Abstract
Impact investing pursues the dual goals of creating socio-economic value for the marginalized, and ensuring net positive financial returns. Impact investing firms achieve their goals through their investments in projects and enterprises which create both social and commercial values. The primary aim of this article is to contribute to our understanding of the process of impact investing, particularly with respect to issues related to aligning impact investing and investee social enterprise goals. The research method employs case-based research methodology. The data consist of six cases of impact investing and their investee social enterprises. In addition, the data involve interviews with experts from the field of impact investing. The findings are that: (1) Social mission plays an important moderating role in the inter-organizational relationship between the impact investor and the investee social enterprise, (2) and an emphasis on due diligence, sector specialization, and communication increases the likelihood of investment while (3) social impact measurement and reporting and frequent engagement increase the likelihood of post-investment alignment. The key contribution of this article is that impact investing (unlike venture capital) is influenced by the ability of its investee to create social value, which plays an important role in the inter-organizational relationship between investor and investee. Furthermore, similar to industry specialization in the for-profit investing, social sector specialization is equally relevant for alignment and returns.
Highlights
Impact investing is a relatively recent term, adopted in 2007 [1], that implies the practice of investing in enterprises with the motivation of creating social and environmental value and in which the principal is repaid potentially with a return [2]
The findings indicate that the due diligence process for impact investors is different from those among venture capitalist firms
The findings suggest that the categorical inclusion of the social mission and valuation of the social mission in the due diligence process help to increase the alignment between impact investors and social enterprise investees
Summary
Impact investing is a relatively recent term, adopted in 2007 [1], that implies the practice of investing in enterprises with the motivation of creating social and environmental value and in which the principal is repaid potentially with a return [2]. There has been a tremendous growth of impact investing funds, which are projected to exceed 500 billion USD by 2023 [6]. The effectiveness of an impact investing firm is primarily understood by its ability to generate social and commercial value [7,8,9]. The effectiveness of impact investing depends upon the social and financial success of its investments, which is tied to its investees [9]. The investee social enterprise is the major instrument through which social and financial returns are generated. Incubation, growth capital No. Non-profit company based out of educational institute in India
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