Department of Management Studies, Aalto University School of Business

Addressing the world’s most pressing social and environmental challenges is attracting growing attention as a management issue, and businesses face high expectations to help solve grand challenges such as climate change and social inequality. As one means of directing financial assets to economic activity that creates socially desirable outcomes, impact investing is emerging as an industry and a new market category. This research project explores from an organization and management studies perspective, how impact investing takes shape in the Nordics, as a novel investment approach. The project is funded by the Marcus Wallenberg Foundation during three years in 2020-2023.

“Profit is a condition – and a result of – achieving purposes”

Martin Wolf on Colin Mayer’s book “Prosperity”

Scope of the project

Impact investing refers to the intentional use of investment capital to achieve measurable social outcomes – along with financial returns from investment. The industry has gained significant momentum over the past decade. Impact investing gives rise to new practices and forms of organizing as different actors join this emerging asset class of social investment. Our investigation centers around the development of the impact investing ecosystem in the Nordics, addressing how new practices of assessing business goals emerge and spread among various members of the new market category.

Major topics of interest include:
– Changing norms and practices related to value assessment among private equity actors and other sectors
– The emergence of impact investing as a new market category and an industry in the Nordics
– Cross-sector collaboration through new impact investing models, such as social impact bonds
– Changing investment time horizons among impact investors and the relationship between valuation and the future

In addition, a broad, cross-cutting topic of interest in the project is understanding the role of impact investing in solving complex societal Grand Challenges

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The project is structured around three sub-projects that are tightly interlinked. All sub-projects are also tied to specific practical considerations for business and other stakeholders. 

In this project, we collect a data set consisting of interviews among actors from the financial sector (e.g. venture capitalists, fund managers, banks and institutional investors), impact entrepreneurs, innovation intermediaries, government actors and other policy bodies, as well as corporations from traditional industries. We also conduct participatory observations at industry events, conferences and business development programs in the field, and collect industry reports, news articles and academic research articles on the topic. This will create a rich data set on the emerging impact investing market in the Nordics.

Research privacy notice in Aalto University Impact Investment Project

Sub-project #1

Changing norms and practices of valuation among management

The financial sector has well-established practices and tools for evaluating the performance and potential of companies. In addition to considering a company’s profit, impact investing measures social and environmental value. This new form of investing challenges traditional norms of valuation in the financial sector, providing a fruitful context to explore how novel valuation practices emerge in strongly institutionalized settings. The purpose of this sub-project is to focus on the processes by which managers adopt new assessment strategies and business goals that might be contradictory in nature.

Sub-project #2

“Hyped” market categories and the emergence of category boundaries

Impact investing as an emerging asset class relates to sustainable development challenges such as climate change and poverty alleviation. Overall, such societal trends create a ‘demand’ for social and environmental businesses. Sometimes “hypes” can emerge in new market categories. Studies have shown that in such settings companies may both substantially and symbolically exhibit certain values and features and adopt novel practices. The attachment of firms to hyped categories, such as impact investing, differs widely. In this sub-project, we study how boundaries are negotiated in impact investing, and the role of different communities in both expanding the meaning of the market category and protecting its boundaries.

Sub-project #3

Valuation and the future

How actors evaluate the future is central to investments; Practices of assessing value creation relates closely to how time is perceived and how the future is used in financial evaluation. Impact investing embodies expectations of both financial and social-environmental value creation in the future. To assess the potential for morally desirable futures impact investors are found to adopt frames that attribute worth in novel ways. In this sub-project, we highlight how impact investors are challenging temporal conventions in financial investments, and explore the relationship between future perceptions and valuation in impact investing

Targeted deliverables and outcomes

With our study, we aim to
– map out the impact investing ecosystem in the Nordics
– craft understanding on the current opportunities and challenges experienced by the ecosystem actors
– craft understanding on the social mechanisms by which the new market category emerges.

We will share our insights with the research participants.

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Nina Granqvist is a Professor at Aalto University School of Business and the Principal Investigator of the research project. The focus of her research is how new industries and markets emerge and develop, and how novel ideas move from margins to mainstream. Her studies explore this topic from multiple theoretical perspectives, including institutional theory, market categorization, temporality, language, and agency in nascent fields. Empirically, her collaborative research draws on extensive qualitative datasets on for example the development of novel science and technology (nanotechnology, quantum computing) and cultural trends and new industries. Her research has been published top-tier journals in management including Academy of Management Journal, Organization Science, Organization Studies and Journal of Management Studies, among others.

Heli Nissilä (PhD) is a post-doctoral researcher at Aalto University School of Business and the project manager of this research project, responsible for coordinating the work of the research team. Her research expertise lies in firm responses to complex sustainability challenges and the emergence of markets in the context of sustainability. In her PhD project, she studied the legitimation of solar energy in the North, focusing especially on how actors developed time perceptions related to the new sustainable field and how this impacted the emergence of collective action in the new industry. Heli has vast experience with qualitative data analysis, and her research has been published in many high-impact journals. She has been involved in multiple large-scale research projects, working at the intersection of academia, business and other social actors.

Samuli Patala is Assistant Professor at Aalto University School of Business. He specializes in sustainability management, including cross-sectoral partnerships for sustainability, institutional change in sustainability transitions and sustainable value creation. Samuli’s work has been published in top-tier management journals and he has received important prizes for his papers. He has been involved in many large-scale research projects involving collaboration with industry actors and policymakers.

Marleen Wierenga is an assistant professor at the department of Business Administration at the Radboud University. She is interested in understanding how different kinds of organizations work to solve pressing global problems such as poverty, climate change and inequality. She has studied for example low-income entrepreneurs and impact-driven startups, and as part of this project she is studying impact investors. Marleen has experience from research and teaching in the field of international business, sustainability in business and innovating.

Arne Kroeger research interests circle around value creation, impact investing and assessment, entrepreneurship, and interorganizational relationships in the context of societal grand challenges. His research has been published in outlets such as The Academy of Management Review, Journal of Management Studies and others. Arne was Associate Editor of the Journal of Social Entrepreneurship for 3.5 years. He also serves as a reviewer for top tier management journal outlets such as The Academy of Management Review, Journal of Management Studies, Journal of Business Venturing, Business & Society and others.

Kaja Lilleng is a PhD student at Aalto University School of Business. She is experienced in the practice of impact investment through her work with early-stage impact funds, and has been part of organising the emerging impact investing community in the Nordics. Kaja has a MSc in Management of Innovation and Business Development from CBS, and wrote her thesis on early-stage impact investing and the role of venture capital in fostering impact tech startups in the Nordics.

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