Maximum-Leverage Impact Selection
Fund interventions that can materially change outcomes rather than merely signal concern.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 92%
Maximum-Leverage Impact Selection begins with a consequential outcome, such as reducing climate risk, and works backward to the constraints that most affect its probability. Candidate organizations, technologies, and campaigns are judged not simply by whether they are virtuous, but by whether success could materially change the system. The evaluator investigates neglected areas, meets scientists and entrepreneurs directly, tests technical and scaling assumptions, and compares the expected impact of different uses of capital. Funding can move when evidence shows that an existing program has lost leverage, as when an environmental journalism prize became less useful than directly financing reporting and research. The method favors additionality, scalability, and order-of-magnitude improvements while recognizing that uncertain high-impact opportunities require active diligence and a portfolio approach.
Origin
Extracted from Masters in Business, where Grantham explained how his foundation selects green investments, research, journalism, and environmental projects.
Core principles
- 01Impact matters more than social recognition.
- 02A candidate should materially change the probability of a desired outcome.
- 03Technical breakthroughs can create disproportionate system-level effects.
- 04Direct research or execution may outperform symbolic prizes or diffuse support.
- 05Capital should target neglected constraints and scalable solutions.
How to run it
- 1
Specify the outcome
State the concrete environmental or social result the capital is intended to improve.
Pro tip Frame the target as a change in probability or system performance.
Watch out A vague mission makes rigorous comparison between opportunities impossible.
- 2
Locate the leverage point
Identify the technical, political, informational, or economic constraint whose removal would have the greatest effect.
Pro tip Look for neglected constraints where small inputs can unlock large changes.
Watch out Popular causes may already have abundant funding and low additionality.
- 3
Source capable teams
Find scientists, entrepreneurs, journalists, or established organizations with a credible way to attack the constraint.
Pro tip Spend time face to face with the people responsible for execution.
Watch out A compelling mission does not compensate for weak operational capability.
- 4
Test transformative potential
Assess whether success could scale and materially alter the relevant survival, climate, or welfare probabilities.
Pro tip Favor order-of-magnitude cost or performance improvements when technically credible.
Watch out Do not confuse novelty with meaningful impact.
- 5
Fund and reassess
Deploy capital to the highest-leverage candidates, monitor progress, and redirect resources when the original vehicle loses effectiveness.
Pro tip Compare continued funding with direct research or execution alternatives.
Watch out Institutional attachment can preserve programs after their leverage has disappeared.
In the wild
The foundation encounters a team that has reduced the cost of producing RNA from roughly a thousand dollars per gram to cents per gram. The technology can target a destructive potato beetle's unique biology, potentially replacing broad poisonous insecticides without harming surrounding insects. The combination of dramatic cost reduction, specificity, and agricultural scale satisfies the foundation's search for a probability-changing intervention.
→ Capital supports a technology with the potential to reduce pesticide toxicity while protecting crops.
An environmental reporting prize becomes less effective as shrinking print organizations eliminate environmental journalism jobs. Instead of preserving the prize for tradition's sake, the foundation redirects its funding toward direct investigative journalism and research.
→ The same capital supports production of needed reporting rather than recognition of a disappearing field.
Common mistakes
Funding for prestige
Choosing causes for social access or recognition directs money away from neglected, consequential problems.
Equating innovation with leverage
An ingenious technology is not high impact unless it can scale and materially affect the target outcome.
Keeping obsolete programs alive
A previously useful funding vehicle should be replaced when structural changes remove its effectiveness.
Is it for you?
Best for
It is best for mission-driven investors and foundations choosing among scientific, entrepreneurial, and communications opportunities.
Not ideal for
It is not ideal for donors whose main objective is immediate visibility, predictable recognition, or broadly distributed small grants.
From the transcript
“And one of the rules we have is they have to be capable of really making it a difference, changing the probabilities of surviving all…”
“Otherwise, we look for the point of maximum leverage”
From the episode
Jeremy Grantham Discusses Sustainable Investment (Podcast)
Jeremy Grantham