We looked at Hatcher's deal flow and third-party transaction data to find the impact of "impact" decisions on investment returns. This analysis includes both ESG and overt sustainable. The multiples those who invest in companies that are influenced by impacts are much higher than investors who are not.
We conclude that impact strategies tend to earn more than traditional early-stage investment plans. In this article, we examine the series A and earlier investments, which is the focus of Hatcher's activities and has enough transaction volumes to allow for an study.
Our analysis compares valuation change across a time span. Valuations change however, they aren't always realized value. Most investments don't realize their value within the specified time frame. Based on the period of time, we discount any new valuations (possibly to 0), if there are no other relevant signals available.
The graph below illustrates the effect. This is a summary from one view of data. We include the early stages of rounds, investments made in recent times, and a five-year time perspective. This illustrates the overall performance across all views that we looked at. However, the numbers are affected by changes in the views' parameters.
Impact Vs. Non-Impact Investment vs. Not Categorised
There are confounding factors in this review. We do not know the purpose of each investment, but we can measure the performance of Impact investments versus the complementary pool of investments.
A few studies suggest that Impact investors are attracted by organizations that have momentum. They usually pay a fee to reduce portfolio gains and thus invest in the potential for scalability. However, the performance of "impact touched" companies is better, on a valuation basis. This is true both in the short and long term.
We classified impact investments by looking at high-frequency venture capitalists with explicit references to "impact" or similar goals that are evident on their website or their website, but without an impact-like approach. We are able to identify large numbers of investments through the use of tags for high-frequency venture funders. We then flagged the investments as being 'known impact investors or blends, having a non-impact investor or neither.
It's not here a simple review of transactions, and many investments have been incorrectly tagged. This is only a small amount of investors. Investors who used impact themes were more Impact-friendly than those who didn't.
There are also factors at playing that go beyond the nature of investor as well as their stated objectives. More focus is given to the scalability and practicality. This can also influence the trajectory of valuation. Many impact investment themes have an intrinsic yield that is likely to be substantial.
In summary the focus that is aligned on impact investing and multiples of return for the investee is extremely strong. In the long and medium time, this can encourage positive feedback in impact investing which can further amplify impact objectives.