Impact -investing remains a niche, even within ESG investing. However, investors want to pay more attention to it, because it produces attractive results.
What distinguishes the impact of investors from both conventional and ESG investors is their search for positive triple bottom lines. Instead of looking for investments that are good for the company in which they invest and make money for them as investors, impact investments must also be an advantage for the communities where the investments are made. The classic example is the financing of a private hospital in a national or underdeveloped region. Although the hospital is a company with a profit motive and the investor tries to generate a return on their investment, the hospital itself offers considerable benefits for the local community.
A common criticism of impact investing is that, by concentrating on the triple bottom line, it can reduce the efficiency for investors in comparison with conventional investments. A new study of Josh Lerner, Markus Lithell and Gordon Phillips Show that, at least in the case of risk capital investments, that is not the case.
They collect the data from 7,300 private companies in the US. Of these 700 companies, investments from Impact Venture Funds, 2,000 received financing from conventional venture capital funds and another 3,600 companies acted as a control group to adapt to size, region, industry, etc.
As soon as they received the data from the companies, they could use microdata from the US Census Bureau that matches every employer with the employees working for getting the location, ethnicity, age, years of education, the profitability of the company itself and other crucial data. Finally, the Census Bureau also maintains average salary data for each company, although not individual salaries.
Ultimately, the researchers had data for about half a million American employees with these 7,300 private companies between 1992 and 2021.
In short, the graphs below illustrate the difference in profitability between companies that receive impact investment financing and small companies with similar characteristics that do not receive external financing. The graphs are normalized so that year 0 is the year that the company receives external financing. In general, companies that receive impact investment financing receive their income and profit faster than corresponding control companies. Although there is no statistical difference between companies that receive impact finance in the four years earlier, approximately one to two years later, Impact with investors funded companies have considerably larger income and profit growth.
Interestingly, this seems to be particularly driven by faster growth of both productivity (turnover per employee) and the profitability of employees (income divided by wages). But there is also some acceleration in average employee wage (as it should be if employees generate more income per employee).
Profitability of companies funded by impact investors
Source: Lerner et al. (2025)
This shows that impact investors really improve the working conditions and profitability of the companies in which they invest. What is more, impact funds tend to invest much more in economically disadvantaged regions of the US and to accept more women and people with a lower level of education than companies supported by conventional risk capital. This in itself offers an advantage for the regions in the US that need the most.
But do they do better for investors than conventional risk capital?
Comparison of the results for companies receiving financing from impact investors versus conventional risk capital funds, they believe that companies receiving financing of traditional risk capital increase faster, but increase in profitability and productivity supported by impact investors, do not differ from those in companies supported. That is why impact investment in the risk capital space does not seem to cost investors, but offers benefits for the communities in which these impact funds invest.
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