We looked at the deal flow of Hatcher and third-party transaction information to determine the effect of "impact" decisions on investment returns. In this study we will use the concepts of impact and ESG together. We found that impact-influenced investees seem to have significant higher multiples.
We conclude that Impact strategies are more likely to be profitable than standard early-stage investment strategies. This article will focus on series A, as well earlier investments. Hatcher's focus is on this subject and is able to handle the volume of transactions required for the analysis.
Our analysis examines the changes in value over a time window, as valuations change and are not always a real value, as most investments are not realized within the time horizon. We take the time elapsed as the relevant signal and discount the current valuations (possibly even to zero)
The chart below illustrates this effects. The chart below shows an overview more info of one data look, which covers early-stage rounds and more recent investments. The chart also includes the 5-year period. It shows the performance of the various views we looked at. The results can change according to the parameters of view and are highly sensitive to changing scenarios.
Investor against.
There are confounding factors in this study. Because we aren't able to comprehend the primary purpose of individual investments and can't compare the impact of investment performance to the complementary pool,
There is some evidence that Impact investors could be attracted to businesses that already have momentum, and therefore they are buying into scalability, selecting higher-quality outcomes, however typically paying a price which could offset gains in portfolios. Overall, the performance of "impact touched" companies is much better in both a short-term and long-term basis.
We looked for high-frequency investors that had clear mentions of impact or similar goals on their websites or an apparent absence of an impact-based approach and tagged them as impact investors. The tagging of high-frequency investors allows us to label significant amounts of investments in the information. We then identified the investments as either a known mix or impact investor or as not having either.
Since this isn't a point-in-time analysis of transactions, many individual investments are definitely not appropriately labeled. However, it's an extremely small sample, and investors that incorporated the concept of impact recently tend to be more Impact-friendly in their previous strategies.
Beyond the objective of the investor, there are other factors to consider. The likelihood is that more scrutinizing and self-selection in alignment to your objectives for impact will lead to greater attention to the feasibility of scaling, how to scale and team composition as well as other factors that could influence the trajectory of valuation. Many of the themes that focus on impact have an intrinsic return which is expected to be substantial.
The strong connection between multiples of return on investment and investment goals can be summarized in the following way: Over the medium and long term, this encourages positive feedback in impact investing that may enhance the impact goals.