In Search of Gamma - An Unconventional Perspective on Impact Investing

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