What Impact Investors Want from Companies with a Cause

The answer is both, according to William Towns, an adjunct professor in the Social Impact and Sustainability program at the Kellogg School. But the order matters. Before leaders emphasize their organization’s impact, they must first establish that the company can succeed as a business.  

While an impact investor may be drawn to a company’s values or its distinctive approach to a market opportunity, a compelling mission cannot make up for a weak business model. Investors still need to understand how the company will create value, manage risk, and generate a return.  

“It’s not a zero-sum game,” Towns says. “It isn’t that I’m either an impact investor who doesn’t care about financial returns or a capitalist who has no concern for society. An impact investor applies the rigor and discipline of modern finance while intentionally pursuing measurable social or environmental benefits.”  

This means that even socially minded company leaders should be ready to answer a standard set of business questions: Which needs does the company meet? Is the market large enough? Can the management team execute? Which evidence shows traction? Which risk could undermine the strategy?   

In addition to those basic questions, companies seeking impact capital must answer an additional question: How does the company’s social or environmental purpose contribute to the way it competes and creates value?  

Towns offers four principles that leaders can use to help accomplish this balancing act, especially in today’s highly polarized political environment, where the sentiment about social impacts can rapidly change.  

Establish the business case first  

A company’s mission may explain why it exists, but investors still need evidence that it can operate successfully. The first hurdles any business must clear is whether its offerings meet an unmet need or fulfill a need in a unique or innovative way. It is also critical that it be delivered in a timely fashion and in the way customers are expecting.  

Only once the business case is clear can the social-impact mission be considered in relationship to it. Most immediately, that means defining how the business will benefit the environment, workers, communities, and other stakeholders. 

Leaders therefore need to communicate two connected forms of value creation: the financial return the company expects to produce and the social and/or environmental outcomes it intends to achieve. This does not mean presenting two unrelated bottom lines. The strongest pitches show how the two reinforce one another.  

“A company might reduce energy use in ways that lower operating costs, work with suppliers in ways that improve quality and resilience, or serve an overlooked population that represents a substantial market opportunity,” Towns says. “The key is: the link must be specific.”  

Claims about “doing well by doing good” are not enough. Investors need to see the underlying economics, the operating choices that will produce the intended impact, and the key performance indicators leaders will use to judge progress.  

“You want investors to have a full understanding of how the company can make a profit and produce a meaningful social benefit,” Towns says. “If there is no viable path to financial return, but a strong societal impact, you have the classic opportunity–capital mismatch. What you have pitched to investors is a philanthropic opportunity.”     

Define the values that guide the business  

Leaders of social-impact companies must start by clearly understanding and articulating their business’s core values and how those values relate to a market opportunity. This requires more than a broad statement of purpose. It is critical that investors, customers, and employees understand what the company stands for, what those commitments require in practice, and which choices the company will make when its values come under pressure.  

Take Patagonia, for example. The company has made environmental protection central to its identity and operating model. This entails more than just avoiding environmentally harmful materials. Patagonia scrutinizes its supply chain for problematic practices, encourages customers to repair old items or buy used clothing, and donates to environmental organizations. It has also taken public positions on environmental policy, including joining litigation challenging the Trump administration’s reduction of Bears Ears National Monument.  

The point is not that every company should adopt Patagonia’s position. It’s that Patagonia’s position is consistent with its stated purpose and with the expectations it has created among its stakeholders.  

“Staying true to your core values is not always easy,” Towns says, “but leaders need to keep them as a north star, especially in challenging times.” 

If a company changes its direction whenever the political environment shifts, those shifts can lead to a loss of trust on all sides. Retail giant Target illustrates this risk. In 2025, the company scaled back several diversity, equity, and inclusion initiatives. Civil-rights leaders organized a boycott, and the company later acknowledged that the customer reaction contributed to weaker sales.  

Target faced a particularly difficult response because many customers and employees viewed the decision as inconsistent with the public commitments the company had made over several years. The lesson is not that a company should ignore changes in its market. It is that leaders need a principled way to respond to them.   

“If your core values no longer line up with the market, you change markets, not core values,” Towns says. “But if you abandon your core values each time the market shifts, they were never really core values.”   

Integrate impact with business strategy 

With a clear business purpose and well-defined values, a company then has the responsibility of integrating the two into a transparent vision for investors. 

“Social impact cannot sit in a separate department with little influence over the company’s central decisions,” Towns says. “It must shape the strategy, operations, incentives, and allocation of capital. This work has to be part of the strategy itself where everyone in the company understands the role they play in helping the organization reach its goals.” 

Unilever’s Sustainable Living Plan provides a useful example of how a company can connect growth goals with commitments to reduce its environmental footprint and increase its positive social impact. For Unilever, that approach required people across the business to consider issues extending beyond the sale of food and household products to include agriculture, nutrition, food safety, waste, water use, packaging, and working conditions in the supply chain.  

This example also shows why integration is difficult. Few companies control every part of the system in which they operate. They may depend on farmers, distributors, retailers, consumers, regulators, and local infrastructure.  

“A credible impact strategy identifies where the company has influence, where it has direct control, and where it needs partners,” Towns says. 

Investors should be able to trace a company’s purpose through its major strategic decisions. For example, it should be clear whether the company directs capital toward the priorities it claims to hold, whether executives have clear accountability, how it aligns incentives to reward outcomes that support its purpose, and how impact considerations affect the decisions to choose suppliers, design products, enter markets, and respond to setbacks. 

“When the answers are unclear, purpose can begin to look like a communications exercise,” Towns says. “But when the answers are concrete, impact becomes part of how the company operates and competes for business.” 

Lean into transparency  

For impact investors, purpose matters. But purpose becomes investable only when leaders can show how it works and where the company has opportunities to improve. When approaching investors, it is imperative that leaders avoid presenting an unrealistically positive picture. Credibility comes from acknowledging trade-offs, negative effects, and areas where the company has limited control.  

“Being carbon neutral, for example, does not mean a company produces no emissions,” Towns says. “It means the company has addressed its net emissions through a combination of reductions and, where necessary, credible offsets or removals.” 

The same principle applies to a company’s broader social impact. A business may create good jobs while also producing waste. It may reduce emissions in one part of its supply chain while lacking reliable data in another. It may serve a community that has been overlooked while still struggling to make its products affordable. 

“Leaders should explain those tensions rather than hide them,” Towns says. “They should identify the actions within their control—such as choosing suppliers, setting labor standards, changing materials, redesigning transportation—and distinguish them from outcomes that depend on others.” 

That level of candor requires good data. Companies need to closely measure the parts of the business that are connected to their theory of change, consistently track them over time, and present them clearly enough for investors to evaluate. This will allow them to report favorable and unfavorable results and explain what they are learning.  

For Towns, transparency is not simply a reporting practice. It is a form of risk management. Investors will assume that every business has limitations and trade-offs. A company that names them, measures them, and explains how it will respond is more credible than one that claims its impact is entirely positive.  

“A full-disclosure mindset matters,” he says. “You do not want to hide something because you think investors may perceive it as negative. Eventually, everything in darkness will come out into the light.”   

The most persuasive impact pitch, then, is neither a conventional financial presentation with a purpose statement attached nor an inspiring account of social good with little attention to business fundamentals. It is a clear explanation of how a viable company will use its strategy, operations, and capital to produce both financial value and measurable societal benefit. 

“You want to make a true assessment of what is happening,” Towns says. “Where are the positive effects, and where are the negative ones? This is not a report that should be led by the marketing team alone.”