Impact investors pursue both financial and social goals and have become an important source of funding for social enterprises. Our study assesses impact investor criteria when screening social enterprises. Applying an experimental conjoint analysis to a sample of 179 impact investors, we find that the three most important criteria are the authenticity of the founding team, the importance of the societal problem targeted by the venture, and the venture's financial sustainability. We then compare the importance of these screening criteria across different types of impact investors (i.e., donors, equity investors, and debt investors). We find that donors pay more attention to the importance of the societal problem and less attention to financial sustainability than do equity and debt investors. Additionally, equity investors place a higher value on the large-scale implementation of the social project than do debt investors. We contribute to the nascent literature on impact investing by documenting how impact investors make investment decisions and by providing a nuanced view of different investor types active in this novel market. Practical implications exist for both impact investors and social enterprises.

Conjoint analysis, Entrepreneurial finance, Impact investing, Screening criteria, Social enterprise
Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (jel G24), Nonprofit Institutions; Nongovernmental organizations (NGO) (jel L31), Portfolio Choice; Investment Decisions (jel G11), New Firms; Startups (jel M13), Corporate Finance and Governance: General (jel G30),
Journal of Corporate Finance
Erasmus School of Economics

Block, J.H, Hirschmann, M. (Mirko), & Fisch, C.O. (2021). Which criteria matter when impact investors screen social enterprises?. Journal of Corporate Finance, 66. doi:10.1016/j.jcorpfin.2020.101813