Expanding the Impact Investing Toolkit with Long/Short Public Equity Strategies

Abstract

The responsible investing field has grown rapidly, but the range of investment strategies within the field is still limited. Product solutions for sophisticated investors applying a strict impact lens are particularly narrow. This project investigates whether a long/short public equity impact fund can be a meaningful addition to the return-seeking impact investor's “toolkit”. “Impact” implies a stricter standard than used in “socially responsible” or Environmental/Social/Governance- “ESG” investing. The project will consist of three primary parts: Part One will review the broader responsible investing landscape and developments within the more concentrated field of impact investing, aiming to identify unaddressed investor needs. Part Two will identify areas where differentiating innovation from a long/short public equity impact fund might fill some of those gaps. Finally, Part Three will outline key business practices to maximize the odds of success for strategy implementation. The paper concludes that such strategies can meaningfully expand the impact investing “toolkit”, combining the best attributes from emerging private equity impact products with the liquidity and accessibility of the public markets.