Impact Investing: An Investor’s Contribution to the Global Agenda

Hedda Bogen Asplin & Eline Christensen

Student thesis: Master thesis


This study aims to investigate the effect of impact investing on portfolio performance. Extensive research has been conducted on the effect of Socially Responsible Investment on portfolio performance. However, the literature within impact investing is found to be rather scarce. Impact investing goes well beyond Socially Responsible Investments and the question of investor’s potentials to create financial and social return as a double bottom line, remains. There is no uniform definition of impact investing, precision in the term impact or acknowledged standardized metrics to evaluate companies’ impact. In an attempt to cover these matters, this thesis seeks to bring attention to the universe of impact investing and to examine the effect of impact screening on portfolio performance. Thus, it contributes to the ongoing discussion on how the additional element of impact affects portfolio performance. The study is conducted on the US market over a 12-year period starting from January 2008 to December 2019. The strategic impact objective of the portfolios is to contribute to the Global Agenda, through the UN Sustainable Development Goals (SDG). Due to the lack of a recognized methodology in the field for measuring companies’ impact, this thesis strives to create a credible impact screening model with the SDGs as a framework. The selfconstructed screening model aims to identify companies which creates positive, intentional and measurable impact value to the Global Agenda and is considered one of the main contributions to the impact investing literature. By creating sustainability scores, implementing impact multiples, and weighting the SDGs in accordance to their investability, the companies in the investment universe are assigned a total impact score. The study constructs impact portfolios with different SDG focus areas, namely: People, Planet and Prosperity. The portfolio performance is examined using the CAPM, the Fama and French three and five factor model and Carhart four factor model. The study finds evidence of an abnormal return ranging between 3,41%-4,53% annually using the Carhart alpha with significance at the 1% level for the three value-weighted top 10% impact portfolios. The results reveal the impact portfolios have outperformed S&P 500. However, the evidence of high abnormal returns is in a great extent influenced by the first part of the research period, from 2008-2011. Further, the study demonstrates how the impact portfolios provide some degree of downside protection during market downturns. The study concludes that the opportunities within impact investing are to a great extent influenced by the impact investor’s own preferences on impact focus, impact level and financial return. Evidence demonstrate that portfolios within People provides the investors with good opportunities and flexibility regarding their preferences, while still successfully gaining a double bottom line. However, investors holding portfolios within Planet and Prosperity, must to a greater extent evaluate a trade-off and prioritize aspects of impact and financial returns.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2020
Number of pages162