Today sees the launch of Util, a next generation impact measurement tool designed to help companies and investors build a better world.
Our journey to the launch of Util is best told through the evolution of our company’s name. In January, we registered Effective Investing, a functional name that described our goal and our primary target market. Prior to January, our team had experienced the clarity of traditional financial metrics, through jobs in corporate finance and advisory. We loved the efficiency of universal financial metrics for making decisions and holding companies to account. Return on Investment, Net Profit margin, Revenue growth and Internal Rate of Return are standardised metrics by which our financial world is built and the best part of $70 trillion is invested. In financial services and investment, we are driven by the bottom-line, in part because it is the purest indicator of performance, allowing for justified decisions to be made and money to be allocated.
We then started to investigate the exciting world of impact investing. What immediately struck us was the lack of accepted, universally relevant performance metrics for investing in companies which seek to achieve ‘profit with a purpose’, which is where the real heart of our mission lies. There is a great deal of focus on impact investing, which seeks to do business in a better way, blending profitability with ‘impact’, as defined by those businesses and investors who are trying to generate this impact. We loved this concept and started thinking; can we have our cake and eat it? Or, can we generate sector-leading profitability whilst also generating amazing impact for a company’s customers, employees and community?
As we continued to investigate the impact investing industry, we realised that capital was not being allocated to the most effective, impactful ‘profit with a purpose’ companies. This lack of effective allocation has somewhat limited the industry’s move towards mainstream investing. The word Effective therefore became central to our goal. Drawing upon the work of the Effective Altruism movement we started to ask the question: how can investment and company decisions be more effective? Or, how can companies and investors maximise their impact through the decisions they make?
The Effective Altruism movement has made great strides in the philanthropic sector towards levelling the playing field across impact areas, with the intention of analysing an anti-malaria charity, with a global warming charity, on a like-for-like basis. The intention was for charitable donations to be more effective — delivering a greater impact bang for a donors’ buck. The Effective Altruism movement attempts to mirror the efficiency of the financial system; providing universally applicable tools to make better, more informed charitable decisions.
Our mission, therefore, is to combine the progress of the Effective Altruism movement with the logic of finance, providing a tool that companies and investors can use to quantify and compare their impact.
This brings us to Util. We feel that there has been an unhelpful distinction between companies that generate amazing profitability and those that generate life-changing impact. The Util methodology bridges the gap by starting to think in terms of the utility companies and investors create, across every part of their operations. ‘Utility’, defined as the state of being useful, profitable and beneficial is the perfect description of how we view companies; as utility creators (or destroyers) at every stage of their business operations. Companies don’t generate either profit or impact, they create utility for their employees and community, destroy utility through its utilisation of environmental assets, and create utility in the form of profits and taxes.
The impact investing community has long lobbied for a refined, well-rounded understanding of company impact, or utility. Util goes one step further by providing a universally applicable metric to better understand the utility a company creates, across its entire stakeholder group. We believe that, in 20 years, investors and companies that make decisions based solely on a ‘bottom-line’ will be judged at best as under-informed and at worst as irresponsible. Our tool provides the insight and analysis required for investors and companies to make utility-maximising decisions.
For more information please visit our website and follow us on Twitter.
Originally published at util.co.
