Impact investing — a strategy for generating positive social and environmental impact alongside a financial return — is a core focus of the Wharton Social Impact Initiative (WSII). We work to grow the talent and evidence base to guide and strengthen the practice of impact investing.
WSII has rigorously researched impact investing over the years, with a number of reports on the topic. Recently, we teamed up with the Rustandy Center for Social Sector Innovation at Chicago Booth and the Impact Collaboratory at Harvard Business School to further our impact and reach, creating the leading repository of data for academic research on impact investing — the Impact Finance Database.
WSII’s Head of Research, Maoz (Michael) Brown, discusses the importance of this work and why this new collaboration will benefit and influence the field.
Why is it important to research impact investing?
“Impact investing is growing rapidly. You can see this trend not only in statistics on growing assets under management, but also in the students we work with day-to-day. At Wharton we’re seeing strong interest in impact investing and social enterprise among our student body. These are the business leaders of tomorrow, and they’re providing a very clear indication that weaving together finance and impact is the business model of the future.
But I think the importance of researching impact investing goes beyond its popularity. Given the severity of the social and environmental problems we face today, impact investing is an increasingly critical field. It shows us that we can put finance to work in addressing and combatting racial and gender inequity, climate change, and other major challenges that require our attention.”
What is the Impact Finance Database (IFD)?
“IFD is a comprehensive database on impact investing operations and outcomes. It’s being developed by the Impact Finance Research Consortium, which currently comprises the Wharton Social Impact Initiative, the Rustandy Center for Social Sector Innovation at Chicago Booth, and the Impact Collaboratory at Harvard Business School. Researchers at each of these institutions have been working together to build the IFD as the leading repository of data for academic research on impact investing. We gather this data through a rigorously designed survey and through an array of documents that funds provide, including financial statements, term sheets, impact reports, and other documentation, all of which is kept strictly confidential within our research team.
I’d also like to note that the IFD builds on the legacy of the Wharton Impact Research and Evaluation Database, or WIRED. This was an earlier effort at Wharton to collect survey and document-derived information from impact investors, and it helped us build a lot of the best practices we use today.”
Why have Wharton, Harvard Business School, and Chicago Booth decided to collaborate on this effort?
“We think the value of our collaboration is greater than the sum of its parts. Working together allows for the cross-fertilization of ideas that’s integral to good scholarship, and it also lets us share the significant responsibilities involved in doing research that’s up to academic standards.
In addition, we owe it to practitioners to find opportunities to streamline our work whenever possible. Rather than ask busy investors to fill out separate surveys, it makes a lot of sense for our three schools to combine efforts and approach the professionals we want to learn from as one initiative.”
What kind of information does the database hold?
“We’re collecting all of the information we need to understand how impact investors deploy capital for impact. Whether it’s financial performance, governance mechanisms, due diligence practices, investor-investee relations — we ask questions and document analysis tools that collect all of the information needed to understand how impact investors go about their work.”
What have researchers learned from IFD data?
“It’s a bit early to share findings and insights from the IFD. I can, however, point to some of our groundbreaking work from WIRED. Wharton Social Impact’s 2015 report “Great Expectations” demonstrated that there is no inherent tradeoff between financial returns and impact focus. A more recent article titled “Contracts with (Social) Benefits” showed how the legal contracts that impact investors write reflect a serious commitment to achieving social and environmental objectives. We’re looking forward to building on these insights in our future work.”
What impact do you hope the IFD will have?
“As academics, we believe knowledge is power. We’re hoping that the findings we share with the field will inform best practice and, ultimately, lead to greater and more sustained impact in the world. We also expect that this exciting collaboration among three top-tier business schools will draw more attention to this exciting, fascinating, and increasingly indispensable sector.”
— Maoz (Michael) Brown and Nisa Nejadi
Posted: October 28, 2020
