Who Loses in Win-Win Investing? A Mixed Methods Study of Impact Risk

Existing scholarship grapples with how impact investors measure positive impacts, but little attention has been paid to negative impact or limitations to positive impact, indicating a need to study “impact risk.” Impact risk refers to the likelihood that impact will be different than expected. In this paper, we study how impact risk is considered in practice. First, through a yearlong data collection effort including interviews with 124 impact investors, we are the first, to our knowledge, to document the consideration of impact risk by practitioners. From this qualitative study, we develop two hypotheses about cognitive mechanisms related to impact risk. Second, we test these hypotheses through a vignette-based experiment with an online sample (N = 435). We find that win–win views of business, exemplified by the impact investing industry, can lead to inadequate consideration of impact risk. Inadequate consideration of impact risk matters for ethical reasons: with beneficiaries—people and planet—in urgent need of real solutions, investors and academics should take impact risk seriously.