Thankfully for investors, data suggest that investing in impact funds is not typically done so at the expense of returns. Nine in 10 impact investors recently reported that their portfolios either met or exceeded their performance expectations, while the Cambridge Associates PE/VC Impact Investing Index (Developed Markets) benchmark showed annualized pooled returns over a three-year period of 17%.
Yet, it is important to point out that while the impact investment model is entirely geared toward positive impact—and there are readily available metrics for many measures of impact, like emissions—there remains no single, centralized way to measure their environmental and social performance. The onus still falls on investors and their advisors to remain vigilant and scrutinize the data presented by asset managers to ensure that they are delivering what they promised.
Kunal Shah is head of private equity solutions and co-head of research at iCapital.