The overlooked role of small and mid-caps in impact investing

Focus and accessibility

Small and mid-cap companies, typically defined as those with a market capitalisation below USD 16 billion, offer distinct advantages over their larger counterparts. Dimitri Willems, Portfolio Manager Triodos Pioneer Impact Fund, emphasises: “Mid and small-caps are quite focused in what they do in a certain area. That’s what we like.” Unlike sprawling conglomerates, these companies often specialise in niche markets, enabling them to innovate and adapt quickly.

Accessibility is another key benefit. “Getting someone here from Nvidia, Microsoft or Alphabet would probably have been a challenge,” Willems notes. “With mid and small-caps, the accessibility of companies – and of their CEOs and CFOs – is much higher than with large-caps, which we see as an advantage.” This closer contact enables investors to engage directly with management, build a  dialogue and influence a company’s strategy. This is critical for impact investors who want to help steer companies toward positive outcomes.

Under-researched gems

Small and mid-cap companies often fly under the radar of mainstream analysts. “Not a lot of external analysts follow them,” Willems explains. “Take Corbion, a Dutch food ingredient specialist with a USD1.5 billion market cap. Around eight analysts follow its stock. A comparable large-cap like BASF has 23 analysts covering it.” This “under-researched or under-brokered” status creates opportunities for investors who are willing to do their homework. They can spot undervalued companies with strong impact potential before the broader market catches on.

Real-world impact

The intrinsic sustainability of many small and mid-caps makes them a natural fit for impact portfolios. Alex Sokolowsky, Head of Investor Relations at Corbion, describes his company as “inherently ESG friendly.” Corbion’s products, from lactic acid for food preservation to omega-3 oils sourced from algae, are bio-based and designed to reduce environmental harm. “Ninety-eight percent of our raw materials are bio based,” Sokolowsky notes. This commitment to sustainability isn’t a marketing gimmick, but the basis of Corbion’s business model. Smaller companies can also adjust course more quickly, responding faster to new challenges and opportunities. Willems compares them to “speed boats” compared to the “tankers” of large-cap firms, able to “change things more easily.”

Engagement and influence

For impact investors, engagement is essential. Direct access to management teams in small and mid-cap companies makes meaningful dialogue possible. “Normally, you’re sitting around the table with a CEO or CFO. That makes it possible to engage them, to influence them and to share ideas more easily than when you’re dealing with a large cap,” says Willems. This relationship is mutually beneficial. Sokolowsky values “the focus of impact investors,” noting that, “the dialogue benefits in both directions. We benefit from contact with impact investors because that’s usually what you care about: long, longer term horizons, not chasing a quarterly performance like a hedge fund might. We really like that.”

Financial performance without sacrificing impact

A persistent myth is that investing for impact means sacrificing returns. Corbion’s experience tells a different story. “Strong impact doesn’t have to come at the expense of good returns or good performance,” Willems says. Corbion’s 2025 financial results underline this. “We grew our EBITDA by around 26% in 2025,” Sokolowsky reports, “and delivered a free cash flow of around USD 91 million. As a result of the great performance, we also announced a special dividend.” This shows that a strong focus on sustainability can go hand in hand with, and even support, solid financial results.

Diversity, challenges and opportunities

The universe of small and mid-cap impact investments is broader than many people think. “A lot of people think that you can only invest in renewables like wind and solar. But it’s actually quite diverse,” Willems explains. “You can also reach impact by investing in a telecom company or in a fitness company, for instance.” This diversity allows investors to build portfolios that cover multiple impact themes, from health and nutrition to clean technology.

Small and mid-caps do face challenges, such as lower visibility and fewer resources for regulatory compliance. The experts see also chances here. “For some mid and small-caps, there’s less information available. There we have to do more homework ourselves,” says Willems. With a dedicated team of sustainability analysts, impact funds can fill these gaps and support companies in moving towards best practices.

The power of early investment

History shows that today’s giants once started out as small caps. “NVIDIA once started as a small-cap a long time ago. If you make sure that mid and small-caps are doing well from an ESG perspective, when they become large caps in the future, their impact can be huge,” Willems says.

Investing in small and mid-cap companies is not only about financial opportunity. It’s also about shaping the future of business and society. With their focus, flexibility and strong potential for engagement, these companies are well positioned to deliver meaningful positive impact. For investors show are looking for both performance and purpose, the small and mid-cap universe offers many possibilities.