Unlocking the black box of private impact investors

Abstract

Purpose: This paper aims to empirically describe the general characteristics and the investment behavior of high-net-worth individuals (HNWIs) who pursue impact investing. Design/methodology/approach: Data was collected from members of a global impact investor network, using an online questionnaire, a portfolio-data collection tool and semi-structured interviews. Findings: Wealthy private impact investors are largely similar in terms of their general characteristics and investment behavior, but they diverge in their interest in specific Sustainable Development Goals (SDGs). They tend to be strongly values-driven and to adopt an investment time horizon of 7+ years for their impact investments, which they expect to yield financial returns that are no different from those of traditional investments. Interestingly, these investors perceive the well-established sustainable investing strategies of exclusion, environmental, social and governance (ESG) integration and best-in-class as not having high impact-generating potential. Practical implications: Suggestions are provided about how wealthy private investors could use the findings to improve their impact investment decisions. Advice is offered to investment professionals on how to optimize impact investment products and services for this economically and societally highly relevant target group. Originality/value: To the best of the authors’ knowledge, this is the first scientific study to investigate the general characteristics and investment behavior of HNWIs who pursue impact investing. HNWIs have great relevance for financial markets yet they are out of reach for most researchers. As a result, they are poorly understood, and apparently also often misunderstood, which has substantial economic and social implications that this paper helps mitigate.