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CBR Briefing #78

A bar chart showing that eighty-nine-point-seven percent of impact investment funds that sought market rates had investor contracts that included language specifying how the funds’ intentions would be put into operation, while eighty-five-point-seven percent of funds that did not seek market rates had such contacts. And a second bar cart shows that seventy-nine-point-three percent of contracts between market-rate-seeking funds and portfolio companies included such language, while only forty-six-point-two percent of contracts between portfolio companies and funds not seeking market rates.

Impact investors want goals written in contracts

  • Investors who care about their social and environmental impact are specifying corporate practices that ensure their intentions will be carried out, according to Chicago Booth’s Jessica S. Jeffers and her co-researchers.
  • The researchers examined 202 contracts at 54 private-equity and VC impact funds and 92 of their portfolio companies. They searched for contract terms affirming investors’ aspirations to deliver a positive impact, and terms spelling out actions that put those goals into operation.
  • If a fund uses actionable terms in its contracts with investors, it also typically does the same with its portfolio companies, the research finds.
  • From setting up fund-advisory committees to seeking control of more portfolio-company board sets, investors tend to participate more directly in the operations of impact funds than those of non-impact funds.

Click here to download this briefing as a PDF.

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