The impact at stake: return and risk in impact investing

This study focuses on the financial performance of impact investing. Compared to more traditional strategies in the area of sustainable investing, impact investing focuses on the product of the investee companies, by selecting target firms whose product (service) directly contributes to social or environmental sustainable goals. We use a unique dataset of US listed firms whose product (service) aims to solve social or environmental issues and we compare the performance of such impact firms to a matched sample of non-impact companies during the time period from 2002 to 2019. Our results show that impact firms outperform non-impact companies during periods of market crisis. However, this positive effect on downside risk comes at the cost of underperformance during non-crisis periods. No significant difference is detected in terms of standard deviation of returns or systemic risk.