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Impact IRR: Leveraging Modern Portfolio Theory to Define Impact Investments

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  • Daniel Soliman

Abstract

The impact investment market has an estimated value of almost $1.6 trillion. Significant progress has been made in determining the financial returns of impact investing. Investors are still, however, in the early stages of determining impact return. In this study, the author proposes the use of impact internal rate of return (impact IRR) to evaluate and monitor impact investments. This approach, which utilizes components of modern portfolio theory, adapted financial tools, and existing datasets, is demonstrated herein through initial use cases and examples showing how it can be employed to optimize impact.

Suggested Citation

  • Daniel Soliman, 2025. "Impact IRR: Leveraging Modern Portfolio Theory to Define Impact Investments," Papers 2509.22600, arXiv.org.
    • Handle: RePEc:arx:papers:2509.22600
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    References listed on IDEAS

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    1. Shawn Cole & Martin Melecky & Florian Mölders & Tristan Reed, 2020. "Long-run Returns to Private Equity in Emerging Markets," NBER Working Papers 27870, National Bureau of Economic Research, Inc.
    2. Landier, Augustin & Lovo, Stefano, 2020. "ESG Investing: How to Optimize Impact?," HEC Research Papers Series 1363, HEC Paris.
    3. Augustin Landier & Stefano Lovo, 2020. "ESG Investing: How to Optimize Impact?," Working Papers hal-02896673, HAL.
    4. Jeffers, Jessica & Lyu, Tianshu & Posenau, Kelly, 2024. "The risk and return of impact investing funds," Journal of Financial Economics, Elsevier, vol. 161(C).
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