5.4 How Universities Can Promote Multidisciplinary and Cross-cultural Collaboration in Impact Investing: the Case of the University of St Gallen and Insper
By Angélica Rotondaro, Managing Director, University of St Gallen Hub Office Latin America; Johannes Boch, Coordinator, Impact Investing Research Platform, University of St Gallen in São Paulo; Sérgio Lazzarini, Professor of Organization and Strategy, and Dean of the Graduate Degree Programmes, Insper Institute of Education and Research
- Management schools can play an important role in building the impact investing marketplace by providing multidisciplinary and multistakeholder common spaces for joint hands-on projects and knowledge consolidation/diffusion.
- Although it is easier to develop one’s own research alone, innovative solutions will come across more easily through cross-cultural teamwork.
- Academia is generally perceived as the “ivory tower”. In the case of the Impact Investing Latin America (IILA) Knowledge Platform, professors, students, researchers and practitioners are developing front-line projects and supporting the growth of the impact investing field.
- Impact investing can be an opportunity to connect the dots between economic, social and environmental demands and simultaneously reinforce the creation of a generation of responsible leaders.
Universities have the means to consolidate the requirements for future sustainable economic, social and environmental development. No other type of institution provides comparable independence, freedom to test and succeed or fail, and start over again.
Whether due to a growing student demand to conduct research, do a traineeship, and afterwards direct the spirit and purpose of their professional lives to improve society and drive innovation as well as generate profit, or as an internal process of rethinking the way business and economics are taught in the universities, some management schools are reviewing their curricula and providing experimental labs aiming at fostering future responsible leadership.
This is the case of the Impact Investing Latin America (IILA) Knowledge Platform44 launched in December 2012 as a joint initiative between the University of St Gallen45 (Switzerland) through its hub office in São Paulo and Insper46 (Brazil).
The mission of the platform is to address the challenges the impact investing sector is facing in Brazil. We started with projects in the following three areas: impact measurement, the development and analysis of hybrid investment models and support for impact entrepreneurs to build their business models. These initiatives were fine-tuned after the 2nd Impact Investing Conference, held in São Paulo in August 2013, where investors, entrepreneurs and academics highlighted the three main challenges for mainstreaming impact investing in Brazil:
- Lack of transparency and available investment data and the lack of a legal framework
- Absence of a standard definition and investor knowledge about impact investing
- Main actors’ tendency to develop their own projects without engaging others and rarely embracing innovative projects in a cooperative way
The central component of our interdisciplinary platform is the student body. Currently, 20 students from different backgrounds are doing their Master’s or PhD theses in the area of impact investing. After the platform was launched, a continuously increasing number of students from different areas of studies have approached us to join front-line projects in Latin America.
From this experience, three main roles management schools can play to respond to this demand, be a cradle of entrepreneurs and a catalyst for responsible and sustainable leadership become apparent, summarized in the box below.
The Functions Business Schools Can Serve
Meeting Point/Centre for Expertise
- Support building the impact investing marketplace by organizing uncoordinated activities through a multidisciplinary approach; leverage universities’ neutral stance to engage different stakeholders
- Partner with other universities to promote cross-cultural viewpoints and improvements on existing theory
Industry Knowledge Platform
- Generate knowledge through academic papers, case studies, research workshops
- Transfer knowledge through graduate courses (integrating social finance into the educational curriculum) and executive education
- Disseminate knowledge through conferences, online communities, newsletters, academic papers and the mass media
- Use a hands-on approach as a learning tool: students in a mixed role of trainees/researchers support building business models and cases for enterprises that provide products and services to underserved markets, or financial institutions (conventional and venture philanthropy), family offices and high net worth individuals
Cross-cultural and Multidisciplinary Approach
IILA provides a neutral, not-for-profit research-oriented space that goes beyond academic circles. The two founding universities – the University of St Gallen and Insper – are long-term academic partners. The impact investing activities of the University of St Gallen are connected and accelerated in a research platform based in São Paulo. Insper has implemented an initiative for impact measurement within its Centre for Public Policy, called Insper Metricis.47 Cooperation between the two universities relies on a steering committee that spans both universities’ impact investing initiatives and its members jointly supervise research pilot projects and executive education programmes.
Pilot projects must follow the Platform’s key values: first, research must be generated jointly with local partners; second, priority is given to front-line research; third, different stakeholders in impact investing should be approached systematically to build a common space.
At the moment, the pilot projects are identified in two ways. First, we are approached by impact funds, entrepreneurs and development banks that would like our students to support their projects. For example, Dr. Consulta,48 a Brazilian healthcare clinic network for low-income people, approached the University of St Gallen through the impact investing fund LGT Venture Philanthropy.49 This research addresses the question of social impact measurement and its relevance for the strategic positioning of the project. As a first step, the social economic impact and the flow of recommendation will be measured, among others, through public value assessment.50 The second step comprises the integration of the data in a sustainability-balanced scorecard51 that will be developed with the Dr. Consulta management team in order to illustrate crucial information for future strategic decision-making.
Another example is a project to adapt the concept of social impact bonds (SIBs) to the Brazilian context for an environmentally protected park. This project was identified through Instituto Semeia,52 an institute that promotes innovative and sustainable management models for protected areas and Brazilian parks. In its current form, the project is a public-private partnership (PPP) crafted by the State of Minas Gerais in Brazil. The idea is to attract investors and entrepreneurs to help develop tourism in the parks, while guaranteeing the conservation of the area’s natural and archaeological resources. The government thus designed a pay-for-performance contract whereby private entrepreneurs who will manage the public concession with receive a 10% bonus if they meet a host of socio-environmental standards.
The second approach to identifying pilot projects includes research topics the universities pinpoint as essential to bring added value to the impact investing ecosystem. For example, the University of St Gallen’s hub office in São Paulo has started a study to evaluate how private companies and their institutes and foundations could engage in impact investing by looking at their inclusive business strategy, along their own value chain. The expected result is to develop a roadmap with the different phases from corporate social responsibility to inclusive business and impact investing, and the milestones for a company to move from one phase to the other. The first roadmap proposal will be presented and discussed during a roundtable at the annual Impact Investing Conference in August 2014, with representatives from Nestlé Brazil, Ouro Verde Amazonia,53 Jari Foundation54 and BNDES (Brazilian Development Bank).55
After identifying the project and depending on project complexity and size, a sounding board committee is put together, which includes experts from complementary fields of expertise from academia and the business world. The two founding universities also hold a monthly meeting that serves as an open feedback session on what should be improved or changed for their respective projects, and whether different sorts of research expertise should be added to ongoing projects. Recent meeting topics included the review of the annual conference programme, and discussions about a methodology for measuring impact and the need to define control groups for comparative purposes.
This research cooperation has resulted so far in an article that was presented at the Academy of Management Conference.56 It uses data from interviews with local and international impact investing funds, entrepreneurs, accelerators and thought leaders in the Brazilian impact investing ecosystem to generate novel propositions on how the impact investing community can combine financial and social performance.
Additionally, other front-line projects have been or are currently being developed, including an investor’s report for an organic agriculture venture in the south of Brazil, the development of a pilot study to measure the socio-economic impact of investment in education for low-income populations in Rio de Janeiro, and a mapping of the impact investing funds in Brazil jointly developed by LGT Venture Philanthropy, the University of St Gallen, the Aspen Network of Development Entrepreneurs57 and Quintessa58 in August 2014.
To connect essential academic and intercultural capacities, the Platform is initiating cooperation with several departments at the University of St Gallen in Switzerland (strategy, entrepreneurship, gender inclusion, renewable energy, transcultural management), and with Insper (public policy, strategy).
In addition, recently, new partners have joined the Platform: the Centre for Organization Studies59 of the School of Business and Economics of the University of São Paulo (FEA-USP) to develop a project to assess the impact of projects supported by a development bank in the area of family farming; the Humanistic Management Center60 (Switzerland) as a sounding board for the IILA Knowledge Platform, the BMW Foundation61 for potential projects in the area of intrapreneurship and for engaging privately-owned foundations, and Oikos,62 a student association for sustainable economics and management.
The intercultural knowledge transfer expresses itself in the classroom as well, and a new course on impact investing is being developed for the University of St Gallen in Switzerland, as part of the master’s additional programme of studies. In São Paulo, an executive education programme is already held every year at Insper that focuses on the latest developments in impact investing, particularly when it comes to measuring social and environmental impact.
Last, but not least, knowledge transfer and diffusion is achieved through various communication channels, such as the annual Impact Investing Conference in São Paulo, already in its third edition. This year the conference will also be initiated in Switzerland.
Challenges and the Impact on the Future Generation of Responsible Leaders
The IILA started as a bottom-up process and consequently the main challenge relates to creating a structured initiative inside the universities. Thus questions on the possibility of creating an independent centre of expertise or integrating the initiative into an already existing centre (social entrepreneurship or sustainability) are currently being discussed.
Besides organizational challenges, intercultural initiatives have a series of pros and cons. The advantage of an intercultural initiative with strong regional partnerships is certainly the fact that it allows access to local contacts, organizational support to set up projects and an understanding of the local culture and current socio-economic issues.
However, like any other kind of cooperation, intercultural teamwork can be difficult. Aspects of mutual coordination, the fact of competition in a common field of research and fundamentally different values and systems for academia, research or education can prevent collaboration. In addition, sensitiveness about methodological approaches exists in academia. Combined with culturally different communication styles, there may be friction.
Therefore, besides looking for the different areas of expertise to compose a project team, it is of fundamental importance to be aware of the cultural and linguistic challenges posed by the different communication style and academic beliefs.
All in all the outcomes have proved to be positive in terms of generating innovative models and exposing students to different front-line and hands-on experiences.
We truly believe that these experiences are of crucial importance for teaching hands-on responsible leadership skills. However, impact investing is a growing industry and open positions for the students and researchers who have been engaged in front-line projects are still restricted, when compared to conventional consulting or banking carriers.
In our case, of the six students who have developed their research connected to impact investing, two are working in the banking industry, two are in a social finance consultancy, one is in academia and one is looking for a position in the area. Additionally, it is interesting to observe that students who have been engaged in research associated with impact-related business models and investment mechanisms start to elaborate personal entrepreneurial ideas.
Summary and Recommendations to Other Universities
IILA and its intercultural and interdisciplinary approaches create cutting-edge knowledge on current developments in the Latin American impact investing market, and provide the incentive for students to come to the region, while supporting the development of real cases as an educational process for future leaders.
Based on our experience, the following are our recommendations to other business schools interested in becoming engaged in building the impact investing sector:
- Assess the local market needs and identify the university’s core expertise. It can be helpful to allow interdisciplinary approaches and support cultural openness and academic flexibility. Consequently, methodological and conceptual knowledge can adapt quickly to the needs of the respective market.
- Relate this knowledge to potential areas of engagement and identify local partners (universities, foundations, associations). Identifying a local partner is essential to ensure the culturally adapted and accepted implementation of new concepts or ways of doing things.
- Start creating collaborative centres of expertise. Impact investing is a multidisciplinary topic, which, to be successfully implemented, requires that centres of expertise be created to engage all the co-related topics in a systemic manner.
- Collaborate with business schools from different regions. To bring together different world views and to promote a better intercultural understanding, invite professors from other schools for lectures, workshops or MBA courses.
- Promote meaningful applied and field research in which students not only engage in observations and apply questionnaires but also support projects as consultant trainees. We consider a time frame of at least three months, so the field work can bear fruit in improving local projects and create a steady academic return for the business school.
- Document the experience in the joint projects and interactions with the communities through teaching cases, disseminating academic papers and white papers with guidelines and actionable recommendations to investors and entrepreneurs.
We believe these points are crucial to constructing a future management educational approach that is able to catalyse the financial and social innovation needed to meet the growing global challenges.