Most impact investors who have worked hard to help companies and projects generate positive impact want some assurance that the impact they have nurtured will continue and grow after they exit the investment.
A new report from the Global Impact Investing Network shows that the maturation of both the field and investors’ portfolios has drawn increased attention to exits, especially how investors try to safeguard the continuity of impact beyond exit.
The report says various risks associated with exit — such as those related to mission drift and business failure — can be mitigated with a responsible exit that ensures the investment makes a lasting impact.
“Impact investing has huge potential to generate positive long-term outcomes for society and the environment,” GIIN research director Abhilash Mudaliar said in a statement. “But investors need to have the confidence that they will be able to exit responsibly.”
On the basis of some 30 interviews with investors and entrepreneurs, GIIN shows that investors employ strategies throughout the life of their investments to ensure the sustainability of the impact that they seek to create.
Pre-investment: To increase the likelihood of continued impact after exit, investors often select investees based on whether impact is embedded in their business model or bound to financial success. They try to understand the business’s likely growth trajectory, which has implications for which exit paths and options will become available. They also consider founders’ commitment to mission.