Impact Investing: The Student Perspective

This post was written by Christina Rausch and Beth Bafford, both rising second year Duke MBA students.

If you run in CASE student circles (or if you are reading this blog), there is a good chance you have been hearing a lot about “impact investing” lately.  There is also a good chance that you are not exactly sure what it means.  Join the club.

“Impact investing” as a term is new (it was coined by the Rockefeller Foundation only a few years ago), but the concept is not. Investors have been deploying capital to create both financial return and social value for decades, but because of recent interest and action by large banks, foundations, and universities (like CASE at Duke!), the industry has gained a lot of momentum the past few years. (For more detailed definitions you can look to JP Morgan here and the Global Impact Investing Network here).

As current MBA students, we wanted to write something from a student perspective – how did we develop an interest in impact investing?  How can a student get involved in this emerging field?

Christina Rausch: Prior to Fuqua, I worked with economically distressed rural and urban areas and was struck by the persistent need for access to capital from both the nonprofits attempting to build opportunity and the businesses struggling to stay afloat.  I learned about catastrophe bonds and was intrigued by the ability of capital markets to channel billions of dollars into businesses and projects. What if there was a way to use financial innovation and creativity to drive capital to low-wealth areas?  I believe there is an opportunity for broader social impact from financial innovation.

A significant factor in my decision to attend Duke was the strong social entrepreneurship program and CASE, in addition to Duke’s academic excellence in more traditional business areas like finance.  I have had the opportunity to take advantage of financial modeling courses and Wall Street visits as well as activities specifically related to impact investing.  For example, in February, I attended a panel on the subject at Fuqua’s annual Sustainable Business and Social Impact conference.

In April, I joined Beth and two other Fuqua students to compete in the International Impact Investing Challenge at JP Morgan, where we presented a model to increase large-scale SME (small and medium sized enterprises) lending in India through partnerships with local banks and service providers. These experiences, among others, have been invaluable in exploring the intersection of social benefit and capital markets.

Beth Bafford: Before coming to Fuqua, I worked in financial services, community organizing, and government.  I came back to school to study social entrepreneurship at Duke, because after reading The Blue Sweater, I was fascinated by the potential to solve social problems with the models and efficiency used in the for-profit world.

In the fall, I started volunteering with an organization in Durham that is looking for innovative ways to provide funding to start-up and growth stage social entrepreneurs.  Hearing the stories of these entrepreneurs – amazing people with huge hearts, strong missions, and keen business sense – and their struggles with accessing capital – opened my eyes to a large problem, and opportunity.

This interest was also piqued during my first year, as I had opportunities to learn about impact investing from the rock star CASE professors at Fuqua.  In Cathy Clark’s Social Entrepreneurship course we got to hear how Cathy started her own Social Venture Capital fund and what she is currently doing with GIIRS and B Lab (among many others) to create metrics and data systems to support the field.  In her class, we also got to hear from Antony Bugg-Levine at the Rockefeller Foundation as he discussed the foundation’s role in impact investing – and where he sees the field heading in the near future.

In Greg Dees’ seminar on Social Entrepreneurship we looked at impact investing from an international development standpoint and had the chance to speak with John Buley of JP Morgan Social Finance to understand why a large, institutional player like JP Morgan has started to experiment with ways to use its capital and banking expertise to help the poor.  Lastly, I was able to write my final paper for Greg’s class on Social Impact Bonds and their introduction in the US, a vehicle that is getting a lot of attention in the field and was fascinating (and fun) to research.

Looking forward

In our first year at Fuqua, we’ve grown more excited about impact investing.  CASE and Fuqua have attracted a community of students interested in asking and answering tough questions about impact investing: What are the financial expectations of impact investments and what will attract institutional investors?  How can we create market-rate returns without compromising mission?  Are the estimates of the impact investing market size exaggerated or realistic?  How can we grow the field?

What we love is that, while at Fuqua, we have the access, time and resources to explore these issues to help shape the field academically and soon, professionally.  In the words of our classmate, Josh Makaron,

“Prior to Fuqua, my knowledge of impact investing was based on my own limited research.  During Professor Cathy Clark’s class, I developed a much more nuanced understanding of how capital can be leveraged for social good, and this really cemented my desire to pursue impact investing as a career path.  This path – one that I expect will become more frequently traveled by MBAs who want to use their business skills for social impact – was made possible thanks to the opportunities provided by Fuqua and CASE.”

Josh just graduated from Fuqua and is looking forward to taking everything he has learned about impact investing and applying it while working with the Acumen Fund this summer, then starting full-time with TBL Capital in the Fall.

If you are interested in impact investing, we’d love to hear your thoughts – what the field needs, good examples of organizations that “get it,” what other schools are doing in this space, and any answers you have to these tough questions.