The B-School Impact Investing Uprising

Why B-schools play an important role in impact investment development

Between research, teaching and talent development, elite MBA programs might be one of the most important cogs in the growth of impact investing. Some schools are already leading the budding field and sending elite talent into the most interesting and important development in the capital markets.

Danielle Reed was already an impact investor when she stepped onto the campus of the University of California-Berkeley Haas School of Business in 2013 — though her family didn’t know it. They thought she worked at a nonprofit or something. But Reed actually worked for San Francisco-based boutique impact investing firm Imprint Capital, which was gobbled up by Goldman Sachs in 2015. “Now they can read about impact investing in The Wall Street Journal and The New York Times. They know what it is,” the 32-year-old San Francisco native says. Indeed, in the past few years the idea of garnering both financial and social returns on investment has moved from the fringe to the mainstream — while also moving toward the mainstream of elite business school curriculum.

At the same time Reed was beginning her business training in Northern California, a new course on impact investing was created at Pennsylvania’s Wharton School, bringing the concept to a Wharton classroom for the first time. Three years later, Jacob Gray, director of the Wharton Social Impact Initiative, says the course’s enrollment tops the school’s traditional investing course. “It’s become extremely popular as a class,” Gray tells We See Genius. Starting this fall, Harvard Business School will launch its first iteration of a course dubbed Creating Shared Value and Impact Investing. HBS offered its first impact investing-focused course in 2011, joining the likes of Columbia Business School, which has been offering similar courses for more than a decade. Duke’s Fuqua School of Business is doing the same. The list goes on.

It may seem as if do-gooder investors are taking over elite B-schools. But ask any top-shelf finance prof and he or she will pump their chests telling you how this is nothing new and they’ve been doing some form of impact investment instruction since the 1950s, when sustainable, responsible, and impact investing (SRI) was first conceived. Everyone wants to be first. In the ’60s and ’70s, amid the country’s political and social upheaval, environmental, social, and governance (ESG) investing arose to the fore. Not until recently, however, have significant curricular and extra-curricular resources in MBA programs been pumped into the phenomenon that many are still trying to properly define. As human rights issues continue to arise in the 21st century, the timing of it all certainly makes sense.


“There’s been a whole groundswell of mind expansion and the tools one can use to make change," says Cathy Clark. Courtesy photo

“There’s been a whole groundswell of mind expansion and the tools one can use to make change,” Cathy Clark says. Courtesy photo

“Those of us who have been in this world for the past 20 years have had a lot of conversations over those 20 years with only us in the room. And now it’s everyone,” says Cathy Clark, adjunct professor at Duke’s Fuqua School and the director of Fuqua’s CASE i3 Initiative on Impact Investing. Over the past five years, Clark says, significant interest from venture capitalists, investment banks, and even pension funds have led to an influx of new, diverse voices in the room — creating “a welcome conversation. And that makes a difference to the purview of an MBA and this as a career track.”

Between talent development and research, she says, academia has played and will continue to play a major role in the development of the fledgling field. “What changed about five years ago is that we realized the field was catching up and the term ‘impact investing’ had emerged,” says Clark, who has spent 25 years in the field and who taught her first impact investing-related course at Columbia Business School in 2001. “There’s been a whole groundswell of mind expansion and the tools one can use to make change.”

Four years after Clark came to Duke’s Fuqua School in 2007, she created CASE i3 based on her observation of growing interest among Fuqua MBAs. “I thought it would take five or six years to build a robust program,” Clark says. “And I was completely wrong.” Within three years, she says, “significant numbers” of incoming MBA classes indicated through school surveys that they chose Fuqua because of its leadership in the field. Now between 10% and 30% of each class applies to be part of CASE i3. “We are seeing more mainstream finance students trying this out,” notes Clark, adding that the 18 impact investing-related credits offered by the school serve alongside traditional finance courses. “It’s not cannibalizing finance, it’s a layer we want to teach them on top of finance,” she points out. Every year, she says, about 70 to 80 students take Fuqua’s mainstay impact investing course.

Jacob Gray, Senior Director of the Wharton Social Impact Initiative. Photo courtesy of The Wharton School

Jacob Gray, senior director of the Wharton Social Impact Initiative. Photo courtesy of The Wharton School


At Pennsylvania’s Wharton School, the Wharton Impact Investing Partners, a $500,000 student-run fund, was created six years ago. Currently more than 60 students are on the team, which Jacob Gray says has grown into the most “popular and selective” club on Wharton’s campus. Each year about a third of the class shows up to Gray’s introductory meeting for the Wharton Social Impact Initiative, he says, and while many gravitate back to traditional finance, at least a significant portion are “curious enough to take some kind of content.”

Students at the University of Michigan Ross School of Business also have the opportunity to make impact investments through the Michigan Ross Social Venture Fund. The are two funds at Columbia: Microlumbia, co-founded by MBA students David del Ser Bartolome and Katie Leonberger in 2008, gives MBAs the opportunity to consult and make investments in companies’ existing “under-banked” populations; the Impact Investing Initiative is a multi-disciplinary fund made up of four schools within Columbia, including the business school and the Earth Institute.


Back at Berkeley, Finance Professor Adair Morse sits in her office, which backs to eucalyptus stands and construction of Haas’ newest building. Here, she says, impact investing is just Berkeley doing Berkeley things. “We get a lot of MBAs who come to Berkeley because it’s Berkeley,” she points out. “And Berkeley is about not just concern with financial health, but also social agenda and improving the world — the kind of things that make Berkeley, Berkeley.”

While the school hasn’t built any specific impact investment-related curriculum, Morse says she and other professors in traditional business disciplines bake a side of social impact into their courses. “Although we could easily fill a class for impact investing, we look at it like ethics,” she says. “Do you want to teach a class on ethics on its own? Or do you want to weave it into the other areas?” Case in point is her New Venture Finance course. Any Haas MBA keen on entrepreneurship takes it. They also receive a hefty dose of impact investing content, which Morse says takes up a third of the course. And that’s totally fine with most students, she says. “The millennials are much more interested in having dual returns, and the MBAs are moving that way strongly, from what we’ve seen,” she says. “A few years ago, that wasn’t mainstream MBA, and now it’s completely mainstream MBA.”

Most popular for impact investing-minded Haas MBAs is the Haas Socially Responsible Investment Fund, which the school says is the first and most robust of its kind. Each year, 16 students are selected from an applicant pool to manage the fund, which currently is worth more than $2.6 million. Seren Pendleton-Knoll, the program director of the Haas Center for Responsible Business, is quick to rattle off key points about the fund’s success — most notably, she says, that it has “realized a total return of 0.1721%” in the past year, outperforming the “iShares Russell 3000 ETF’s total return of -0.36% by 53.5 basis points.”


Adair Morse is an award-winning finance professor at Berkeley's Haas School of Business. Photos courtesy of Berkeley-Haas

Adair Morse is an award-winning finance professor at Berkeley’s Haas School of Business. Photos courtesy of Berkeley-Haas

If all this seems like a hodgepodge of do-gooder-ness pouring in from all directions, that’s because, in a way, it is.

“The struggle we have with impact investing is meshing too many things under one term,” Morse says. “For us, the goal at the end of all of this is to get more private capital going to investments that have some sort of externality that brings social good to something, whether it’s jobs, environment, or poverty.”

If there is a guiding force for impact investing at the MBA level, it’s the MBA Impact Investing and Training Network (MIINT). Founded in 2011 by Bridges Ventures and the Wharton Social Impact Initiative, the program now has a network of more than 25 of the world’s strongest business schools. Each year, students or teams pick a startup and develop an investment pitch. Judges include Bridges Ventures partners and higher-ups from Bank of America, Merrill Lynch, and Goldman Sachs. Last year, more than 600 students from around the globe competed.

“There’s a huge interest among students in sustainable business, social entrepreneurship, and impact investing,” Bridges Ventures partner Brian Trelstad told We See Genius in April after the conclusion of this year’s competition. “But there are almost no courses in this. And it’s sort of channeling this impetus or impulse of the students into an experiential opportunity. To learn how to be an impact investor, you have to make investment decisions. And to make investment decisions, you have to evaluate a company.”


Hodgepodge or not, the phenomenon is significant and important. Be it Goldman Sachs’ purchase of Imprint Capital, Blackrock’s launch of an impact fund, or the venture capital and private equity dough pouring into the space, times are changing. Adding more fuel to the impact investment inferno was the publication of the most recent Global Impact Investment Network (GIIN) annual Impact Investor Survey. Regarded the most robust of its kind, the survey offered some interesting numbers. Since 2014, deals from 158 leading impact investors have surged from about 5,400 to the 12,000 or more expected in 2016. At the same time, the total value of the deals leapt from more than $10.5 billion in 2014 to an expected $17.7 billion this year. What it boils down to is an increasing amount of capital being pumped into socially minded companies and a growing number of decision-makers keen on socially minded investments.

“Relative to five years ago, we see a significant uptick in student, faculty, and alumni interest,” says Matt Segneri, director Harvard Business School’s Social Enterprise Initiative. “More people are pursuing internships, conducting research, getting involved in competitions, and transitioning to impact-focused funds.”


According to Matthew Weatherley-White, co-founder and president of CAPROCK Group, a $3 billion multi-family investment fund, one should look to modern portfolio theory as a pertinent example. Described as a “genius” by both Gray and Clark in separate conversations, Weatherley-White says modern portfolio theory was the dominant staple for future Wall Streeters in business schools from the 1950s on, until it played a significant role in the 2008 market crash. If impact investing can become the next modern portfolio theory, our world might be in better shape than we imagined, Weatherley-White says.

Gray sees it the same way. “My personal prediction is, this is just the way investing is going to get done in the future,” he says. “It will be an anomaly for one not to measure on three dimensions instead of just two. Instead of risk and return, it will be risk, return, and impact.”

This is the next natural evolution in the capital market, Weatherley-White insists. “Capital markets are an evolutionary animal. I think we forget that,” he says. “And we think of it as this static inter-relationship between prevailing social norms and the flow of capital through society. But it’s not static. It’s constantly evolving.”


Perhaps the most fascinating piece of the evolution is a transfer of wealth and positions of power from a (generally speaking) white male baby boomer population to an increasingly diverse millennial generation. It’s no secret more women are in MBA programs than ever before. Put together the fact that women and millennials seem to be the most interested in impact investing and the blossoming programmatic offerings at elite B-schools is the market response to that growing interest.

Amit Bouri, CEO of the GIIN, says the wealth and leadership transfer combined with the influx of millennials in the area will have a “profound impact on fueling the growth of impact investing going forward.” What’s more, “people are going to continue to be thinking about how they can invest in different ways and actually align their capital with their values,” he says.

“The interest among students,” Bouri continues, “is absolutely energizing and holds a tremendous amount of promise for the future of the impact investing market.”

Weatherley-White agrees. “If you look at the projected $42 trillion of wealth that will be transferred over the next 30 years from the predominately male baby boomers to their wives and children, who are mainly millennials, and you look at who’s driving impact investing, it’s women and millennials,” he explains. “You have to ask yourself, is this an inevitable trend of the capital market? Because the people who have the capital will be asking for it. And I think the answer is yes.”

Danielle Reed. Courtesy photo

Danielle Reed. Courtesy photo


At least a couple of factors prevent the complete explosion of impact investing. Both can, should, and likely will be solved within academia.

First is the infancy and lack of proof in the field. Second is the job outlook. “My concern is there is a ton of hype around impact investing,” says Danielle Reed, who has since taken a job in the Mission-Related Investing department of Cambridge Associates’ San Francisco office. “In a very short period of time the industry has become quite well known. But there has been little to show for it.” As Matt Segneri points out, the words “impact investing” have yet to be published in the Journal of Finance.

But the beginnings of proof are arriving. Last year, Gray and a Wharton team produced the first significant piece of evidence in a study that examined 53 private equity funds with a total of 557 individual impact investments. “You now have a little bit of ammunition to say it’s at least worth the look,” Gray told We See Genius when the report was published. The ammunition was that in “certain segments” of the market, there were no trade-offs for financial and social returns.

Morse is sitting on some more significant research that will be published soon. In a “very preliminary” draft of the completed research she shared with We See Genius, investment impact funds performed 13.5% higher than benchmark traditional venture funds. The robust report examined around 3,500 partners, 5,000 funds, and 25,000 capital commitments. “Our results imply that the supply of impact funds is incomplete, failing to meet demand,” the abstract of the report reads.


It’s demand that seems to be hobbling the industry’s development. “There just aren’t that many jobs out there,” Gray asserts matter-of-factly. While Reed was essentially able to pick up where she left off after her MBA, that’s certainly not the case for all graduates — especially those coming from the nonprofit or social sectors. “Their experience is very relevant, but they can’t say they’ve done banking or some other finance job before school,” Reed reasons. “So the question always becomes, how can I show my potential employer that through my finance classes at business school I am a good candidate?”

Zeina Fayyaz knows what Reed is talking about. The 27-year-old freshly minted Berkeley-Haas MBA boasts an impressive resume. After graduating from Harvard, Fayyaz went to work at Boston-based nonprofit Root Cause, quickly working her way up to accelerator manager, where she built a portfolio of nonprofits and, later, social enterprises that received $10,000 grants and consulting from her. As Fayyaz was introduced to social enterprise, she became increasingly interested in impact investing as a way to achieve greater scale and increased sustainability.

Zeina Fayyaz. Photo courtesy of Berkeley-Haas

Zeina Fayyaz. Photo courtesy of Berkeley-Haas

To be sure, her time at Haas was valuable. “My idea of impact investing was much more hazy and conceptual than anything else,” the Stamford, Connecticut native admits. “I never would have been to exposed to as much as quickly without the MBA.” And yet, here she is about a month after graduation with a couple of consulting projects but no full-time employment. Admittedly, she turned down one offer and has been geographically “choosy,” but defending her investing prowess has also been a hurdle. “It’s a harder case to make than I anticipated coming in. And I did everything,” Fayyaz says.

Indeed she did. Fayyaz flexed the muscles of Haas’ robust extra-curricular offerings. She interned at Goldman Sachs last summer. Fayyaz even spent the past spring interning at San Francisco-based impact investing firm Sonen Capital.

The explanation seems simple to Reed. “There just aren’t that many jobs compared to the people who express an interest in impact investing,” she says.

Bouri concurs, albeit in a bit more optimistic way. “The supply and demand might not match in all places, but for those talented individuals who have the right blend of skills, there is a lot of room where they can develop as professionals and have a huge impact on the world,” he says, noting the GIIN Job Board.


Meanwhile, Patrick Sagisi, an associate at leading impact investing venture capital firm DBL Partners, was surprised to hear that some MBAs struggle to find a place in the impact-investing universe. “It’s a big umbrella with a lot of people under it,” he notes. Sagisi, who holds an MBA from Stanford’s Graduate School of Business, suggests a potentially overwhelming abundance of opportunities. “The challenge coming out of business school is figuring out where to focus your efforts in a particular field, sector or activity and just going after it,” he says.

Even with a nonprofit background, Sagisi believes the MBA holds special value among potential impact investing employers, especially within his own office. “We think having an MBA is a critical part of having the skills in understanding businesses and business models in order to be an effective investor,” he says, noting it’s certainly not the only requirement. A policy background is particularly attractive for his firm’s portfolio of clients in the energy space, he adds.

Reed says that at Cambridge Associates, the MBA is viewed as attractive but not necessary. “In general, do I think an MBA is required to work in impact investing? I think it’s becoming increasingly necessary. Because the space is becoming increasingly competitive,” she says, adding that she doesn’t want to see impact investing “go to a place where we only have ex-bankers working here.”

Ex-bankers or not, impact investing is gaining increasing attention from within and outside business school campuses.

“When people like Bill Gates and even Warren Buffet talk about how capitalism has created the externalities that are causing so many problems — wealth and income inequality, environmental degradation — you have to question the system,” Weatherley-White insists. “And I’m not saying it’s all messed up and capitalists suck. I’m not a socialist, I’m a capitalist. But you have to question it. And that’s the beauty of impact investing. Is it really enough just to be focusing on the financial short-term? And I think the answer collectively is … maybe not.”