Organizational Architectures of Sustainable Investment Funds: Evidence from Private Equity

Wed, 01 Apr 2026 00:00:00 +0000

Abstract: We analyze the contractual and marketing documentation of 89 French private equity funds raised between 2017 and 2026, hand-code approximately 120 architectural variables across objectives, resources, incentives and governance, and apply configurational clustering. Three findings emerge. First, sustainable funds do not form a homogeneous organizational category: eight distinct organizational signatures distribute across three families (weakly structured 28.1% intermediate 38.2%, complete 33.7%). Second, each mechanism takes radically different forms and their combinations follow non-random patterns. The carried interest indexed on extra-financial objectives, present in 47.2% of funds, splits into four configurations ranging from generic indexation to calibrated outcome-based thresholds. Third, the additionality strategy structures the compatibility between logics: funds pursuing operational additionality, the theoretically most demanding strategy, display the weakest architectures (25% with a dedicated extra-financial committee versus 62% for financial additionality, 24% with a fully structured measurement process versus 44%). This misalignment between strategic ambition and architectural depth creates the conditions for mission drift and undermines social impact potential. These results extend hybrid organization theory to the financial system and establish the configurational coherence of investment vehicles, not the presence of isolated mechanisms, as the relevant unit of analysis for evaluating social impact potential.

Hybridizing Investors: Designing Investment Organizations for Social Impact

Wed, 01 Oct 2025 00:00:00 +0000

Abstract: Sustainable finance aspires to align capital markets with sustainability goals, yet remains criticized for its limited social impact. Prior research has largely examined investors’ interactions with firms, overlooking the organizational design of the investment intermediaries that channel most financial capital. This study opens the “black box” of investment organizations by examining how asset owners and asset managers jointly design them to pursue both financial and social objectives. Building on a 16-month ethnography of a private equity impact fund complemented by interviews and archival data, we trace how these actors negotiate and stabilize the fund’s organizational architecture (its value-creation objectives, resources, and governance and control structures) before it becomes active on the market. We identify three interrelated organizational mechanisms. First, locking the organizational architecture ex-ante mitigates agency costs and shapes the asset manager’s subsequent behavior. Second, building a social impact ambition leads to hybridizing this architecture by coherently integrating financial and social logics. Third, the resulting configuration exerts a framing effect on investment and monitoring practices, channeling attention and decision-making toward aligned financial and environmental goals. By theorizing these mechanisms, the study builds the organizational foundations of both agency capitalism and sustainable finance. It conceptualizes sustainable finance as an organizational design problem under hybridity constraints, showing that due to financial intermediation, the social impact potential of sustainable finance is determined upstream in the investment chain (through the design of investment organizations) rather than downstream in the financial markets.

Projects | Léo Denis

Organizational Architectures of Sustainable Investment Funds: Evidence from Private Equity

Hybridizing Investors: Designing Investment Organizations for Social Impact