Publications

Our research agenda is to contribute by producing research that blends the best ideas from financial economics, ‘impact’ and moral philosophy. We would like to see more mutual understanding between these fields. Thus, features of our work include:

  1. Financial economics. Alignment with the core ideas of financial economics.
    • All our models are designed to reduce to standard finance if impact is taken out of the equation. But, there are many ways one might add impact to the equation. We do this with care by considering the impact and moral philosophical implications of our modelling decisions.
  2. ‘Impact’. The investors in our studies seek to optimize their counterfactual investor contribution.
    • This is different from simply seeking to improve the ESG score of their portfolio.
  3. Moral philosophy. The investors in our studies only care about ‘impact risk’ (volatility in social outcomes) to the extent that a careful moral philosophical examination suggests they should.
    • This means we don’t assume that investors handle ‘impact risk’ in the same way as they handle financial risk.

Case studies

TPP case study: A to Z This case study is structured around Acumen's classic example of lending to a malaria net manufacturer called ‘A to Z’. The case walks through how investor contribution can be assessed in terms of ‘financial-equivalent’ values and returns. It shows how these investor contribution returns can be integrated with financial returns and discusses the implications.

TPP case study: Mind Ease This case study reviews an investment opportunity in an early-stage mental health start up called ‘Mind Ease’. The case demonstrates how to assess investor contribution and other considerations, even under great uncertainty. We find that the excess returns to the opportunity are significantly positive, driven by a large ‘investor contribution return’.

TPP case study: IIR Example This example focuses on assessing Investor Impact Returns (IIRs). We assess a venture that is developing a low-cost and easily-distributed vaccine for future variants of Covid-19. We demonstrate why assessing Investor Impact Returns is useful both tactically and strategically.

Technical papers

This paper goes through a model of capital markets based on the supply and demand for financial capital with heterogeneous firms and investors and a public good. Investors with concern for the public good develop endogenous portfolio tilts. These tilts depend on the degree to which an investment counterfactually contributes to the public good, and the price each investor is willing to pay for this contribution. We the model to estimate the price of investor impact implied by observed portfolio tilts. We also explore how an investor's expected contribution varies with firm characteristics. Adjusted for the expected contribution, the implied price of impact for ESG scores is an order of magnitude or more greater than the prices suggested by known social and charitable costs. This tension in the results highlights important questions for both research and practice.

Possible extensions and applications related to Pricing Investor Impact

Investing for Impact in General Equilibrium This paper develops an equilibrium model of the financial market that is in line with our research agenda. It studies how the extra-financial benefits of investments (investor contribution, mission correlation) can be thought of as quasi returns that are comparable to normal financial returns. A calibrated example shows what this might look like and what portfolios would be optimal if we could assess these returns for the entire market.

A Framework for Investing with Altruism This paper examines the lessons for financial economics research from the worlds of ‘impact’ and moral philosophy. It introduces several concepts including:

  • Mission correlation
  • Outputs vs outcomes
  • Enterprise Impact
  • Investor impact/contribution
  • Moral uncertainty