Between symbols and substance: Voluntary impact reporting of funds

Impact investing has emerged as a prominent investment approach to addressing social and environmental challenges while generating financial returns. Given its dual mandate to generate impact and financial returns, impact investing faces heightened pressures on its legitimacy, making transparent impact reporting essential to counter allegations of impact-washing and to safeguard the credibility of the approach. Despite the growing relevance of impact reporting, little is known about the underlying motivations and reporting strategies of fund managers who voluntarily publish impact reports. Drawing on legitimacy theory, the paper investigates the motivations and reporting strategies behind voluntary impact reporting by fund managers using a sequential exploratory design. First, 13 semi-structured interviews with impact-reporting professionals were analyzed following Grounded Theory principles. Second, a qualitative content analysis of 141 publicly available impact reports was conducted to analyze how reporting strategies are implemented in practice. The findings of the interviews reveal that fund managers’ motivations are driven by a need to show the alignment of profit with purpose, move beyond institutional compliance, and foster impact reflexivity. These motivations are operationalized through six reporting strategies: rationalization, contextualization, verification, institutionalization, participation, and transformation, which cluster around the dimensions of justification, integration, and adaptation. The content analysis assesses the potential for more substantive forms of legitimation in individual reporting elements. The paper contributes to legitimacy theory in the context of reporting by demonstrating that reporting strategies are interdependent and to practice by offering practitioners and standard setters a starting point for critically reflecting on the design of impact reporting.