Publications
Publications
- 2025
- HBS Working Paper Series
Impact Investing and Worker Outcomes
By: Josh Lerner, Markus Lithell and Gordon M. Phillips
Abstract
Impact investors claim to distinguish themselves from traditional venture capital and growth
equity investors by also pursuing ESG objectives. Whether they successfully do so in practice
is unclear. We use confidential Census Bureau microdata to assess worker outcomes across
portfolio companies. Consistent with earlier studies, impact investors are more likely than other
private equity firms to fund businesses in economically disadvantaged areas, and the performance
of these companies lags behind those held by traditional private investors. We show that postfunding
impact-backed firms are more likely to hire minorities, unskilled workers, and individuals
with lower historical earnings, perhaps reflecting the higher representation of minorities in top
positions. They also allocate wage increases more favorably to minorities and rank-and-file
workers than VC-backed firms. Our results are consistent with impact investors and their
portfolio companies acting according to non-pecuniary social goals.
Keywords
Citation
Lerner, Josh, Markus Lithell, and Gordon M. Phillips. "Impact Investing and Worker Outcomes." Harvard Business School Working Paper, No. 25-040, February 2025.