Learning to Invest With Impact
By Sunny Lewis
NEW YORK, New York, June 13, 20198 (Maximpact.com News) – “Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them,” wrote Larry Fink, hairman and CEO of Black Rock, the world’s largest asset manager with US$6.5 trillion under management, in his 2019 letter to CEOs.
An American global investment management corporation based in New York City, Black Rock makes impact investing the central core of its profit-making strategy. For instance, BlackRock’s U.S. Real Assets platform, which manages $17 billion in real estate and infrastructure assets in the United States, today announced a new Responsible Contractor Policy.
Jim Barry, chief investment officer of BlackRock Alternative Investors and global head of BlackRock Real Assets, said today, “Core to BlackRock Real Assets’ investment process is the integration of ESG [environmental, social and governance] considerations, including sound governance practices, which we believe are essential to building resilient portfolios for our clients.”
Most large asset managers such as Goldman Sachs, Bain Capital and State Street are establishing ESG, sustainability, or impact investment practices, and developing such products to meet the needs of pension funds, endowments, and family offices.
Not only are mature asset managers and their clients earning fat profits by investing for social and environmental good, many young people, too, are growing enthusiastic about learning how to do well by doing good.
In California, an increasing number of students at the Stanford Graduate School of Business are focusing on social impact and innovation courses as part of their educational experience, the school announced May 29.
This year, more than 90 percent of the Stanford Graduate School of Business students took a course related to social innovation or social impact: 95 percent of the MBA Class of 2019 and 81 percent of the one-year MSx Class of 2019.
On the East Coast, in Cambridge, Massachusetts the Harvard School of Business (HBS) recognizes that more than $23 trillion assets globally are subject to an environmental, social, and governance and impact screen, including over 25 percent of all professionally managed assets. This approach is growing, so Harvard is offering popular courses on impact investing and opportunities for students to get involved outside the classroom.
Since 2015, the John F. Kennedy School of Government at Harvard University has offered a class called “Impact Investing for the Next Generation,” in coordination with the Center for Sustainable Finance and Private Wealth at the University of Zurich and the World Economic Forum.
The course aims to teach “wealth holders of the next generation” how to use their capital for good through a foundation or personal portfolio.
The Initiative for Responsible Investment at the Kennedy School’s Hauser Institute for Civil Society supports the social purpose of finance through research and multi-stakeholder dialogue, with the goal of catalyzing leadership and action that creates long-term, values-driven wealth, “…while creating a stronger society and a healthier environment.”
And outside the classroom, over 100 student members participate in the student-run Harvard Impact Investing Club . The club offers panel sessions and workshops to explore key concepts and practices within impact investing, connection to HBS’s annual Social Enterprise Conference, and coordination with impact investing competitions such as the Kellogg-Morgan Stanley Sustainable Investing Challenge.
Other Ivy League schools are also rich in impact investing activities.
At the Yale School of Management, the second annual Yale Impact Investing Conference held in April featured a keynote address by Yale Professor Robert Shiller, the 2013 winner of the Nobel Prize in Economics.
Shiller told the conference, “Human enterprise is guided by institutional structures that have subtle effects on motivation and creativity. Impact investing creates a narrative that brings in people with skills and motivations that can enhance effectiveness. There is an important niche for impact investing.”
The conference gathered investors, academics and philanthropists to discuss metrics for impact, and the newest ideas to generate market-level returns through impact investments.
Dr. Jonathan Rothberg, Yale School of Medicine, demonstrated Butterfly iQ, a medical device that he developed with the intention to make an impact. This US$2,000 ultrasound machine plugs into an iPhone and allows any person to perform an ultrasound that can be sent to a medical expert to evaluate. It can be used in remote parts of the world where access to the right equipment is scarce.
Bethany Gorham, Energy Impact Partners, spoke about making an impact by investing in the “fuels of the future” and focusing on technologies that can help drive the energy transformation.
Columbia University Business School in New York City says that impact investing has emerged in recent years as a high potential approach to long-term sustainable social and financial value creation.
This summer Columbia Business School offers an Impact Investing Seminar covering financial instruments and techniques used to fund social enterprises – for-profit, nonprofit and hybrids – and the differing financial return and social impact return expectations of impact investors.
The seminar will cover how investors and funders, investment managers and advisors structure their portfolios and funds; strategies used by impact investors to search for impact investing opportunities; and finally, the enabling regulatory framework and information intermediaries needed to support the development of robust social capital markets.
Columbia Business School graduate Clare Murray from the class of 2017 said in a recent Columbia Bizcast video, “Every investment has an impact, it’s just positive or negative. So for me, I really wanted to work in sustainable investing to create products that had the financial return side where then institutions were able to invest and then also where it’s doing good for society.”
Impact investing is a growing niche not only in the United States but elsewhere in the world.
In an article published August 15, 2018, Eunice Jeong, a student analyst in the Georgetown University Class of 2020, surveyed the growing popularity of impact investing.
In 2018, the University of Cape Town launched its first course on impact investment for lawyers through its Graduate School of Business. The course was convened by the Bertha Centre for Social Innovation and Entrepreneurship.
Program convener Susan de Witt said, “Impact investment is growing at a rapid pace, both globally and in South Africa, and as more international funding becomes available with demands for better social and environmental as well as financial returns, there will be a need for legal expertise to craft the kind of agreements and deals that will ensure these outcomes are realized.”
“Other universities should consider implementing similar programs so that students can learn to implement social impact investing practices in their future careers,” Jeong writes. “This program is similar to other established programs such as the Social Impact MBA program at Boston University aimed to teach business management with a social impact mindset, aimed toward students interested in the nonprofit and social sector.”
In addition to courses offered, schools are promoting impact investing for students outside the classroom. Socially conscious investing efforts can come directly from the student body in the form of student organizations like the Wharton Social Venture Fund, Jeong points out, mentioning similar projects that exist at the University of Michigan, Columbia University, and the University of California, Berkeley.
Students interested in learning about impact investing can create or join student organizations like Net Impact. Through over 350 chapters worldwide, Net Impact mobilizes next-generation leaders to use their skills and careers to make a positive impact on the world.
Featured image: Nobel Prize Laureate in Economics (2013) at Yale University (Photo courtesy Yale University)