• September 2022
• Case

Fernando Scodro, a third-generation member of his family, mulled over the next step in integrating an ESG strategy into his family office’s investment portfolio. While his family office, Grupo Baobá, had made excellent progress in incorporating his family’s values into their individually owned assets, such as VC and real estate, he weighed how to expand their ESG strategy in future investments. How should the family evaluate the relative benefits of an asset's return on investment versus return on impact? What would a forward-looking ESG strategy look like for his family – and other families who were their co-investment partners? How could Fernando convince external partners of his strategy’s imperative and cultivate likeminded managers and financial products to achieve his goals? Finally, when should the family instead prioritize achieving impact through philanthropic initiatives? However he chose, he knew that the paths he advocated for within his family would impact all future generations of the Grupo Baobá Family Office.

• 2022
• Working Paper

We estimate perceptions about the Fed's monetary policy rule from micro data on professional forecasters. The perceived rule varies significantly over time, with important consequences for monetary policy and bond markets. Over the monetary policy cycle, easings are perceived to be quick and surprising, while tightenings are perceived to be gradual and data-dependent. Consistent with the idea that forecasters learn about the policy rule from policy decisions, the perceived monetary policy rule responds to high-frequency monetary policy surprises. Variation in the perceived rule impacts financial markets, explaining changes in the sensitivity of interest rates to macroeconomic announcements and affecting risk premia on long-term Treasury bonds. It also helps explain forecast errors for the future federal funds rate. We interpret these findings through the lens of a model with forecaster heterogeneity and learning from observed policy decisions.

• 2022
• Working Paper

In recent years, impact investors – private investors who seek to generate simultaneously attractive financial and social returns – have attracted intense interest and controversy. We analyze a novel, comprehensive data set of impact and traditional investors to assess how the non-financial characteristics of impact portfolios differ from their traditional counterparts. We exploit the co-investment network between venture investors to identify the extent to which impact investors expand the financing frontier, versus invest in companies that could have attracted traditional venture financing, and find considerable heterogeneity across impact investors. We then explore the portfolio allocation decisions of impact investors and document that they are more likely to invest in disadvantaged areas, crowd in non-impact follow-on investors, and are more likely to invest in “pioneer companies” – the first 30 or 40 companies in new industries. Relative to traditional investors, impact investors select companies that are less likely to reach exits and take longer to do so, which is consistent with greater risk tolerance and longer time horizons. These patterns are most pronounced amongst the impact investors that seek out deals that did not attract traditional investors.