 Hey guys, welcome back to my YouTube channel. This is Daniel Rosal here for today's video. I want to record something that is a little bit out of the usual range of topics covered here on my YouTube channel, stuff like camcorder, video editing software, Ubuntu marketing, not that that is even such a narrow range, but something more professionally oriented for me and that's the work I've been doing for the past six months working with someone called Sir Ronald Cohen and working on advancing impact as a philosophy and as a totally new approach to doing business. Now, it occurred to me to record this video because I just uploaded yesterday a video review of a very relevant and interesting new book in this field, Purpose and Profit by George Seraphim just finished it yesterday. Highly recommend it for anyone looking to understand what impact entrepreneurship can look like and indeed, and this is actually a genuinely impartial recommendation for Sir Ronnie's book as well, Impact Reshaping Capitalism to Drive Real Change that's now being translated into 10 languages worldwide. So even if you have colleagues or friends who may not speak English as their first language, check if it's one of the translated editions. Now, since I started this work with Sir Ronald in February of this year, naturally want to go out to meet friends or family people ask, well, what are you doing? What's your job, Daniel? What's your career? What are you doing? And I've been able to say communications for a while, but this particular job brings with it the need to explain what impact is about and try to do it in the 30 second window before people start to fall asleep when you're talking about your job in a social setting. So essentially, I would put it like this impact is a fundamental change to the way that folks invest or do business that seeks to take account of basically a business's holistic impact, hence the word impact, as well as just how they're making money. Now, another way to look at it is risk and return have been guiding the guiding principles for capitalism for in the 20th century. So before not super long ago, there was a time when folks didn't engage in measuring risk when backing businesses. And when that became an established discipline, stuff like venture capital became an enormous thing. And then we can just think about the various repercussions that have flowed from the rise of venture capital, including startups displacing, you know, a traditional the traditional kind of employment paradigm of these large blue chip companies that weren't super innovative and really VC has been the financial bedrock that has backed the tech revolution. So that's what impact is it's about. And I'll talk about the sort of goal of impact investing as well in a little bit. But that's the basic idea. And to simplify, just consider this, you might have a company nowadays that is generating, let's say $5 million of profit a year, right? But what if they are a horrible polluter of the environment? And there if you if you were to quantify the costs of their operations to the environment in terms of carbon emissions, and so on and so forth, let's say that was you could value that and minus 10 million pounds or dollars, whatever currency. Now under the normative system of accounting that we have in place today, that would be that would be an externality that it would be up to the business if they want to report that perhaps in an ESG report, they might disclose, well, this is our, this is how much we're damaging the environment we aim to reduce it by x% in this year and so on and so forth. Now impact goes a little bit further. And the idea behind impact with the big idea, which is why I'm calling this video, the big idea is to come up with a universal system for quantifying all these impacts extending beyond environmental, social governance criteria, but looking at all the holistic impacts of a business. So if we were able to take the environmental damage of this company, let's call it an airline, okay, and we were able to actually come up with a system for quantifying that damage and offsetting the profitability in dollar terms of that airline against its environmental cost, we might find that that airline is net negative, right, because again, we said it's generating profit of 5 million and damaging the environment to to the tune of 10 million, if we can find a way to quantify that impact. So that's really the central idea of impact, it goes beyond minimizing harm, which is to a lot, you know, what ESG has been traditionally focused on negative screening and excluding, you know, extractive industries, the major, the major polluting industries, etc. But actually going, going beyond that and thinking, well, if we can quantify everything that a business does in monetary terms, and that's that that huge enterprise is something called impact weighted accounting, and a group, a working group that I've been involved in since starting to work with Sir Ronald is the impact weighted accounts initiative IWAI commonly abbreviated IOA at Harvard Business School, which is going to be becoming the are working alongside the IFVI, the International Foundation for the valuation of impacts. And this is an enormous undertaking to develop these methodologies that try to quantify all these impacts, whether we're talking about equal advancement and opportunity in the workplace, whether we're talking about environmental damage and whether we're talking about the very, very complicated task of calculating businesses scope through emissions, which are the emissions and impacts and consequences once called externalities. And it's really a, it's really a bad word in my opinion, because it kind of says, well, you know, these are the core things we want to focus on the profitability and these are the little things, the external things. In actual fact, I don't think, you know, it's irrational to consider effects on the planet to be mere externalities. They're all of our problem. So that's the work of the impact weighted accounting. And we've already seen from the data that they've been putting out an open sourcing, which is amazing, as a huge open source fan in the technology sense, that there is a correlation between profitability and impact, in other words, that companies that are already polluting more and having greater negative impacts have lower valuations. And of course, that's easy to measure on the stock exchange for publicly listed companies. And the challenge will be to, to bring that down to the private, the private sector, the non listed private sector, and finding ways to get the impact weighted accounting adopted by that sector. And of course, mandated by governments. So there's a huge amount of work in order for this revolution, the impact revolution to come to fruition. But that's the big idea I would say under today's normative system of financial accounting, that's only been with us for 100 years. So it's not as bait and stone. Some of us would like to believe you can have a company that is causing colossal environmental damage, colossal damage to the world. But so long as it's profitable in sales terms that come that that huge negative is not going to be reflected in its financial performance. And that that is a huge lacuna or flaw in our current system, I would say, and it's that flaw that impact is trying to remedy and go beyond that in finding a new system for accounting that actually incentivizes and rewards companies that are going to create positive change so that you can just do good for yourself, you have to do good for yourself in terms of running a profitable enterprise and do well for the world at the same time. And this is the idea really, I guess, is that when this system comes to fruition, this grand master plan that we're going to have a new schema in which once this is entrenched, the people are going to approach commercial opportunities through an impact lens, we're going to say, well, this is an underserved population. This is a population that doesn't have access to clean water or education and that factoring those sort of things into the investment rationale is not just going to be a sort of nice to do thing for sustainably minded businesses. This is going to shift to become normative investment and business practice. So that is what I would call the big idea behind impact. I think it's a really exciting space. I think it's a really good space. There's a ton of work needed to get from where we are now and these kind of forward thinking companies highlighted in George's book to where we need to be in order to close the funding gap to meet the SDGs, the 2030 UN goals. But this is the push that we hope is going to take us in that direction by fundamentally changing the system of capitalism and indeed business and entrepreneurship as we know it today. Hope that video has been useful. If you've taken an interest like me in this really interesting world of impact, what it means and particularly what distinguishes impact from ESG, a question a couple of friends have asked me about, then I hope this has been useful. Thank you guys as always for watching and if you want to get more videos from me, do click on that as subscribe button and you will get them and wishing everyone a fantastic and enjoyable and restful weekend.