Impact or return: a false dilemma

Financial performance and social impact are not mutually exclusive; in fact, they reinforce one another. Yet, many professionals in the financial sector struggle daily with the choices that Sustainable Finance entails. In the third edition of our column series ‘Tussen de Regels’ (Between the Lines), Eszter Vitorino-Fuleky, Impact Lead at Van Lanschot Kempen, dives into the real dilemmas of impact investing.

For years, I’ve heard the same question repeatedly in slightly different forms: can you really achieve positive impact without compromising expected financial returns?

I however do not think this is the most interesting question to ask. When impact investing is done well, financial performance and impact can reinforce each other. Without returns, impact cannot scale. In other words: impact returns and financial returns go hand in hand – not as a slogan, but as a practical condition for scale and long-term success.

The real tension in impact investing is not because of impact and (expected) financial returns. It is between long‑term outcomes and short‑term realities – and how we design portfolios that steer on broader outcomes and can hold both, without pretending the choice is easy.

The real dilemma: short-term progress versus long-term outcomes (timing of impact)

Timing is one of the real frictions I encounter: incremental improvements today versus deeper change tomorrow. Many solutions with the greatest systemic – broad societal –  impact potential are early, complex or capital intensive. Supporting them requires patience, tolerance for uncertainty and acceptance that awaited financial returns may not materialise on a neat quarterly schedule.

For example, if your goal is to reduce greenhouse gas emissions, investing in established renewable infrastructure can deliver tangible, measurable results. An operating wind or solar asset starts avoiding emissions from day one, with relatively predictable cash flows and a clear impact profile. The contribution is visible early and fits well with investors who value near‑term outcomes.

Contrast that with an earlier‑stage venture investment in a new technology aimed at improving energy efficiency in industrial processes, or revolutionizing agricultural practices through biological fertilisers. Today, the emissions saved may be negligible or even zero. The real potential lies further out: if the technology works and scales, its contribution to emissions reduction could be far larger than what is visible in the first few years. That impact is delayed, more uncertain, and harder to quantify early on – but potentially much more transformative over time.

This difference is less about what you finance and more about when impact emerges. Infrastructure, private debt and buyout strategies often generate impact that is earlier and easier to measure. In contrast, early‑stage venture capital tends to concentrate impact later, once business models mature and adoption accelerates.

Portfolios designed for endurance

The timing dilemma shows that the “impact or returns” framing often distracts from the real work. Financial returns matter precisely because they can allow you to stay invested long enough to see outcomes materialise, and because they attract more capital to solutions that work. In private markets in particular, patience is not a virtue; it is typically a structural requirement. Portfolio decisions made today may only show their full financial and impact effects years down the line, and not all promising initiatives can withstand the pressure of time, competition or market pressures.

In practice, this means that a portfolio designed for impact should also be designed for endurance. Combining strategies with different time horizons allows investments that deliver earlier, steadier results to sit alongside those with longer‑dated and more uncertain pay‑offs. Infrastructure and buyouts can provide stability and near‑term visibility, while earlier‑stage venture investments create optionality for impact and value creation further out.

A well‑constructed impact portfolio does not force every investment to prove impact and performance on the same timeline. Instead, it deliberately combines approaches, accepting that some contributions show up quickly, while others need time to unfold. That alignment of different impact and expected financial return horizons is not a compromise -it is what makes long‑term impact credible and investable in practice, and how a total impact investing portfolio with a systemic lens is built.

The second dilemma: depth versus scale (and what we choose to optimise)

A second hard dilemma, in my experience, is choosing between impact depth and scale. Do you support a solution that delivers transformative outcomes for a relatively small group,  or one that reaches many people, but with a thinner layer of impact? Both can be legitimate.

Some strategies focus on deep, system‑level transformation: think of solutions that address root causes (not just symptoms), where change in one system can affect other systems, and where “what you see” is only the tip of the iceberg. This kind of approach can be slower to show results, but it can enable much deeper, systemic transformation.

Other strategies are designed for direct impact at scale: replicable models, broader rollout, faster diffusion, typical for renewable energy infrastructure. These can reach many more end‑beneficiaries or avoid more emissions in aggregate, but the impact per unit may be less transformative.

In a portfolio context, the question is not which is “better” in isolation. It is how to combine depth and scale in a way that is coherent  – and financially resilient – so that the portfolio can keep allocating to both over time.

This is also where “returns with impact” becomes concrete. It is about being explicit what one steers on as both depth and scale have their merits. They also require a different risk appetite and time horizon. A mature impact portfolio acknowledges both, and designs for both – deliberately integrating depth and scale in a way that best contributes to the targeted outcome at total portfolio level.

Conclusion: owning the friction – without falling back into “impact or returns”

To me, mature impact investing is not about claiming perfection. It is about owning the friction between the timing of impact (short‑term progress versus long‑term outcomes) and the trade‑off between depth and scale.

I don’t believe we have to choose between doing well and doing good. But I do believe we have to be upfront about the dilemmas involved in trying to do both – and design portfolios that steer on broader outcomes can hold those dilemmas without breaking.

Disclaimer

Van Lanschot Kempen Investment Management (VLK IM) is licensed as a manager of various UCITS and AIFs and authorised to provide investment services, and as such is subject to supervision by the Netherlands Authority for the Financial Markets. This document is for information purposes only and provides insufficient information for an investment decision. This document contains no investment advice, no investment recommendation, no research, nor any invitation to buy or sell any financial instruments, and should not be interpreted as doing so. The opinions expressed in this document are our opinions and views as of the date of writing only. These may be subject to change at any given time, without prior notice. As an asset manager VLK IM may have investments, generally for the benefit of third parties, in financial instruments mentioned in this document and it may at any time decide to execute buy or sell transactions in these financial instruments.

Capital risk

The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested. Past performance does not predict future returns. The information contained within this publication is provided for general and reference purposes only. Under no circumstances may the information contained within this publication be construed as an offer, nor may any rights be derived therefrom. In preparing this publication, we have exercised the greatest possible care in the selection of external sources. We provide no guarantees that the information provided by these sources and contained within this publication is correct, accurate, and complete, nor that it will remain so in the future. We accept no liability for any misprints or typesetting errors. We are under no obligation to update or modify the information we have included in this publication. All rights with respect to the contents of this publication are reserved, including the right of modification.

About the “Between the Lines” series

Within the financial sector, the transition toward sustainability is in full swing. But what do the laws, learning goals, and obligations actually mean for the daily practice of financial professionals? In the series ‘Between the Lines’, DSI invites industry experts to share their perspectives on the opportunities, challenges, and ethical dilemmas of Sustainable Finance. Together, we look beyond the letter of the regulations.

Curious about previous contributions or want to learn more about Sustainable Finance? Visit our overview page: www.dsi.nl/en/susfin.