Does Impact Investing Really Work? Insights from Dr. Jules van Binsbergen

Dr. Jules van Binsbergen, Lauder Professor and Anthony L. Davis Director of the Joseph H. Lauder Institute for Management and International Studies at the University of Pennsylvania, shares key insights from his research, “The Impact of Impact Investing.”

The podcast notes argue that ESG-focused impact investing, especially through divestment, has very limited ability to change firms’ real economic behavior or materially raise the cost of capital for “dirty” companies, because other investors quickly replace the capital that socially conscious investors withdraw. The research discussed shows that the price and cost-of-capital effects of divestment are extremely small under current market conditions and would only become meaningful if a very large majority of global wealth adopted the same exclusions, which is highly unrealistic. Instead, the conversation emphasizes that real impact is more likely to come from active shareholder engagement, clearer and more coherent ESG priorities, support for technological innovations that make harmful activities uneconomic, and in some cases regulation and democratic processes that address problems markets alone cannot solve.

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