Impact Investing: exploration of potential solutions to compare impact performance between impact funds

Details

Supervisors

De Ronge, Yves

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

The resolution of global challenges like climate change requires a tremendous amount of financing that states alone cannot bear. Therefore, the role of private actors as liquidity providers is critical to address those complex and systemic issues. Where should investors put their capital if a determining criteria was the ability of a financial instrument to solve a given societal challenge while also looking for a financial return? Impact investing is the asset class that reconciles those two objectives but, just like investment opportunities vary in financial performance, impact driven investments differ in their ability to generate impact. This paper explores the different available ways an investor seeking to allocate its capital towards investment opportunities that are better performing on impact has. A quantitative approach to impact performance comparison being currently impossible, a qualitative approach has been expressed to ease the investment decision process based on characteristics of impact funds to select the most impactful ones.