Impact or return: a false dilemma

Financial performance and social impact are not mutually exclusive; rather, they are mutually reinforcing. Yet many professionals in the financial sector struggle daily with the choices that Sustainable Finance entails. In the third edition of our“Between the Rules” column series, Eszter Vitorino-Fuleky, Impact Lead at Van Lanschot Kempen, delves into the real dilemmas of impact investing.

For years I’ve heard the same question come back again and again, each time in a slightly different form: can you actually achieve positive impact without compromising on expected financial returns?

Personally, however, I don’t think this is the most interesting question. When impact investing is done well, financial performance and impact can actually reinforce each other. After all, without returns, impact is not scalable. In other words, impact return and financial return go hand in hand. Not as a slogan, but as a practical condition for scalability and long-term success.

Therefore, the real tension within impact investing is not between impact and (expected) financial returns. It is between long-term outcomes and short-term realities. And in how we design portfolios that steer for broader outcomes and can carry both perspectives, without pretending that choice is easy.

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

The timing of impact is one of the key tensions I encounter in practice: incremental improvements today versus fundamental change tomorrow. Many solutions with the greatest systemic – broad societal – impact potential are still in early stages, are complex, or require significant investment. Supporting such solutions requires patience, tolerance for uncertainty and acceptance that expected financial returns will not unfold according to a rigid quarterly rhythm.

Take, for example, the goal of reducing greenhouse gas emissions. An investment in existing renewable energy infrastructure can produce immediate tangible and measurable results. An operational wind or solar farm prevents emissions from day one, has relatively predictable cash flows and a clear impact profile. The contribution is quickly visible and fits well with investors who value short-term results.

Contrast that with a venture capital investment in an early-stage technology company aimed at improving energy efficiency within industrial processes or making agriculture sustainable through organic fertilizers. Today, the emissions reductions realized may still be limited or even zero. The real potential lies further into the future: if the technology proves successful and reaches scale, the contribution to emission reduction may eventually be much greater than is visible in the first few years. That impact takes longer to materialize, is more uncertain and more difficult to quantify early on, but may actually prove much more transformative in time.

This difference is less about what you fund and more about when impact becomes visible. Infrastructure, private debt and buyout strategies often deliver impact that is visible earlier and easier to measure. Early-stage venture capital, on the other hand, concentrates impact later in time, as business models mature and adoption accelerates.

Portfolios designed for the long haul

The timing dilemma shows that the “impact or return” frame often distracts from what really matters. Financial return is important precisely because it allows investors to stay invested long enough to realize actual results AND because it attracts additional capital for solutions that work. Certainly within private markets, patience is not a nice trait, but usually a structural necessity. Decisions made today in a portfolio often only show their full financial and social impact years later. Moreover, not all promising initiatives can withstand the pressure of time, competition or market conditions.

In practice, this means that an impact portfolio must also be designed for endurance. By combining strategies with different time horizons, investments that deliver earlier and more stable results can coexist with investments with longer durations and more uncertain outcomes. Infrastructure and buyouts can provide short-term stability and visibility, while early-stage venture investments create optionality for future impact and value development.

A well-constructed impact portfolio, therefore, does not demand that every investment prove impact and return within the same timeline. On the contrary, different approaches are deliberately combined, based on the recognition that some contributions are quickly visible, while others take time to develop. It is precisely this alignment of different impact and return profiles that makes long-term impact credible as well as investable in practice and forms the basis of a total impact portfolio with a systemic view.

The second dilemma: depth versus scale (and what we steer by)

A second difficult dilemma, in my experience, is the choice between depth of impact and scale. Do you invest in a solution that has a transformative impact for a relatively small group, or do you choose one that reaches many people but achieves less profound impact per individual? Both approaches can be legitimate.

Some strategies focus on deep, system-changing impact. Consider solutions that focus on root causes rather than symptoms, where change within one system affects other systems as well, and where what is visible is just the tip of the iceberg. These types of approaches often show results less quickly, but can ultimately enable much deeper social change.

Other strategies are instead designed for direct impact at scale: replicable models, broad deployment and rapid adoption, as is often the case with renewable energy infrastructure. These can reach significantly more end users or avoid emissions at scale, although the impact per individual unit may be less transformative.

Within a portfolio context, therefore, the question is not about which approach is “better” on its own. The real challenge is how to combine depth and scale in a coherent yet financially robust way, so that a portfolio can continue to allocate structurally in both types of solutions.

Here, too, the concept of “returns with impact” takes on concrete meaning. It requires explicit choices about what to actually steer for, because both depth and scale have their own value. They also require different risk appetites and time horizons. A mature impact portfolio recognizes both perspectives and consciously integrates them in a way that optimally contributes to the intended outcome at the total portfolio level.

Conclusion: recognizing the tension without falling back on “impact or return”

To me, mature impact investing is not about claiming perfection. It is about recognizing the tension between the timing of impact (short-term progress versus long-term results) and the trade-off between depth and scale.

I don’t believe we have to choose between financial and social returns. But I do believe that we need to be honest about the dilemmas that arise when we try to achieve both, and that we need to design portfolios that can manage for broader outcomes as well as carry tensions without the system collapsing under pressure.

The English version of this document constitutes the original. This Dutch translation was produced with the help of AI and is intended to reflect the content as accessibly as possible. Although the translation has been prepared with care, no rights may be derived from the Dutch version. In case of differences in interpretation, the English text prevails.

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About the “Between the Lines” series

Within the financial sector, the transition to sustainability is in full swing. But what do the laws, guidelines and obligations mean in concrete terms for the day-to-day practice of the financial professional? In the series ‘Between the Rules’ DSI invites experts from the sector to shine their light on the opportunities, challenges and ethical dilemmas of Sustainable Finance. Together we look beyond the rules.

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