MaRS Centre for Impact Investing is now seeking a Senior Associate, Capital Advisory Services! From persistent poverty to climate change, we face entrenched social and environmental problems. Fortunately, a growing number of charities, non-profits, co-ops and for-profit companies are building business models to tackle these problems. They are turning to investors for the financing to […]Read More ›
Instructing For Impact: Financial Innovation
Innovative Social Finance programs at American Colleges & Universities
US college social finance programs are pushing the frontiers of what social finance is and how it can be applied across the financial sector. These programs aren’t just teaching students about social finance. They are empowering students to explore the flaws or holes in the current system and contribute to solutions. Students are affecting financial innovation by contributing to its body of work, leading social finance research, and conceptualizing new financial models.
A major road block for mainstream investors considering social finance is the lack of a track record. Many impact funds do not have much historical data on returns or demonstrated deal flow. The Sorenson Global Impact Investing (SGII) Center at the University of Utah is addressing this, by “greasing the wheels” of the sector. A team of student analysts at the SGII Center take on a myriad of impact investing projects. Everything from market research to due diligence. In a space with significant human capital and cost constraints, these students are building the capacity for greater and better vetted deal flow. More successful impact investments will only lead to validating the effectiveness social finance mechanisms.
Beyond individual organizations, social finance programs are driving the industry forward through research. At the Center for the Advancement of Social Enterprise’s (CASE) Initiative for Impact Investing (i3), students are involved in ground breaking research in the impact investing space. Cathy Clark, an impact investing professor at CASE, explains that her students are actually getting into the game of creating the field through their research at CASE. Projects range from working with B Lab and GIIRS to create a public resource for impact data to surveying domestic entrepreneurs for the White House.
In addition to ground breaking research, students are also thinking up the next generation of financial models. At Northwestern University, Impact Investing Professor David Chen explains, “What I wanted our students at Kellogg to understand and get exposure to is that impact investing can be applied across every single asset class.” To do this, Chen has his students conceptualize new outcomes-based financial models for their final project. After coming up with these models, students have the opportunity to pitch them at Northwestern’s International Impact Investing Challenge (I3C). These ideas, while far from implementation, are the seeds of a better financial system.
In the rapidly evolving space of social finance, this exposure to financial innovation is giving students an edge when they graduate. Nikki Tyler, former student of Chen’s explained, “the final project is what I found personally transformational about the class and had a really big impact on my career going forward.” Being able to identify gaps in the existing system and develop solutions for them is exactly the kind of thought leadership the social finance space needs. Students are directly contributing to the development of social finance now and are better equipped to excel in a social finance career going forward.
While these examples of students engaging in financial innovation are exciting, they are unfortunately few and far between. There is a lot of opportunity for faculty and students to be part of cutting edge research. Programs like the SGII Center, CASE i3, and Northwestern’s I3C are attracting both faculty and students who want to make an impact in this emerging space. “They are learning as we are learning,” says Clark at CASE. Colleges interested in social finance should begin exploring ways can they affect the space. This is already becoming a critical element of top social finance programs.