Eric Huang

Journal article

This paper attempts to explore the relationship between government's economic policies and impact investing. In a capitalist state such as the United States, businesses often have significant influence on creating social impact, and such positive actions can be encouraged by policies created by the government. I will first provide an overview of government policies intended to incentivize businesses in promoting social goals such as subsidies, tax incentives, and regulatory frameworks. I will analyze how these policy actions affect the decision-making process within firms. This will be achieved through examining case studies of specific impact investment incentives (with data), such as social impact bonds, low-income housing tax credit, and clean energy investment incentives under the Inflation Reduction Act. Moreover, I will examine the effects these actions ultimately have on communities and compare different policy solutions to determine the best course of action. I intend to propose policy reform solutions as well as regulatory frameworks that have historically proven to be beneficial in incentivizing impact investments within our communities, such as impact investment subsidies. The goal of this paper's exploration is to elucidate ways governments can use political economics to their advantage in encouraging impact investments within our communities.