Context and goals

The report examines how investors in private markets influence social and environmental outcomes through their own activities, not only through portfolio companies. It builds on earlier work on “investor contribution” and reframes the concept as “investor influence” to reflect both positive and negative outcomes.

The project targets investors in private equity, private debt and venture capital, particularly those using impact, responsible or system-level approaches. It responds to a gap in existing standards, which largely address company impacts rather than investors’ own roles. The work involved consultation with more than 200 stakeholders across investment, business, civil society, academia and labour, and was led by Impact Frontiers and the Predistribution Initiative with support from Omidyar Network.

A key shift is recognising that investor actions are not inherently positive or negative; outcomes depend on context. The report also emphasises that investors can influence outcomes through firm-level behaviour, including governance, lobbying and strategy, in addition to capital allocation and engagement with investees. It introduces causality as relevant mainly for positive impacts, while negative impacts should be addressed through precautionary approaches and human rights due diligence aligned with global norms.

Components of investor influence

The report defines four components that together explain investor influence: investor activities, pathways of influence, stakeholder outcomes, and causality. These components can combine in different ways and apply retrospectively or ex ante.

Investor activities fall into two broad categories. Activities through investments include capital allocation, pricing, structuring, exit decisions and engagement such as board participation or stewardship. Activities as a firm include internal practices (governance, remuneration, tax, diversity, equity and inclusion, and strategy) and external actions (policy influence, collaboration and data infrastructure). The report stresses that weaknesses in governance or risk management constitute deficiencies even if negative outcomes do not materialise in every case.

Pathways of influence describe how activities affect stakeholders. One pathway runs through the capital chain, from asset owners and managers to investees and then to workers, consumers and the natural environment. Another pathway operates through other channels, such as policy influence, industry collaboration and contributions to system-level issues like climate change or inequality. These effects can accumulate and create feedback loops that ultimately affect investors themselves.

Stakeholder outcomes are defined as changes in well-being for people or the condition of the natural environment. Outcomes may be intended or unintended, positive or negative, and are assessed against social or ecological thresholds, such as living wage benchmarks or planetary limits. The report highlights that job creation or growth can still result in negative outcomes if thresholds, such as living wages, are not met.

Causality considers whether outcomes would likely have occurred without the investor’s action. The report introduces the concept of “causal investor impact” for situations where there is a preponderance of evidence that investor actions changed outcomes. It acknowledges that counterfactuals cannot be proven and should be estimated using contextual evidence. For negative impacts, causality is not required; investors are expected to prevent, mitigate and remedy harm regardless of counterfactuals, consistent with the UN Guiding Principles on Business and Human Rights.

The report provides practical examples, including bridge financing that preserves jobs, debt structuring that leads to layoffs, and lobbying activities that undermine stated fund mandates. It also references tools developed alongside the paper, such as templates for positive investor contribution claims and proposed governance and disclosure frameworks for private market asset classes.

Conclusion

The report argues for a comprehensive approach to impact management that accounts for outcomes associated with and caused by investors’ own activities. It concludes that investors can influence outcomes positively or negatively, through investments, firm-level behaviour and system-level effects. For positive impact goals, investors should assess magnitude, likelihood and evidence of change. For negative impacts, they should implement robust management systems to prevent and address harm, drawing on established international standards.