potential reasons. Regarding both geographic and sector concentration, the demand for investments is much more concentrated than their supply. Finally, early-stage companies suffer from an undersupply of investments, while growth-stage companies display an upward match and mature companies have an oversupply of investments. These findings have implications for impact investing theory and practice, including the attainment of Sustainable Development Goals. JEL Classification: D53; E41; E51; G15; G23

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Section: Theoretical Backgroundmentioning

confidence: 94%

Section: More Specifically It Addresses the Following Research Questionmentioning

confidence: 99%

Current demand and supply of impact investments across different geographic regions, sectors, and stages of business: Match or mismatch?

Islam

Scott

2021

Australian Journal of Management

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“…At the individual level, impact investors assess the personal characteristics of social entrepreneurs. In this regard, a major evaluation criterion used is the integrity of social entrepreneurs (Drayton, 2002;Mogapi et al, 2019;Block et al, 2021). Research shows that social entrepreneurs having either high voluntary accountability efforts (e.g., voluntary disclosure of organisational reports) or high reputation are more likely to receive an overall positive judgement of integrity from potential impact investors (Achleitner et al, 2013).…”

Section: Criteria Used In Decision Makingmentioning

confidence: 99%

Impact investing in social sector organisations: a systematic review and research agenda

Islam

2021

Accounting & Finance

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Impact investing has great potential to contribute to achieving the Sustainable Development Goals by financing the growth of social sector organisations. This paper conducts a systematic literature review to develop cumulative insights into impact investing in social sector organisations. It identifies four streams of impact investing research: impact investment decision making, impact evaluation in impact investing, behavioural issues in impact investing, and impact investing ecosystem. This paper also identifies nine main research focus areas within these research streams and discusses key insights into each of them. Finally, building on prior research, this article offers a comprehensive future research agenda.

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“…Literature traditionally identifies impact investors as those actors more inclined to generate blended value, because they typically emphasize the condition of positive screens, that is, investors' search for organizations that pursue a positive social impact [23]. Impact investors provide financial support to organizations in order to pursue market-rate financial returns [24], but in addition to these financial objectives, impact investors seek for a positive social and/or environment impact of their investment [25,26].…”

Section: The Framework Of Blended Value Financementioning

confidence: 99%

“…For this reason, the finance industry lacks clear guidelines and regulations that help in distinguishing trustworthy socially oriented approaches while achieving financial returns [24]. Thus, the context of blended value presents loose boundaries, favoring the entry of heterogeneous actors free to declare the adoption of blended value approaches without reliable counterfactuals, making the context far from clear.…”

Section: The Framework Of Blended Value Financementioning

confidence: 99%

Investors’ Aspirations toward Social Impact: A Portfolio-Based Analysis

2021

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In the last ten years, we have witnessed a proliferation of investors claiming blended value strategies, i.e., pursuing both economic and social returns in their investments. Aside from this rush for self-selecting in a blended value finance context, we still do not know to what extent the investors’ claims actually reflect investment decisions. Evidence suggests that, in some cases, such investors tend to maximize the social performance over the financial performance; in some others, the effect is reverted, but literature currently lacks studies aligning the analysis of the investment decisions with the investment portfolios. Yet, it is still unclear whether blended value investment decisions are enacted as a result of investors’ deliberate strategies and what influences this relationship. In this paper we tackle this issue, analyzing the extent to which investors’ finance firms pursuing goals aligned with their strategic aspirations. Specifically, adopting a Fractional Logistic Regression model, we test the effect of investors’ aspirations toward social impact on the extent to which their investees (i.e., the portfolio of firms in which they invest) pursue social returns. Results suggest the existence of a positive and significant investor–portfolio alignment effect (i.e., the higher the investors’ aspirations toward social impact, the higher the number of investees with higher social aspirations). Yet, this effect is influenced by contingencies at both investor and portfolio levels. Investors with strong aspirations toward social impact that: (i) invest in countries with high levels of social inequality, and (ii) are located in countries that support social progress and maximize, in their portfolios, the presence of businesses pursuing social impact. We discuss implications for future researchers, policymakers and practitioners.

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Which criteria matter when impact investors screen social enterprises?

Cited by 70 publications

References 66 publications

Current demand and supply of impact investments across different geographic regions, sectors, and stages of business: Match or mismatch?

Current demand and supply of impact investments across different geographic regions, sectors, and stages of business: Match or mismatch?

Impact investing in social sector organisations: a systematic review and research agenda

Investors’ Aspirations toward Social Impact: A Portfolio-Based Analysis

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