Impact DNA? Tensions in Strategy-Identity Nexus in Impact Investing

An increasing number of academic studies and industry reports discuss the transformative power of impact investing to tackle Grand Challenges compared to other strategies in financial markets. A key topic in this context is the true nature of impact identity and its connection to strategic choices and actions. Being intentional about impact means embedding it across the key pillars of impact investing: materiality, additionality, and measurability. Moreover, aligning impact identity with strategy is crucial not only at the investor level but also at the investee level, though this alignment presents several challenges.Current studies only sparingly examine the nexus between identityand theinterlinkage with strategic choices. Additionally, the practical tensions encountered in aligning strategy and identity are often not analyzed. Our research explores the link between strategy and identity in impact investing and the related tensions. We collected data through interviews and observation notes from impact investors, banks, for-profit organizations, NGOs, social enterprises, and academia.This research underscores the importance of aligning the pillars of impact investing strategy with the identity of both investors and investees to distinguish this approach from other strategies within the broader field of sustainable finance. By adopting a bottom-up approach centered on practitioners’ experiences, we explain how identity and strategy are interlinked in impact investing and identify the main tensions that arise in aligning the two.