Too often, when discussing social and environmental issues such as poverty, global warming, water access and energy, business is cast as the culprit, not the solution.
The sentiments I hear include:
Business leaders focus on the bottom line. Investors expect a high return on their money. It’s all about beating the competitor.
Business is evil.
I wholly agree with the first set of statements, and wholly reject the latter.
Business is focused on providing a market rate of return to its stakeholders, which is precisely why it holds the key to solving the intransigent problems plaguing a large percentage of the world’s population. Problems such as hunger, disease, violence, lack of access to the basic necessities that reduce life to daily suffering and hold back the economic development of entire nations.
More specifically, I am referring to the concept of impact investing, which is an evolving business philosophy essentially stating that business operations can and should support societal change through market forces, while providing its investors with a competitive rate of return.
I understand that for many, there seems to be an intrinsic conflict when pairing the words “social good” with “profit.” But consider: Impact investing integrates social impact as an inherent part of the corporate strategy, not an “add-on” to be addressed through special philanthropic initiatives. As such, impact is measured across all groups of stakeholders – investors, employees, customers, community members, environmental concerns – so that the corporation’s operations tightly align with addressing social and environmental problems.
Historically, attempts have been made to assuage these dire realities through government aid, individual and corporate philanthropy, nonprofit service organizations and charities. And while the mission supporting many of these efforts is noble, their impact undeniably vital, and the work foundational to our faith, it is also clear that those attempts are not enough.
The numbers yet increase. The percentage of the world’s population living in dire poverty. The individuals who lack access to clean water. The incidences of violent upheavals, population displacements, war.
Business is needed to solve seemingly intractable social problems and provide models that have the potential to scale to a global level.
Business is not a panacea, nor is it a perfect institution, as has been too often evidenced in media headlines. To realize its power more fully, we need leaders who can reimagine what their organizations can do through their core operations – not as an add-on philanthropic program – to solve issues affecting their workforces, their clients, the countries in which they operate. And yes, to provide a competitive rate of return for investors while doing so.
We need for investors to be able to direct their resources toward businesses that create value through fulfilling neglected social and environmental needs, without suffering a penalty. This would ensure that the best minds and the latest technologies are brought to bear on solving problems.
At Mendoza, impact investing aligns with our founding mission for business to serve the social good, while offering many new avenues for thought leadership expressed through teaching, research and public discourse. And we have begun to build on our foundation with many efforts centered on the concept.
In June 2014, Mendoza jointly convened the Investing for the Poor Conference in Rome with the Pontifical Council for Justice and Peace and Catholic Relief Services, which brought together more than 100 global leaders to discuss how impact investing can address global poverty. We have held workshops and created a website about impact investing, in order to provide our faculty with resources for teaching and engaging in broader discussions. We’ve gathered experts representing environmental, financial, government and academic concerns as part of our inaugural Climate Investing Conference, which offered a new vision for addressing the dire climate challenges affecting the globe.
Our 2015 spring speaker series, Ten Years Hence, was dedicated to the theme of impact investing, with leaders from diverse industries sharing their perspectives for what the next decade will bring. We’ve organized a panel discussion centered on the topic as part of our Shamrock Series breakfast in Boston so that our alumni and recruiters can participate. There are undergraduate and graduate student clubs, such as Unleashed and the MBA Association, that are developing initiatives to further the understanding and application.
These are just a few of the College’s activities related to impact investing, and we have plans for many more. We hope to establish a dedicated center to concentrate and leverage our efforts, as well as to develop a course similar to Applied Investment Management (AIM), so that students may gain real-world experience with impact investing, learning first-hand from private equity experts and managing an actual portfolio.
Impact investing offers tremendous possibilities, and it is an energizing time to be part of the Mendoza College of Business. So instead of blaming business, let’s remember that business can be used as a vehicle to solve societal problems, period. And if investors get high returns on it, so be it. The high returns would entice additional investments devoted to the social and environmental problems.
The power of an individual being able to earn a living in a way that promotes societal and environmental good should not be underestimated. Likewise, the power of the market directed toward serving its stakeholders while impacting the human community for the better cannot be denied.
Let us all aspire to be great. God bless you.
Roger D. Huang
Martin J. Gillen Dean
Kenneth R. Mayer Professor of Global Investment Management