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Impact Investing and Worker Outcomes

Author

Listed:
  • Josh Lerner
  • Markus Lithell
  • Gordon M. Phillips

Abstract

Impact investors claim to distinguish themselves from traditional venture capital and growth equity investors by also pursuing environmental, social, and governance (ESG) objectives. Whether they successfully do so in practice is unclear. We use confidential Census Bureau microdata to assess worker outcomes across portfolio companies. 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 post-funding 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 and thus are not consistent with mere window dressing or cosmetic changes.

Suggested Citation

  • Josh Lerner & Markus Lithell & Gordon M. Phillips, 2025. "Impact Investing and Worker Outcomes," Working Papers 25-30, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:25-30
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    File URL: https://www2.census.gov/library/working-papers/2025/adrm/ces/CES-WP-25-30.pdf
    File Function: First version, 2025
    Download Restriction: no
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    More about this item

    Keywords

    ESG; private equity; venture capital; wages;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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