Perspectives

Impact-adjusted Return on Investment, by Nigel Lake

An important new paradigm for 21st century decision-making

Almost everyone in business is familiar with the concept of return on capital and, particularly in financial investment circles, the notion of risk-adjusted return on capital. As focus on sustainability and ESG accelerates, new measures are required that give proper consideration to non-financial factors . This is especially important as traditional metrics have a propensity to focus too strongly on the short term, often to the detriment of overall shareholder returns.

In this important new paper, our co-founder Nigel Lake outlines his new concept of impact-adjusted return on capital (or impact-adjusted return on investment). As the paper explores, we do not yet have all the tools we need to translate this concept fully into reality, but the scientific innovations needed are not far away. Meanwhile, there is plenty that you can do now to adapt your decision-making to this new paradigm.

Please click the thumbnail to the right for access to the paper.

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Conventional business decision-making places a huge emphasis on the short term, thanks to the mathematics that is hard-wired into discounted cash flow valuation methodologies. This approach is, however, fundamentally flawed. By lumping all risk into a discount rate - rather than explicitly evaluating each risk - the future is made to disappear. This dramatically undervalues both long-term risk and long-term reality. If you want to stress test this idea, just ask any any sophisticated futures and options trader how they assess value. For more on this, please read our white paper on how to "End Accidental Time Bias" (click image to download).

Dawn Patrol, by Nigel Lake

A year has passed since the effects of the COVID-19 outbreak first began to be seriously felt in the West. For most, it has been a challenging year both at work and at home, and plenty of uncertainties still lie ahead. Nevertheless, technological development has continued apace, not least with the development of multiple vaccines in record time.

Meanwhile, the immediate pressure on businesses and governments to deliver short-term results remains as high as ever, making it hard to find time to position your business – or country – for what lies ahead in 2022 and beyond. That said, powerful technological shifts are happening in several major industry sectors, creating opportunity for those that can find the time to think through the implications and begin to act.

In Dawn Patrol, Nigel Lake share’s his perspectives on what is unfolding and how best to ride the technological waves as they build momentum.

Read on>>>