Concept of “limited” return

When talking about investment returns in traditional financing forms, the nature of these returns is often maximizing. The question of “how much” is usually answered with “as much as possible”, with sometimes far-reaching consequences: companies may be pushed onto unsustainable growth paths, with financial returns taking precedence over everything else. As a result, businesses are being turned into speculative assets, often at the expense of their original purpose. Over time, the expected return can become increasingly disconnected from the initial investment – potentially no longer reflecting the actual value created for the company or its purpose. 

In steward-ownership aligned financing, the discussion around investment return is shifted from the question of “how much can we make?” to “how much is enough, adequate, realistic and appropriate to what is put into the company?”.

The principle of purpose-orientation within steward-ownership reflects the desire of many companies to ensure that the creation of shareholder value and profits is not the main driver of the company but that the purpose of the company remains in focus. The idea is that investment returns should ideally reflect an appropriate input-output relationship, meaning that investment capital serves the purpose of the company and the capital costs should proportionally reflect the value that the investment has created. Here, the term “regenerative finance” comes to mind, where what is put into the system serves to create value.

In that sense, the principle of purpose-orientation ensures that there is no scenario in which there is an uncapped extraction of value from the company to the detriment of its purpose and long-term development and self-determination. Therefore, investment returns are limited (either by amount, duration or influence) and designed to be adequate for the risk and/ or needs of investors, the financial potential and needs of the company (what can the company afford to pay back at some point in the future) and what feels “fair” and good for all parties involved.