It’s not always easy for advisors to determine which impact funds achieve the best social and environmental outcomes while meeting financial expectations—especially since most impact funds are private and have no disclosure obligations.

After two years of research, however, the authors of a new book say they've identified a dozen funds that stand out in terms of both their impact on society and their financial performance.

The authors shared their results with an audience of financial professionals at a breakout session at the 25th annual SRI Conference earlier this month in Colorado Springs, Colo. The book, Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism, is published by Wiley.

“We assembled a list of about 380 impact investing funds around the globe and then we talked to investors—people like you—who put their money into those funds,” Cathy Clark, director of the CASE Initiative on Impact Investing (CASE i3) at Duke University’s Fuqua School of Business, told the audience.

The 12 funds profiled in the book are Aavishkaar, ACCIÓN Texas Inc., Bridges Ventures, Business Partners Limited, Calvert Foundation, Deutsche Bank, Elevar Equity, Huntington Capital, MicroVest, RSF Social Finance, Small Enterprise Assistance Funds (SEAF) and W.K. Kellogg Foundation.

When they started the project, Clark said she and the other researchers asked a simple question: “Who has met or exceeded their investors’ expectations on financial performance and on social impact?”

Clark and her co-authors, Jed Emerson and Ben Thornley, narrowed the initial list down to about 30 funds that investors claimed were doing “something exceptional.” They further divided those along such lines as geography and vehicle, then selected 12 funds to profile. “It doesn’t mean they’re the only high-performing impact investing funds by any means, but they’re a nice cross section,” said Clark.

The researchers signed non-disclosure agreements with the funds and interviewed their investors, staff members, investees and stakeholders. They asked the funds how they raised money, what their private placement memorandums contained, what kinds of deal flow they received and how they negotiated terms.

One finding from the study was that investors like social debt funds precisely because of their impact. “The investors that we talked to said, ‘Look, I’m getting the same kind of return that I can get out of some other cash vehicle, but I’m getting impact as well,’” said Clark.

While most of the funds profiled are headquartered in the U.S. and Europe, the money they raise is distributed to over 120 countries. “It is a very global picture in terms of the impact of the dollars going out,” said Clark.

Several factors set the top-performing funds apart from their peers. One is having “multilingual leadership,” she said. That is, top impact fund managers have some public policy experience, some non-profit or impact experience and some financial experience.

“When we looked across the funds, we thought that financial skills would be paramount, and they certainly are necessary, but they’re not sufficient. Every fund team that we saw had experience across all three sectors. Maybe not in one person, but within the team,” said Clark.

Another characteristic of the top funds is that they have moved beyond the “artificial bifurcation’’ of impact versus financial performance. “They took an investment thesis and a theory of change and they married them. They made them so aligned that all their stakeholders understood exactly what they were trying to achieve. Then they could just mange it on both levels evenly,” said Clark.

“[Bifurcation is] basically a dead conversation when it comes to practice,” added Jed Emerson, chief strategist at ImpactAssets, who also serves as an advisor to three family offices that are executing 100% impact investment strategies. “It’s very interesting for arm-chair pundits and pontificators, but people who are actually executing in practice are functioning on a fully-integrated basis.”

The top-performing funds ranged in size from Aavishkaar, a $9.4 million fund based in Mumbai, India, that invests in early-stage rural enterprises, to Business Partners Limited, a $331 million fund based in Johannesburg, South Africa, that invests in small and mid-sized businesses. Collectively, these funds manage about $1.3 billion.

Their aggregate impact includes:

● Creating or sustaining over 1.3 million jobs in under-served markets.
● Providing over 17 million entrepreneurs with access to financing they could not previously obtain.
● Investing more than 40 percent in women-led enterprises and over 60 percent in firms run by individuals from ethnic groups that have historically had difficulty accessing mainstream capital markets.

Their vehicles and performance include:

● Emerging market equity, hybrid and debt funds, which produced a 3 percent to 22 percent net internal rate of return (IRR).
● Developed market equity and hybrid funds, which produced a 10 percent to 14 percent net IRR.
● Social debt funds, which produced a zero to 3 percent net IRR.