Impact investing and sustainability performance in manufacturing companies in Kenya

Abstract

There has been recent increase in the practice of "impact investing," which aimed to generate profits while simultaneously improving society or the environment. Impact investments sought to provide measurable benefits for society while maintaining financial sustainability, unlike traditional investments that focused only on profit. The main aim of the study was to evaluate the effects of impact investing strategies on the sustainability performance of manufacturing companies in Kenya. Specifically, the study examined the effects of equity-based impact investments, outcomes-based financing, venture philanthropy, and blended financing on sustainability performance in manufacturing companies. This study employed a descriptive correlational design. The target population consisted of 798 registered member companies of the Kenya Association of Manufacturers (KAM). A stratified random sampling technique was used to select managers from manufacturing firms in Nairobi County 266 companies predetermined using Yamane’s formula. Data were collected through questionnaires from primary and secondary sources. The data were analyzed using both inferential and descriptive methods to determine the relationships between the variables. Equity-Based Impact Investments were found to have a moderate positive effect on sustainability performance. The study concluded that promoting equity-based investments could significantly enhance organizations' sustainability by providing critical financial resources to support sustainable initiatives. Outcomes-Based Financing showed a stronger positive influence, indicating that funding tied directly to specific sustainability outcomes encouraged greater accountability and effectiveness. The conclusion emphasized that linking financing to measurable sustainability results fostered improved environmental and social impacts. Venture Philanthropy had the strongest positive effect, highlighting its substantial role in advancing sustainability goals by combining financial support with strategic guidance and capacity building. The study concluded that increased engagement in venture philanthropy was crucial for driving sustainable development. Blended Financing also showed a positive relationship, suggesting that combining different funding sources improved the availability and effectiveness of capital for sustainability projects. The study concluded that adopting blended financing approaches strengthened sustainability outcomes by leveraging diverse financial instruments. Together, these variables explained a significant portion of the variation in sustainability performance, indicating a strong combined impact of these financing mechanisms. The study recommended that policymakers, investors, and practitioners encourage the adoption and integration of these innovative financing models to accelerate sustainable development.