In Search of Gamma - An Unconventional Perspective on Impact Investing

64 Pages Posted: 31 Jul 2012

See all articles by Uli Grabenwarter

Uli Grabenwarter

European Investment Fund; IESE University of Navarra

Heinrich Liechtenstein

University of Navarra - IESE Business School

Date Written: November 25, 2011

Abstract

The report is the result of a 18 months research project which Uli Grabenwarter conducted with Heinrich Liechtenstein and led to the publication of the report "In search of gamma - an unconventional perspective on impact investing".

Key findings of the report include:

True impact investing has five key characteristics. It must have: - profit as an objective - a positive correlation between intended impact and financial return - an intentional pre-determined social impact - a measurable impact - a net positive impact on (change to) society

With true impact investing there is no trade-off between profit and social impact because the two are positively correlated.

Any trade-off between profit and social impact is the investor’s choice, not a function of impact investing. We identified four key-types of investors, each with different approaches and different expectations of the amount of profits they chose to retain or reinvest in the business.

Successful impact investing depends on many traditional factors - such as a strategic approach, intelligent deal sourcing and building the best team - but is set apart by a process that continually assesses impact.

Impact investing has traditionally been hampered by inadequate measurement tools - the report suggest a novel approach to impact metrics (the gamma model) which respects the individuality of impact objectives by respecting tailor-made metrics at the business model level, while still allowing to assess impact investment performance on an investment portfolio level.

Keywords: Impact Investing, Impact Metrics, Trade-Off Impact/Financial Return

Suggested Citation

Grabenwarter, Uli and Liechtenstein, Heinrich, In Search of Gamma - An Unconventional Perspective on Impact Investing (November 25, 2011). IESE Business School Working Paper. Available at SSRN: https://ssrn.com/abstract=2120040 or http://dx.doi.org/10.2139/ssrn.2120040

Uli Grabenwarter (Contact Author)

European Investment Fund ( email )

15, avenue J.F. Kennedy
Luxembourg City, 2968
Luxembourg
+352 426688 341 (Phone)
+352 426688 301 (Fax)

HOME PAGE: http://www.eif.org

IESE University of Navarra ( email )

Avenida Pearson 21
Barcelona, 08034
Spain
+352 621 239 324 (Phone)

Heinrich Liechtenstein

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

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