Before Stephanie Pow started her MBA at the University of Pennsylvania’s Wharton School, she had been working at an investment bank for four years. But she wanted to make a bigger impact.
“I’m trying to find a way to leverage my education and my work experience to do something good,” Pow says, “and impact investing is that sweet spot for me.”
There are many signs that impact investing – that is, investing in organizations that turn a profit and make some kind of social impact – is catching on, not only among MBA students but also with larger trendsetters.
Earlier this month, the investment management firm Blackrock Inc. announced plans for a range of new investment vehicles that would address social issues.
"What if you wanted to drive outcomes like poverty elimination or hunger elimination or the development of medicines?” Rich Kushel, an executive at the firm, recently told Reuters.
It sounds audacious, but Blackrock is certainly not the first investment house to launch such services; nor will it be the last.
“At first it was just Goldman Sachs, now it's everybody,” says Melissa Bradley,” a professor at Georgetown University’s McDonough School of Business.
Bradley teaches an MBA elective called “Investing for Impact,” which explores key topics in the space, including deal structuring and “due diligence,” which is the process that investors go through before investing in an organization. The class also touches on related topics in social entrepreneurship and innovation.
“We look at the entire rubric of social finance,” Bradley says.
Other business schools also offer MBA electives or other initiatives covering impact investing and related topics. Columbia Business School, for instance, offers an “Impact Investing
Seminar,” which is an MBA elective covering the basics of these investments. Switzerland’s University of St. Gallen and Canada’s York University Schulich School of Business have similar electives.
Some offerings are more robust. Last year, for instance, UC Berkeley’s Haas School of Business announced that it would launch the “Haas Impact Investing Network,” a year-long initiative where MBA teams go through the process of finding investment opportunities in social ventures. At the end of the year, an investment firm that the school has partnered with for the initiative will invest $50,000 in the selected startup.
Stephanie Pow is currently participating in the “Wharton Social Venture Fund” program, which is a student-led venture capital fund where, like the Haas program, participants research and then invest in early-stage enterprises that create social impact.
“We go through the process of what a traditional venture capital firm would do,” Pow says.
Teams first start by looking at trends and developing a list of potential investments. From there, the list is whittled down through due diligence and meetings with external investment committees, who offer advice and direction.
In the past, the fund has invested in startups like raise.me, which provides micro-scholarships to underserved high school students to help them afford college; and LearnSprout, an educational technology provider.
The real deal
According to some business school faculty, the increasing interest in impact investing among MBA students can be attributed, in part, to a generational shift.
“This is the real deal,” says Jerry Hildebrand, director of the Center for Social Impact Learning at California’s Middlebury Institute of International Studies at Monterey (MIIS), which offers hands-on impacting-investing programs for the school’s MBA students and other young professionals.
“I think it's because the millennial generation wants to connect meaning with money,” Hildebrand says.
Georgetown’s Melissa Bradley – who says that enrollment in her impact investing elective sometimes exceeds capacity – would agree.
“I would say that in terms of millennials, it's probably more a part of their DNA,” says Bradley. “They desire to do better than prior generations.”
However, Bradley says the appeal of impact investing goes beyond generational categories.
“I would also say that for anyone who is looking to make a trajectory in institutional asset management, it's real,” she says.
Specifically, Bradley notes that recent global events, like China’s commitment to transition 20 percent of its energy production to renewable resources by 2030, could open new opportunities in the space.
However, these opportunities have yet to translate into a huge number of impact-investment jobs.
“I think more and more jobs are opening up,” Bradley says. But “I'm always mindful to say to students that there's probably more interest than there is demand for employment.”
MIIS’ Jerry Hildebrand calls the impact-investing community a “tight-knit group of people” that, due to its cliquish nature, can be difficult for newcomers to beak into. He says, though, that internships and hands-on projects with impact-investment funds can help students get a foot in the door.
Stephanie Pow – who, in addition to her Wharton MBA is also doing an MPA from the Harvard Kennedy School – is not exactly sure what she wants to do after graduation, but notes that impact investing is on her radar.
“In the longer term this is definitely a field I see myself in,” she says. “I've done the investment side, now I want to see the social entrepreneurship side, and hopefully I find something that's for me.”
Image: "Microfinance in India" by Peter Haden / Flickr (cropped and rotated)