If a group of three graduate students at the University of Southern California’s Marshall School of Business have their way, there’s about to be a new type of farmer in the West African country of Angola. Not to mention, a cleaner agricultural land. But first, the team, which calls itself Terra Limpa–Portuguese for “clean” or “clear land”–just wants to put the often overlooked country on the map.
“Often times, Angola is overlooked,” says Suzana Amoes, who moved to Los Angeles from her native Angola to attend USC Marshall’s Masters of Science in Social Enterprise (MSSE) program. “Not a lot of investors or people around the world ever hear about Angola as a whole or the social and environmental issues in the country.”
They do now. Last month, Amoes, alongside her teammates Megan Strawther and Ryan Alam, stood toe-to-toe with MBAs and other graduate students from some of the world’s most elite business and graduate schools in the Morgan Stanley Sustainable Investing Challenge. And they walked away with a victory.
COMPETITION ATTRACTS ELITE GRAD STUDENTS FROM ACROSS THE GLOBE
Now in it’s sixth year, the challenge stemmed from a growing observation at Northwestern’s Kellogg School of Management. “We started noticing if we challenge students to use their finance education to intentionally build investment instruments to change the world, we will be amazed and surprised by the creativity and passion they are applying,” says David Chen, a finance professor at Kellogg. Chen reasoned if he was seeing this at Kellogg, it was surely happening at B-schools across the globe. And so the Sustainable Investing Challenge was created at Kellogg.
Fast-forward six years and the competition has grown from about 12 schools participating to more than 60 this year. The challenge also got a name change and backing from Morgan Stanley. “Every year the teams get more and more sophisticated,” Chen says. “And a lot of that is from the international component. The strength is in the global.”
Indeed, the challenge is global. More than 100 teams from 64 schools based in 21 different countries participated. This year half of the final 10 teams were from schools outside of the United States. The competition itself was hosted in Hong Kong. And the issues at hand were equally global. Teams proposed investment solutions to problems from water and sewage treatment in Brazil to insect farming in China to microfinancing refugee entrepreneurs in Europe. But when all was settled, it was Terra Limpa, the team fixated on creating a new breed of small holder farmers in Angola.
A MARKET UNTAPPED FOR NEARLY HALF A CENTURY
The nod from an expert panel that Chen says was “very conscientiously curated from the biggest investment firms in the world,” makes sense. Prior to a 27-year-long civil war that left the country war-torn and ravaged after ending in 2002, Angola had a robust agricultural sector. With an ideal climate and millions of hectares of fertile farmland, Angola was a major exporter of coffee, maize and bananas. By the early 1990s, the country was producing less than 1% of the amount of coffee they were exporting in the early 70’s. Despite currently having about 57 million hectares of farmable land, less than five million is actually being used. In 2014, the country exported a measly $953,000 in edible plants and produce, according to the most recently available data. Meantime, Angola imported about $803 million. The main cause of slow agricultural growth and recovery? Land mines that littered the country, courtesy of the civil war.
“That agriculture hasn’t been tapped for about 45 years,” says Amoes, noting there are anywhere between 10 and 20 million land mines currently left in the countryside. “It’s being hindered by land mines.”
No longer. Terra Limpa has a plan to acquire contaminated land with the funding of impact investors and flip it into farmland while employing local small-scale farmers. Ideally, the farmers will work the land until they have enough to buy it back from the investors.
‘WE WANT TO BUILD A NEW CLASS OF SMALL-HOLDER FARMERS’
The trio of teammates met in Strategic Formulation for Competitive Advantage at USC Marshall where they created a business plan focusing on a market-based approach to addressing Angola’s waste management issues. In December, the course ended but the team didn’t. With a budding interest in impact investing and Angola, the group heard about the Morgan Stanley competition. Simultaneously, Amoes discovered the amount of land mines still underground during research for a thesis paper.
Amoes, Alam and Strawther interviewed 50 local farmers within 50 miles or so of Luanda–the country’s coastal capital. Two lessons were learned. First, many farmers simply didn’t have access to necessary farming supplies. Essential items like seeds and tools were tough to come by. Next, major agribusinesses were overlooking the small farmer. This meant missing out on such basic resources as institutional fertilizer wholesalers, a factor that limited access to bringing product to market. Eventually, the team says, farmers will be able to own the land and be noticeable to the wholesalers.
“The goal of the project is not to retain ownership over the land over the long run,” Alam insists. “It’s to sell it to the farmers. The fund acquires and develops the land with the intention to sell back to the farmers who accrue savings through income and through profit sharing in success of the crop fields. We want to build a new class of small-holder farmers.”
IMPACT INVESTING TRENDING UP
Considering that about 80% of farmers in Angola are small, independent farmers, Terra Limpa very well could do just that. And not just in Angola. “It clearly is applicable across any war-torn land that has been degraded in a rudimentary way,” says Chen, before ticking off the regions in Asia and Africa that still have spoiled land. “They (Terra Limpa) took the time to create interest from the judges in a very specific model and communicated how it may create big levels of change.”
And that large scale change is one of at least a few factors driving the impact investing phenomenon, which is gaining steam across B-school campuses. Gone are the days of flinging money around and hoping for the best in either financial or social returns. Untapped markets that have traditionally been impacted by government and non-profit support appear ripe for this new breed of investing.
“I see sustainable investing as the future and directly impacting the livelihoods of people and getting them from $2 a day to more than that,” Amoes says of Angola and Africa as a continent. “And getting them to a place in their lives where it couldn’t have been done with traditional methods of financing.”
Chen says he’s seeing two factors behind the growth. First, is the struggle to find innovative investments and untapped markets. Next, is a worldly shift. “There is a growing awareness that capital can be applied to intentionally create positive change in society,” says Chen. “What’s the difference between a collateralized debt obligation and the securitization of a micro-finance loan? The joke is they are both lending to poor people.”
WANTED: GREEN THUMBS
Up next for Terra Limpa is a summer pilot model in Angola to “stress test” the economics of the model. If all goes well, the team says they’d like to prove out the model and attract more institutional players. “What started as a project is turning into something that could be so much more,” says Strawther, noting the mentorship Terra Limpa received from MSSE program director Adlai Wertman and professors Fran Seegull and Adrian Stern.
“Being the first mover in any market is like leading by example,” believes Alam. “And if somebody can prove they can generate a meaningful return for investors and do so in a safe and sustainable way, then it paves the road for future investments.”
As for Chen and the challenge, he only sees social impact and sustainable investing increasing. “One of the most important institutions we have ever created in the civilization is capital and business and these businesses have an intentional role to play,” says Chen. “Schools like Kellogg are beginning to implement more of this social impact and social obligation of businesses in the curriculum. Wharton is going that way. Duke is going that way. Kellogg is on the forefront of this.”
As for the competition and feedback from the judges?
“They definitely scrutinized our business model,” says Alam. “They scrutinized our assumptions. And they critiqued a lot of it. We’re business students and rose up the agricultural learning curve as fast as possible. But there is still a hell of a lot we don’t know about farming.”
That’ll likely take care of itself soon enough.