Framework
Sustainable return
The transformational powers of capital markets can only be unleashed if sustainable investments are no longer limited to particular “green” industries and technologies.
A comprehensive measure to evaluate the sustainability of companies and investments is required. Similar to traditional return metrics, sustainable return is a key indicator of a company’s efficiency – but reflects both financials and sustainable outcomes.
Economics applied effectually
Our concept is founded on the theory of externalities going back to A.C. Pigou and has been used by economists for the century since to evaluate economic efficiency in a way that captures costs and benefits to society as a whole.
In a sustainable economy, economic activities’ damages and benefits to society are “internalized”, or “priced”.
How to make capital effectual:
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Economic activity has consequences for society as a whole, such as environmental pollution.
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If these external effects are not adequately priced, inefficiency and imbalance will result – as in the case of ecological damage and overproduction.
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A sustainable return metric includes costs and benefits to society as a whole, in addition to the traditional financials.
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Allocation of capital based on sustainable return leads to efficiency and thus to an effectual transformation to a sustainable economy.
Objective, verifiable, comprehensive
Built on this framework and leveraging big data, sustainable return provides investors with an objective, verifiable and comprehensible measure for evaluating the sustainability of portfolios.
Sound theory drives real change:
