Intentionality and Decision-Making in Impact Investing—Understanding Investment Motivation and Selection Criteria of Impact Investors

Abstract

The opacity of the impact investment decision-making process is one of the main constraints hampering further growth in the impact investing ecosystem. This paper takes a differentiated view on why (investment motivation) and how (investment decision criteria) the major private impact investor types allocate funding to investees. We incorporate insights from 34 interviews with the five major impact investor types: social business angels, foundations, social banks, impact investment funds, and crowdvesting platforms. We find that motivation and decision-making significantly differ between the impact investor types, especially concerning strict vs. ambiguous impact definitions, active vs. passive investment approaches, and return requirements reaching from capital preservation to market-driven returns. By providing a differentiated overview of the investor type-specific motivations and most important investment criteria, our study offers social entrepreneurs a roadmap to identify the most appropriate impact investors for their business model.