Middlebury College: Energy2028 (320029)
by
Brian Trelstad,
Michael Norris and
John McKinley
- APRIL 2020 (REVISED MAY 2021)
Not all social change happens with new organizations. Middlebury College is one of the oldest liberal arts colleges in the United States and its new President Laurie Patton faced the challenge of students calling for divestment from fossil fuels, trustees opposed to it, and a series of day to day administrative challenges that demanded her immediate attention. How does change happen in established institutions?
Key Themes: Leaders in higher education and beyond can realize change by working with, not against,
change-makers even when board members and community leaders stand in opposition. Bold
collaboration, significant due diligence, and persistence are integral to reaping
institutional change.
Mission Related Investments at the Ford Foundation (A) (220026)
by
Shawn Cole,
Michael Norris and
T. Robert Zochowski
- FEBRUARY 2020 (REVISED JANUARY 2022)
Darren Walker and his staff have been preparing for months to present the final proposal for Mission Related Investments (MRIs) to the Ford Foundation’s Board. Many well-respected investors as well as trustees of leading nonprofits had expressed uncertainty about whether MRIs were compatible with a board’s fiduciary duties. Darren wondered if his board held the same view. This case will explore the process and structuring considerations that the Ford Foundation grappled with to set up their Mission Related Investment Program.
Key Themes: Knowing how much to ask for and when can sometimes be as important as the ask itself.
Making large institutional changes towards MRI is challenging, though significant
strides can be made with peer support, a clear deployment structure, and a thoughtful
investment strategy that aligns with the foundation's mission.
CalSTRS Takes on Gun Violence (819079)
by
Vikram Gandhi and
Caitlin Lindsay Reimers Brumme
- NOVEMBER 2018 (REVISED DECEMBER 2018)
In Spring of 2018, Chris Ailman, CIO of the $200 billion pension plan for California public
school teachers (CalSTRS) was mandated by his board to “prioritize engagement with makers and retailers of firearms in California” following a series of gun-related tragedies in schools. While CalSTRS had a long history of engagement and even divestment, as a fiduciary for the retirement assets of current and future teachers, calls for values-motivated screening or divestment always posed an inherently complex challenge. Having spearheaded the development of Principles for a Responsible Civilian Firearm Industry released on November 14, 2018, what if anything, should Ailman and his team do next?
Key Themes: As a public pension plan, CalSTRS operates in the context of a complex array of stakeholders,
who from time to time push for divestment or other values-driven investment decisions.
And yet, as a fiduciary, CalSTRS must carefully navigate the line between values and
value. Engagement with a long-term horizon is a strategy that allows them to advocate
for change and returns-driven shareholders.
JANA Partners: Impact through Activism? (819073)
by
Vikram Gandhi and
Caitlin Lindsay Reimers Brumme
- NOVEMBER 2018 (REVISED 2019)
Jana Partners, a well-known “activist” hedge fund, has announced the launch of a new
fund Jana Impact. The basic premise is that the fund will be able to generate superior returns by
using Jana’s activist approach with companies that are underperforming on ESG metrics. The case
examines the history of activist investing and Jana’s proposed approach in unlocking ESG value.
Key Themes: ESG and activism may in fact be a source of financial and impact alpha; however, the
path from theory to implementation is still being tested.
Investing in Nature: The Nature Conservancy and NatureVest 2018 (219055)
by
Shawn Cole and
Caitlin Lindsay Reimers Brumme
- NOVEMBER 2018 (REVISED JANUARY 2019)
Mark Tercek, Charlotte Kaiser, and the NatureVest team have spent almost a
decade structuring investments in conservation. While proud of their work to date, the
$200M they have raised is insignificant compared to the billions experts estimate is needed to
meet annual conservation needs. What role should investment capital play? What role should
TNC play?
Key Themes: Impact investing is option proposed a new “tool” for socially-motivated actors to
achieve their mission. While this appears to be the case for TNC, the work is resource
and time intensive and also requires new skill sets and networks. This case also showcases
multiple uses of “blended capital” financing structures.
Social Finance, Inc. (219044)
by
Shawn Cole and
Fanele Mashwama
- OCTOBER 2018 (REVISED JANUARY 2019)
Social Finance US was founded 2011 to bring the concept of the "social impact bond" (SIB)
to the United States. SIBs were a novel, albeit complex financing instrument to allow private investment
capital to fund and scale social service providers, wherein government repaid investors based on
performance. Tracy Palandjian (MBA 1997) examines early successes, and grapples with how to design
use investment capital to create social change.
Key Themes: The social impact bond is a unique financial contract that allows investors to fund
social service organizations with the potential to earn a return. Returns, if any,
are directly tied to impact. While a compelling and novel concept, there are many
challenges and risks in execution for the service organization, government and investors.
The VELUX FOUNDATIONS: Selecting Impact Funds (819021)
by
Vikram Gandhi,
Caitlin Lindsay Reimers Brumme and
Nathaniel Schwalb
- SEPTEMBER 2018 (REVISED JUNE 2019)
After much internal debate, the VELUX Foundations of Denmark have decided to
allocate a small percentage of their investment portfolio to impact investments. Cambridge
Associates, one of the leading investment advisory firms in the world, has been engaged to assist
them in developing and implementing an “impact strategy”. VELUX only invests in funds (as
opposed to direct investments) and must now decide on fund selection criteria and on specific
fund investment options that have been presented to them.
Key Themes: Multi-generational family foundations must navigate changes in preferences, goals
and beliefs, particularly as new generations come into decision-making positions and
may advocate for new strategies such as impact investing. Once a strategy is in place,
selecting the right investments or funds requires extensive work. An advisor such
as Cambridge can play a critical role in both building a strategy and supporting execution.
Goldman Sachs: Making an Imprint in Impact Investing (218069)
by
Shawn Cole,
Vikram Gandhi,
Caitlin Lindsay Reimers Brumme and
Lynn Schenk
- APRIL 2018 (REVISED MAY 2018)
In 2015, Goldman Sachs acquired Imprint Capital, a small but well-known impact investing advisory firm - a widely touted example of impact investing going mainstream. The case
examines Imprint’s integration into the asset management platform at Goldman Sachs and how the approach to clients evolved post acquisition. Students will look at impact investing in the context of the asset management industry and explore portfolio construction strategies for the firm’s clients and explore the concept of mass customization for impact investing.
Key Themes: Acquisition of Imprint offered Goldman a unique and “authentic” advisory service in
a fast growing segment. In the competitive world of asset management, the ability
to help clients navigate and implement in this relatively new marketplace is valuable.
However, working at scale means less ability to do client-specific work on small accounts.
Morgan Stanley: Building Long-Term Sustainability (318103)
by
Vikram Gandhi and
Lynn Schenk
- MARCH 2018 (REVISED APRIL 2018)
By 2017, it seemed as though all major financial institutions were racing to position themselves as the leader in the fast growing sustainable investing market; yet what it would mean to succeed remained ambiguous. This case examines the emergence of an “investing for impact” platform at a major financial institution following the financial crisis, including an analysis of core products: green bonds, ESG-based equity research, and a variety of advisory products.
Key Themes: Intermediaries have a tremendous impact on and influence in financial markets. While
intermediaries are very good at responding to client demand, they have limited ability
to promote their own agenda. However, even “incremental” change can be important from
such an influential platform.
The Rise Fund: TPG Bets Big on Impact (318041)
by
Vikram Gandhi,
Caitlin Lindsay Reimers Brumme and
Sarah Mehta
- FEBRUARY 2018 (REVISED AUGUST 2019)
It is March 2017 and TPG Capital, a global alternative investment firm with $74 billion
assets under management, is in the process of establishing its inaugural impact investing fund—the $2
billion Rise Fund. In an effort to “take the religion out of impact investing,” Rise Fund CEO Bill McGlashan
and Partner, Maya Chorengel have partnered with The Bridgespan Group, a nonprofit consultancy, to
develop an evidence-based methodology for quantifying the impact of prospective Rise investments.
Bridgespan’s framework generates an impact multiple of money (IMM); if an investment fails to meet
the IMM threshold, Rise will not invest in it. As the Rise team considers making its first investment in
EverFi, an educational technology company, McGlashan wonders: will his attempt to insert scientific
rigor into impact measurement succeed?
Key Themes: The entrance of big-name players in impact investing is an opportunity but also a
risk. TPG Rise is defending against that risk by developing a detailed algorithm to
forecast and “underwrite” impact using academic evidence. This raises many questions
about rigor, comparability, resources, false precision, standards etc.
Blue Haven Initiative: The PEGAfrica Investment (318003)
by
Vikram Gandhi,
Caitlin Lindsay Reimers Brumme and
Amram Migdal
- FEBRUARY 2018 (REVISED AUGUST 2018)
In May 2017, Blue Haven Initiative (BHI) Co-Founder and Principal Liesel Pritzker Simmons
and Director of Private Investments Lauren Cochran were deciding whether to participate in a Series B
round for PEGAfrica, which sold solar home systems in Africa via pay-as-you-go (PAYG) financing plans
that allowed customers to make small payments via mobile money to pay off the solar equipment over
time. BHI engaged in direct and indirect investments that generated positive environmental and social
impacts alongside healthy financial returns and had already invested in PEG’s Series A round the
previous year. Should BHI commit to the Series B round?
Key Themes: Investing in emerging markets (Africa) and emerging business segments (PAYG financing)
poses many challenges to core investing activities such as financial projections,
valuation and exit modeling. Family offices doing direct investing have unique capacities
to be flexible, long-term partners to companies absent formal capital markets.
Root Capital and the Efficient Impact Frontier (218084)
by
Shawn Cole and
Caitlin Lindsay Reimers Brumme
- FEBRUARY 2018
In 2015 Root Capital, a pioneer in the impact investing space, began to explore how to more systematically integrate impact and financial management. After much deliberation, Root Capital landed on ex-ante rating system for any potential investment that produced a proprietary expected impact. With this tool in place, Root Capital had an integrated picture of impact and financial performance for a loan and across its portfolio. The next question Root capital faced was how to use this tool to optimize impact and financial performance going forward. This case was designed to be taught alongside Root Capital’s Efficient Impact Frontier Simulation exercise.
Key Themes: Creating an actionable way to quantify expected impact “ex ante” allows firms that
are actively seeking to maximize impact within a given set of parameters a way to
integrate financial and impact management.
Meridiam Infrastructure Africa: Madagascar Airports (218068)
by
Shawn Cole and
Lynn Schenk
- FEBRUARY 2018 (REVISED DECEMBER 2019)
This case examines an asset class critical to global economic growth, but often
overlooked in the impact investment space: infrastructure. We will examine the role an equity investor
can play in in the context of a Public Private Partnership in Madagascar, one of the poorest countries
on earth.
Key Themes: Public private partnerships can be an approach to sharing risk/value to finance large
public assets. A focus on ESG may be a competitive advantage when bidding on opportunities
and a source of risk-mitigation for these projects over the long-run.
Wellington Global Impact (218067)
by
Shawn Cole and
Lynn Schenk
- FEBRUARY 2018 (REVISED OCTOBER 2018)
In 2016, Wellington launched the first-ever public market impact investing fund. This case
explores the process of building a new impact investing product within a leading asset manager. In
addition, the case examines two fundamental questions about impact investing in public markets: Can
an impact investing strategy in public markets generate alpha? And, how can you measure, manage, and
communicate impact in a public markets context?
Key Themes: An impact investing (intention, measurement) strategy is possible in public markets,
where “impact” as defined by Wellington having a close proximity to opportunities
in neglected markets. Impact themes themselves are not highly correlated. Alpha, net
of fees, remains an open question.
OpenInvest (218064)
by
Shawn Cole,
Boris Vallee and
Nicole Tempest Keller
- FEBRUARY 2018 (REVISED AUGUST 2018)
OpenInvest is a San Francisco-based startup founded in 2015 that uses “Robo advising” to enable retail investors to customize their portfolio as per their individual preferences. OpenInvest seeks to combine the strengths of both index investing and personalized impact portfolios. Examples of the latter include a lower-carbon portfolio, or a portfolio that underweights firms associated with gun violence.
Key Themes: The financial cost (Sharpe ratio) of small screens is negligible. Proxy voting enables
retail level engagement with companies and studies demonstrate proxy voting can influence
corporate behavior. FinTech enables customization and democratization of “impact investing”
that was not available even just a few years ago.