This new leadership mind-set will foster not only impact but innovation and growth alongside and transform the logical constructs of mainstream investing and finance. This misinterpretation can be overcome with a growth and innovation mind-set that understands impact creation as an ex ante decision making tool and integrates in in all strategic decision making. Although there is rich research that this trade-off is not true, it may still misalign impact investing with the principal-agent theory that posits that shareholder value is the indicator on how well the agent has managed the capital and ownership rights of the principal. The dominant paradigm in financial markets today is the creation of financial returns solely and within the mindset of the twentieth century eco-social return is seen as sacrificing a certain amount of financial return.
#Impact integration guide 7.1 full#
The dependence on unpredictable funding hindered many charitable organizations from realizing their full potential concerning innovations, effectiveness and scale”. Focussing on the act of charitable giving belongs into the mindset of the twentieth century. Integrating impact into decision making is the new leadership tool because governments, charities, philanthropists alone are no longer capable of dealing with the twenty-first century’s social and environmental challenges. Many authors stay with the ex post outcomes like creation of jobs or new consumption possibilities for customers when researching impact. It is rational to assume that a positive impact driven approach will foster innovation, Yet the market has not entirely captured the upside potential of looking into positive impact creation as a decision making tool. Modelling of future fitness and positive impact creation ex ante will be a decisive market advantage in decision making. The ex ante decision support function of impact in opportunity recognition and scenario modelling has not been researched so far. While this ex post perspective on consequences of leadership behaviour is useful, it does not provide management with a practical ex ante decision making tool, expanding decision making to integrate impact as a new decision making perspective. Some academic research has been done on the consequences of consistent implementation of ESG standards and their value in de-risking assets, managing reputation and preventing damage to communities and environment, finally showing up in a better rating, lower operational risk or a higher good will. At the moment, it is mostly practitioners that are driving the impact assessment process and its integration into investment and finance. Integrating impact into investment and financial decision making based on the SDGs is a nascent field of research.