Having your cake and eating it: can impact investing also generate strong returns?

For some time, there’s been a prevailing view that to have impact and drive real-world change, you need to compromise and forego some investment performance. But that isn’t the case, and in this article, we explain why it’s possible to ‘have your cake and eat it’ when it comes to impact investing.

Generally speaking, most investors focus on meeting their target risk/return requirements. But for an impact investor, it’s about balancing impact, risk and return across the relevant parts of a portfolio. Adding an extra dimension to the process makes it more demanding, reducing the potential investment universe, but it is possible to meet an impact requirement in addition to the risk/return requirements.

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There are two main ways that an impact investor can have impact (or, more likely, their asset manager working on their behalf):

1. Capital allocation
2. Stewardship, eg ‘value-add’

The extent to which providing capital helps varies substantially. In many cases the impact can be modest, for example where the investment is on the secondary market, and the company has already received the investment in the past (as explored in an earlier article).

The amount of impact achieved by providing capital becomes stronger when the investor has to overcome some sort of barrier in order to invest. It’s true that delivering below-market returns is one example of a barrier that holds investors back, but it’s not the only one. For example, some companies may be complex and require specialist skills to understand, but may still be very profitable (eg a niche sector like biotech can be like this, as can emerging markets). This means that one investor who is willing to contribute capital could make a big difference to the company’s ability to grow and succeed, and therefore have positive impact.

Stewardship as a route to impact

Another main route to impact is stewardship. This is especially the case if the asset manager can demonstrate that impact is above and beyond the support that the investee company would likely have received anyway from another asset manager. In general, such ‘value add’ could be in the form of non-exec support from individuals with specialist skills, networks and introductions, or other strategy support. It can also be particularly tangible in an asset class like real estate, where the asset manager can be very hands-on in managing the asset.

For an example of stewardship which goes above and beyond what would have been achieved anyway, consider a real estate fund that buys offices and refurbishes them to have better environmental credentials. Crucially, the manager refurbishes the offices before those refurbishments are needed (e.g. before the building gets so old that it needs refurbishment, or before regulation forces a change to the fabric of the building). Doing this clearly has positive impact – another manager would likely not have refurbished an office that didn’t (yet) need refurbishment. This need not mean lower returns, even if the asset manager spends more on refurbishment, or spends that money sooner than would have happened otherwise. If the buildings are offices with corporate clients, they may be willing to pay more rent in return for lower energy bills and a better ability to meet their own net-zero targets.

The impact story here depends on the asset manager achieving environmental benefits over and above what would have happened anyway with any other asset manager (who might refurbish a building anyway in order to meet regulatory requirements). But if the impact asset manager is going above and beyond what’s required, and is getting recompensed for it, wouldn’t we expect lots other asset managers to do the same, reducing the additionality/impact?

This question suggests that achieving the strongest forms of impact investing can be like surfing a wave. Today there are relatively few asset managers who achieve environmental impact materially above and beyond regulatory requirements but, assuming they are right to believe that they will get recompensed for it, other asset managers will notice and the practice will spread. However, this process may take several years. So as time goes on, impact asset managers will need to continue ‘surfing the wave’ by finding more ways to achieve impact above and beyond what is happening anyway. It’s an ongoing process of innovation.

In any case, the bottom line in our example is that the extra rent delivered may achieve market returns on the extra cost of the refurbishment. In other words, impact investing won’t have required compromising on returns.

From this example, we can see that it’s possible to be an impact investor without compromising on returns. Survey data lends further weight to this view.

What do the data say?

According to the 2025 Global Impact Investing Network (GIIN) impact survey, 79%[1] of investors target market returns, and only 9%[2] of respondents were dissatisfied with their financial performance.

There are always nuances and caveats when interpreting survey data. But whether you’re looking at individual examples or looking at survey results, both lines of evidence seem to point in the same direction – it is possible to find opportunities that allow you to achieve positive impact without compromising on returns. In short, you can have your cake and eat it.

Reach out to the author of this article to explore how you could invest to have impact – and still meet your risk/return objectives.

[1] Source: p34 of GIIN impact survey report

[2] Source: p37 of GIIN impact survey report

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