Investors with standard monetary preferences will give a fund manager incentives to increase firm profits, which can be achieved through a share in profits via carried interest. When investors have social preferences, it is not clear which incentives the manager should receive. We explore this puzzle by applying an agency theory perspective to impact investing, a practice where investors seek both financial returns and a measurable social or environmental impact. Using an inductive, qualitative approach, we identify and describe the ethical (...) tensions and challenges faced by fund managers to structure and implement impact-based variable compensation schemes. Our results indicate that economic incentives tied to non-financial objectives are useful to alleviate goal incongruity between principals and agents during fund creation but have the potential to lead to perverse effects during the fund lifecycle, where managers may exploit subjective non-financial metrics to maximize personal wealth. We introduce the concept of impact fidelity, a conceptual equivalent of fiduciary duty, to ensure that investment decisions reflect the asset owner’s impact preferences. (shrink)

While research has focused on financial and social goals in impact investing, we add to the limited research that focuses on how individuals manage identity multiplicity, defined as three or more role identities. Based on our qualitative study of Christian impact investors, we develop a model of identity multiplicity work, explaining how individuals manage their multiple role identities to reduce identity tensions during the process of impact investing. We find individuals engaged in an interactive, ongoing three-step process of identity multiplicity (...) work: prioritizing one of their salient identities, managing their identity multiplicity interrelationships, and reinforcing their prioritized identity. Investors generally prioritized an identity that was neither financial nor social, but rather religious. We also find this identity work implemented through three novel mechanisms: shadowing, one identity casts a shadow over another thereby enabling the simultaneous pursuit of related goals; distinguishing, all identities are retained and at least a minimum threshold of role expectations are met; and surrendering, partial sacrificing of goals of one identity in favor of another identity based on an individual’s self-reflective importance of the role. Our findings offer new insights to multiple identities, impact investing and business ethics literatures. (shrink)

El emprendimiento social es visualizado como alternativa para responder a las consecuencias que ha generado el neoliberalismo a nivel mundial. La revisión del concepto, desde una perspectiva axiológica y pragmática, por parte de algunos autores, han demostrado que el emprendimiento social, lejos de ser una alternativa al neoliberalismo es una continuidad del mismo. El presente artículo estudia la relación que tiene el emprendimiento social y el neoliberalismo en función de los elementos ontológicos que lo conforman y las escuelas de pensamiento (...) sobre las que se ha implementado. El resultado muestra las paradojas que presenta el concepto a nivel ontológico, y cómo los emprendimientos sociales desarrollados desde la escuela de Economía Social tienen una mayor capacidad de generar una ruptura con el sistema e ideología neoliberal; mientras que los emprendimientos desarrollados bajo la escuela de innovación social, tienden a generar una continuidad al neoliberalismo.Social entrepreneurship is visualized as an alternative to respond to the consequences generated by neoliberalism worldwide. The review of the concept, from an axiological and practical perspective by several authors, has shown that social entrepreneurship is an alternative to neoliberalism. This article studies the relationship between social entrepreneurship and neoliberalism regarding the ontological elements that make it up and the schools of thought on which it has implemented. The result shows the paradoxes that present the concept at the ontological level, and how the enterprises of the School of Economics have a higher capacity to generate a rupture with the neoliberal system and ideology; while entrepreneurship under the school of social innovation tends to create a continuity to neoliberalism. (shrink)

Social impact investing is transforming the availability of private capital for nonprofits and social enterprises, but demand is not yet meeting supply. This paper analyzes the perceived barriers faced by nonprofits in engaging with SII, arguing the need to assess differences using a policy field framework. Four parameters of a subsector are conceptualized as shaping participation in SII: the scale of investment required, embeddedness in place, the need for radical innovation, and the configuration of intermediaries. Based on 25 interviews with (...) leaders of nonprofits and intermediaries in affordable housing and community economic development in Canada, the study finds that significant barriers are a lack of knowledge of the market, inadequate financial literacy, and the challenges of measuring and valuing social impacts. In addition, nonprofits report that, in spite of the inherent importance of social impact in this form of investing, they currently make limited use of evaluation and impact metrics, and perceive that intermediaries and investors, particularly in affordable housing, still put a greater emphasis on financial over social returns. (shrink)

This article examines how organizational experience influences social enterprise responses to impact assessment practices. Limited attention has been paid to why organizations resist or challenge impact assessment practices or how prior experience with impact assessment may shape organizational responses. The study draws on interviews with practitioners involved in social enterprise–impact investor dyads in Australia and the United Kingdom. The findings reveal that social enterprises enact either combative or collaborative responses in their relationships with impact investors based on past experiences with (...) impact assessment. The study shows how more experienced social enterprises reach a state of impact lock-in—where they become committed to particular approaches to understanding, measuring, and reporting impact. The article contributes to the literature on impact assessment and impact investment by showing how organizational experience shapes divergent reactions to the demands imposed by impact investors, creating complementary forces of institutionalization and contestation of impact assessment practice. (shrink)

Business Ethics: A European Review, EarlyView.

This article explores impact investing within the renewable energy sector. Drawing on ethical decision making and sensemaking, this article contributes to an enhanced understanding of the complex ethical sensemaking process of impact investors when facing plausible situations in a world of contested truths. Addressing the ethical tensions faced by impact investors with mixed motives, this study investigates the way decision makers use context-specific reasons to make sense of and shape the renewable energy investment process. This represents an initial attempt to (...) understand ethical sensemaking in impact investing made within the renewable energy sector using a multi-stakeholder approach. Our findings show that prosocial, personal, reputational, and economic motives are the main drivers of REI, with prosocial and personal motives being value-based, and reputational and economic motives being evidence-based. We find three different modes of ethical sensemaking, allowing for the construction of the four motives noted above. These motives are based on the context-specific reasons of impact investing decision makers in the RE sector. This article contributes to the academic discourse on ethical sensemaking with some key processes involved in ethical decision making, and a better understanding of the underlying motivations of impact investing in the RE sector. (shrink)

Although the importance of measuring and reporting the social and environmental impact of organisational action is increasingly well recognised by both organisations and society at large, existing approaches to impact measurement are still far from being universally accepted. In this context, the stakeholder dynamics within the nascent field of impact investing demonstrate the complexity of resolving potentially differing perspectives on key impact measurement issues such as materiality. This paper argues, from an organisational perspective, that such arenas of contestation can be (...) conceptualised in terms of social justice. Specifically, we draw upon Sen’s notions of ‘arrangement and realisation’ to explore the dynamics of contestation across a range of stakeholders concerning materiality judgements to suggest that such ‘arrangements’ may lead to suboptimal impact outcomes as ‘realisations.’ Our analysis of the nature of materiality contestations in impact measurement reveals the conflicts, tensions and paradoxes evident in this field of action. Empirically, we examine data drawn from 19 cases and 33 interviews. The analysis suggests three arenas of contestation around the materiality of impact measurement: the power dynamics between economically powerful investors and objectified investees; the conflicts between materiality norms and standards; and the interactions between all stakeholders with differing motivations towards radical or incremental materiality. Building upon this analysis, we then discuss how arenas of contested materiality may be mediated by drawing upon Sen’s notions of transcending the individual interests of the invested parties for the greater good via processes of contextualisation and case-specificity. (shrink)

This study explores the discourse of social entrepreneurs and their audiences in pitch situations. Adopting a practice perspective on social entrepreneurship, we videotaped 49 pitches by social entrepreneurs at five different events in two incubators in Germany and Switzerland. Our analysis of the start-ups’ pitches and the audience’s questions and comments as well as of interview data elucidates the nuances of social and business discourse that social entrepreneurs and their audiences draw upon. Our analysis shows how many social entrepreneurs mobilize (...) a discursive repertoire that is familiar to their business-oriented audience while others predominantly draw on a social discourse. We identify separating, mixing, and combining as key strategies that allow social entrepreneurs to dance between the two. We discuss how the intertextual reproduction of concepts, objects, and subject positions contains both enabling and constraining elements, which results in an ethical dilemma for social entrepreneurs: Should they re-package their social impact story in a business discourse to connect with their audience? (shrink)

This article maps existing research from 5,874 scholarly publications on social entrepreneurship (SE) utilizing scientometrics. The mapping indicates a taxonomy of five clusters: (a) the nature of SE, (b) policy implications and employment in relation to SE, (c) SE in communities and health, (d) SE personality traits, and (e) SE education. We complement the scientometric analysis with a systematic literature review of publications on SE in the Financial Times 50 list (FT50) and Business & Society and propose a multistage, multilevel (...) framework that highlights the clusters of existing research on SE based on their stage and level of analysis. This review study also helps outline a set of future research directions, including studies examining (a) the process stage at the micro-level and macro-level, (b) linkages across levels and stages, (c) linkages across stages over time or longitudinal studies, (d) SE in resource-constrained environments, (e) technological advancement and its impact on SE, (f) the types of social enterprises and their outcomes, and (g) various emerging topics in SE. (shrink)

Environmental, social, and governance (ESG) investing is synonymous with sustainable investment for socially responsible investors. Unfortunately, the diversity of ESG investing remains unattended amidst the growth in ESG literature, as the academic literature focuses dominantly on measuring performance. An understanding of a wide range of subjects entailing ESG is required before future research on ESG investing is performed. To overcome the challenge, this systematic literature review uses bibliometric mapping to reveal four significant research themes within the ESG investing literature: investor (...) behavior and motivations for ESG investing; cost and risk mitigation in ESG investing; portfolio screening and ESG investing; and ESG performance. The review critically examines each theme and broadens the research agenda for future studies. In addition to the significant themes, this paper also discusses theoretical and recent research trends in the ESG investing literature. The review identifies clashes and crossovers between these themes to appropriately interpret one theme using another and emphasizes the heterogeneity in ESG investing. Lastly, discussion over concerns and criticisms of ESG investing highlights greenwashing as a major cause of concern for investors. (shrink)

This introduction to the special issue on impact investing applies the attractive nuisance notion to impact investing. Social sector actors ‘trespassing’ on the playing field of conventional investment markets may not appreciate the risks. We apply the framework of essentially contested concepts to foster fruitful diverse research in this emerging research field. We advance six dimensions, which we propose allow to describe different sub-clusters of how the term is used in research and practice. For each dimension we identify risks and (...) opportunities stemming from the contested nature and highlight an ambitious research agenda for how future business ethics scholars can help address and foster impact investing. We conclude by illustrating how the papers in this special issue address these challenges. (shrink)

Despite recognizing the importance of impact investing in combating complex societal challenges, researchers have yet to examine the capacity of the field to address systemic inequality. While impact investments are intended to benefit vulnerable stakeholders, the voices of those stakeholders are generally overlooked in the design and implementation of such investments. To resolve this oversight, we theorize how the fields’ design—through its tools, organizations, and field-level bodies—influences its capacity to address inequality by focusing on the concept of giving voice, which (...) we define as the inclusive participation of vulnerable stakeholders in decision-making processes. We build from stakeholder engagement research to show how the design of impact investing can address inequality using three illustrative cases: social impact bonds, impact investing funds, and national advisory boards. We conclude with a discussion of how the ethical decision of giving voice to vulnerable stakeholders will determine the capacity of the field to address inequality, as well as provide implications for future research and practice. (shrink)

Impact investing is progressively losing focus in ensuring investments really do make a difference; therefore, the growth of the market may not make real social and environmental change. We propose three ways to put the “impact” back into the heart of impact investment.

Based on an abductive analytic study, we examine financial and social value incorporation in the multi-valued market of impact investing. This paper draws on interviews with investment professionals in 54 charitable foundations, intermediary and field building organizations in the impact investing market, to compare market objectives with practice, and to determine whether social and financial values are incorporated, thus producing ‘returns’ of both types through market exchange. We find unincorporated valuation is apparent at both the market level and for several (...) types of investors in contrast with the incorporated or even integrated valuations of other investors. This demonstrates that rather than incorporating logics in a binary or hybrid way, valuation in the moral market of impact investing occurs in a multiplicity of ways and on different levels of the market, depending on a variety of factors including adherence to traditional financial market standards and market design and maintenance. (shrink)

Business ethics in Africa, as a field of research, practice, and teaching, has grown rapidly over the last two decades or so, covering a wide variety of topical issues, including corporate social responsibility, governance, and social entrepreneurship. Building on this progress, and to further advance the field, this special issue addresses four broad areas that cover important, under-researched or newly emerging phenomena in Africa: culture, ethics and leadership; business, society and institutions; corruption, anti-corruption and governance; and philanthropy, social entrepreneurship and (...) impact investing. In addition to advancing research by addressing some of the imbalances and gaps in the extant literature, this special issue draws attention to indigenous African theories, models and firms. Some challenges facing business ethics, as a field of practice and teaching in Africa, are also highlighted. The paper concludes with a summary of the eight articles in this special issue. (shrink)