In developing EngagedX – the world’s first financially orientated index for impact investing, Rupert Evenett and Karl H Richter recognise that capital pricing variations occur with respect to the financial expectations of impact investors when compared with suggested capital pricing benchmarks based on conventional risk, return and maturity fundamentals.
This capital pricing spread – the Implied Impact Coefficient – can either be a discount or premium and is specifically being measured by the EngagedX Index to help with impact investing decision making and financial analysis of impact investments.
Evenett and Richter are currently integrating the Implied Impact Coefficient into standard financial equations to test whether it produces consistent and practical results in accordance with the real-world variations in capital pricing, as observed in the actual investment decisions of investors. The goal is to develop an analytical and mathematical framework for calculating risk-adjusted and impact-adjusted returns in a similar way to the currently accepted risk-adjusted return calculations, and thereby to develop a model with which to compare all investments, impact investments and commercial investments, on a like-for-like comparable basis.
The capital pricing dilemma of impact investing is not new and has been well documented by others. However the specific precepts of the Implied Impact model, as presented by Evenett and Richter, are new.
This website has been established as a “sandbox” with which to undertake a public discourse on the Implied Impact model, and to help mature it as a useful analytical tool in assessing impact investments and reconciling associated capital pricing irregularities with respect to conventional investment benchmarks.
Evenett and Richter have trademarked the term “Implied Impact™” and make it available to the social investing / impact investing community to use freely, consistent with the meaning and interpretation on this website and according to the principles of a Creative Commons license, Attribution-NonCommercial-ShareAlike (CC BY-NC-SA):
- Attribution — You must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work).
- Noncommercial — You may not use this work for commercial purposes.
- Share Alike — If you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one.
The reason for trademarking the term “Implied Impact™” is simple – to avoid it being used out of context, to retain its use for the impact investment and social investment community, and to avert an incedent such as the recent attempt by Salesforce to register the “Social Enterprise” trademark for commercial purposes. Not being proprietry or protectionist, we hope the term “Implied Impact™” will gain widespread use.