Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
Brad M Barber (UC Davis) , Professor of Finance
Barber, Brad M. and Morse, Adair and Yasuda, Ayako, Impact Investing (August 3, 2018). Available at SSRN: https://ssrn.com/abstract=2705556 or http://dx.doi.org/10.2139/ssrn.2705556
We document that investors derive nonpecuniary utility from investing in dual-objective venture/growth equity funds, thus sacrificing financial returns. In reduced form, impact funds earn 4.7% lower IRRs compared to traditional VC funds. Likewise, random utility/willingness-to-pay (WTP) models of investment choice indicate investors accept 3.4% lower IRRs for impact funds. We rule out alternative interpretations of risk, liquidity, and naiveté. Development organizations, banks, public pensions, Europeans, and UNPRI signatories have high WTP; endowments and private pensions have none. Mission-oriented objectives and local political pressure increase WTP; legal restrictions (e.g., ERISA) decrease WTP.