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Impact investing
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DOI：10.1016/j.jfineco.2020.07.008.png)
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Abstract
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We show that investors derive nonpecuniary utility from investing in dual-objective Venture Capital (VC) funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower internal rates of return (IRRs) ex-post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and United Nations Principles of Responsible Investment signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., Employee Retirement Income Security Act) exhibit low WTP. (C) 2020 Elsevier B.V. All rights reserved.
Keywords:
Impact investing
Venture capital
Private equity
Socially responsible investment
United nations principles of responsible investment (UNPRI)
Sustainable investing
Public pension funds
Willingness to pay
Random utility discrete choice models
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