Impact Engine: The Pursuit of Impact-Weighted Market-Rate Returns

As the CEO and Managing Partner of investment firm Impact Engine, Jessica Droste Yagan had grown accustomed to pushing the boundaries of impact. For over a decade, she had overseen multiple efforts to redefine what it meant to be an impact investor, where impact was achievable, and how best to realize it. The purpose of doing so was not just to build the field of impact investing but to expand it—all while bringing community together in a cooperative effort.

With a mission of bringing more capital to a market where financial returns were linked to positive social and environmental impacts, Impact Engine sought to realize a new vision of sustainable capitalism where there was no tradeoff between impact and financial return; instead, both impact and financial returns were optimized concurrently and would grow hand-in-hand.

This “middle” path, however, would necessitate a renewed view of what constituted financial returns. Prevailing financial targets spoke to “market rate returns” or “benchmark returns,” but mainstream investments failed to price in fully the negative and positive impacts of their investments. Droste Yagan wondered whether a more comprehensive measure of market rate existed—one that allowed for more accurate comparability across impact and mainstream investments, for increased capital flows to impact investments, and toward a more sustainable capitalist system.