Cambridge Associates is one of the few organisations that has systematically tracked and published impact investing financial returns data.

When it first started publishing its impact benchmark in association with the Global Impact Investing Network in 2015, it found that financial returns from impact firms were underwhelming. Impact funds launched between 1998 and 2004 underperformed conventional private investment vehicles, returning 6.9 percent to investors versus 8.1 percent for the comparative vehicles. Subsequent reports saw no improvement, with impact funds raised between 2005 and 2020 delivering an internal rate of return of 5.4 percent net to investors. This is comparable to public markets, but lags wider private equity performance.

But it is hard to draw conclusions from the research. A lot of the funds in the initial benchmark looked very different to traditional private equity vehicles. Many had unrealised assets, a number targeted emerging markets and about half had assets of less than $50 million.

As Cambridge noted at the time, limited performance data availability, coupled with “very strict” inclusion criteria, meant only 51 funds made up the benchmark, presenting “unavoidable data analysis limitations”. All of this made comparing these vehicles with traditional private equity performance problematic.

The results are further muddied by how much the impact investing universe has changed over the past 10 years, with bigger funds being raised by a more diverse group of managers, often with different takes on what it means to be an impact vehicle. This development has been so dramatic that Cambridge Associates no longer takes the position that this sort of specialist impact investing data is particularly useful and will no longer publish the benchmark.

“The impact investing space has evolved so much since 2015”, a spokesperson for Cambridge Associates told New Private Markets. “We have seen impact funds raised from much bigger managers since then and there has been a real convergence between the mainstream and impact managers. The world has moved on.”

Instead of picking out impact managers and comparing them against one another, Cambridge Associates now analyses managers on a thematic basis. For instance, it compares health technology or clean technology managers against one another, regardless of whether or not they label themselves as impact managers.

“The number of impactful opportunities that stack up has just exploded,” the spokesperson says.

Investor view

The data may not exist to state categorically whether impact investments do deliver market-beating returns, but investors are mostly happy with performance.

Around two-thirds (67 percent) of investors expect their impact investments to generate market rates of return, according to the GIIN’s 2020 Annual Impact Investor Survey. Of those investors, the vast majority (89 percent) said their investments were performing in line with or better than their expectations.

This research lines up with the experience of Elizabeth McGeveran, director of investments at the McKnight Foundation.

“I’ve only got a handful of mature impact investments. Like any portfolio, many of them are delivering market rates of return, but a few of them haven’t,” she says.

The family foundation makes grants to organisations that promote equality and battle climate change in the Mid-West US and has invested $177 million in impact funds and direct investments since 2014. McGeveran benchmarks these managers against their counterparts in private equity, rather than against other impact managers. She thinks this is important to create a strong and sustainable portfolio.

“No one is being asked to leave their good investment sense at the door,” she says. “That is a recipe for failure. I want them to bring all their scepticism, all their questions into the room, and it’s going to make a better portfolio.”

She adds that, along with delivering good returns and positive impact for wider society, the organisation itself also benefits from its relationships with impact managers. The foundation’s separate grant-making arm gets to learn about market trends. Plus, her investment team is excited by the work.

“Our team finds this so energising,” she says. “I’ve had very hard-nosed investment folks leave our meetings and say, ‘this is just so fun’. It’s really engaging to think about all these new things that are emerging in our market.”

Bucket problem

But the GIIN’s figures still show that one-third of investors do not expect their investments to generate market rates of return.

David Gowenlock, head of funds advisory at impact placement agent ClearlySo, puts this down to the wide range of investors in the impact investing space and their different priorities.

Smaller foundations, charities and endowments often see impact investments as an extension of their grant-making work, and therefore want high-impact projects that might only preserve their capital or deliver inflation-linked returns.

Larger pension funds and private banks, meanwhile, are often more concerned with the financial aspects of their impact investments and tend to benchmark against their wider private equity portfolios. For instance, Dutch investor PGGM has €20.8 billion invested in impact investments, which it terms “solutions investing”, and benchmarks these investments against its wider portfolio.

“When we talk to our clients, we say ‘what bucket does this fall into?’” says Gowenlock. “We tend to advise clients to either structure it as impact-first or financial-first. Very few fall in the middle.”

Gowenlock says it is becoming harder and harder to even compare impact managers with one another.

“There is this umbrella term ‘impact investing’, but underneath there are various positive impacts that are actually quite different,” he says. “A lot of these things are not that comparable. How can we compare reduction in greenhouse gas emissions or job creation? Impact investment is so broad and those impacts are very different.”


Some remain sceptical that impact funds can deliver everything they promise. A working paper published by the London School of Economics in 2019 concluded that while it was possible to generate both returns and impacts, it was difficult.

Co-authors Feng Li, Gianandrea Giochetta and Luigi Mosca found that “only selected opportunities” exist to deliver both effectively.

They wrote: “Successful examples of impact investing remain rare, particularly those consistently generating market rate return and measurable impact at large scale.”

“According to Confucius, ‘he who chases two rabbits catches neither’,” the authors wrote. “The challenge for impact investing is first to demonstrate that it is indeed possible to catch two rabbits at the same time, and then develop robust methodologies to identify and seize such opportunities.”

That sentiment is shared by Hauke Hillebrandt, an academic who studies effective altruism and founded research organisation Let’s Fund. He believes investors are making a big trade-off by investing in impact funds.

“The more things you try to do, the less good you are at it – it’s a law of nature,” he says. “They are in this weird, awkward space where they have to provide a return, but they also have to do good.”

He argues that if there is money to be made, socially neutral investors will spot that opportunity and step in to make an investment in most situations, making impact investors redundant. Instead, he argues that it would be more effective for investors to focus on generating top-notch returns, then giving away a portion of their profits to charity.

“It is something that is not always considered: what are the alternatives?” he says.