5.1 Essential Steps to Building a University Impact Investing Programme: the Case of Duke University
By Cathy Clark, Director, CASE Initiative on Impact Investing (CASE i3) and Adjunct Professor at Duke University’s Fuqua School of Business, and Grace Webster, Co-Chair, CASE i3 2013-2014
- Universities can play a unique role in field-building, developing talent and connecting finance to other expertise. While much has been done to incorporate impact investing in MBA curricula, to develop frameworks for successful practice, better data on what works and what does not are needed as well as meta-studies to compare approaches.
- It is important to define the theory of change for a university’s programme on impact investing and build activities around the assets and the outcomes to be achieved.
- Looking for specific ways to engage with faculty across the campus is also important. Impact investing is never just about finance, and the depth that experts in other fields can provide is invaluable.
- Other recommendations include leveraging activities across different stakeholder audiences and across curriculum, research and practitioner engagement, and creating programmes that provide flexibility to learn as the field learns.
The wave of impact investing has hit, and universities have jumped on board. Deloitte’s annual surveys show the millennial generation – which in the United States alone comprises approximately 80 million people born between 1980 and 2000 – is more interested than ever in the power of business to solve social problems. Many are looking to graduate degrees, especially the MBA, to help equip them for this new task.
The role of universities in the developing field of impact investing is important and much of the terrain remains uncultivated. Universities are long-term institutions that can play a unique role in field-building, developing talent and connecting finance to other expertise. While a lot has been done in terms of creating the beginnings of a case literature and theoretical basis for the education of MBAs in the past decade, the data in the field are still largely inadequate for a high volume of peer-reviewed research on both the kinds of enterprises that succeed and the financial strategies that do. On the practitioner side, the world is exploding with white papers, case studies and blogs, and more meta-studies are needed to compare approaches and lessons and develop stronger frameworks to truly guide successful practice. Over the longer term, the cross-sector nature of impact investing also represents both a challenge and an opportunity for universities. Some of the most exciting work comes from different disciplines working together, and university programmes starting to do this formally in such areas as impact investing in health, education, the environment and poverty alleviation are worth watching.
Founded in 2001 and one of the first MBA centres focused on the role of enterprise in solving social problems, the Center for the Advancement of Social Entrepreneurship (CASE) at Duke University’s Fuqua School of Business has been concerned with the capital markets supporting social entrepreneurs. In 2011, we took the idea of creating a signature initiative on impact investing to the CASE advisory board and our dean’s office. At the Social Capital Markets (SOCAP) Conference three months later, we announced our new initiative alongside a new global advisory board, and a significant project grant from the Rockefeller Foundation.1617 Our timing was clearly fortuitous; a year later we had raised about $1 million and 24 months later we had raised another $10 million, in partnership with others inside and outside of Duke.
Today we have received funding from over 20 partners, including major financial institutions, foundations, investor networks and individuals, including alumni. We have worked with practitioners across the entire spectrum of impact investing, from innovators on the front lines of last mile healthcare delivery in the Gambia, to major investment banks and funds, to individual angel investors working on nearly every continent. We have taught over 850 Fuqua MBA students about impact investing, convened over 600 practitioners at global meetings, helped build a database of over 8,000 impact enterprises and contributed to policy recommendations at the US White House and on Capitol Hill about ways to advance the field. We believe that the lessons of what we have learned can serve other universities, perhaps helping them to not only develop their students’ interests effectively, but truly leverage their institutions in service of the field18 of impact investing at large.
Three years into our programme, we have learned a lot on how to best leverage resources when creating a new programme in impact investing:
1. Define your theory of change. Many people look at MBA programmes, or social enterprise programmes within MBA programmes, and think we all do the same thing. However, each centre is unique in programming and overall goals. At CASE we have always thought carefully about the change we are trying to create, our best assets and how we can leverage that change. Based on this assessment we make choices about what we emphasize, and what we turn away from.
In the case of our impact investing initiative, we had a very definite point of view about student preparation. In 2011, the interest from MBA students to learn about impact investing was very high, but the supply of jobs for them as impact investors was very low. Together with our dean’s office and faculty committees, CASE had developed a curriculum for social entrepreneurship concentrating on two strategies, which we call “broad” and “deep” student engagement, and we imitated this for impact investing. For the broad student body, our goal was to introduce the emerging field of impact investing into required coursework, so that every Fuqua MBA would be exposed to impact investing. All new MBA students prepare an impact investing case at the beginning of the core curriculum, and the CASE i3 information session, workshops and speakers’ series are open to all MBAs. For students highly interested and committed to going deep, our goal was to prepare leaders who can help build the field of impact investing, not just staff it through entry-level MBA jobs.
The implications of our choice to have a deep engagement strategy were significant: it was not enough to add a module to an existing course or to have students learn to perform due diligence; we needed them to master the basics of investment and impact, as well as excel in the ambiguity of an emerging field, becoming experts in cutting through uncertainty, and doing so in ways that could provide value for others. We sought to develop what we call “multilingual leaders”,19 an idea that was identified in some of our research, which showed that successful impact investing practitioners – and others in the social impact space – must navigate comfortably across the public, private and non-profit sectors, mastering their frameworks, vocabularies and cultures. We have been building coursework and co-curricular experiences around specific skills and cross-sector communication we want our students to acquire. For the past six years, for example, we have held slots in some of our courses for students from the public policy, law and environment schools at Duke, to create richer interdisciplinary conversations. We have also built the skills we think are most critical (such as designing debt and equity impact investment funds, conducting due diligence, structuring investments, defining investment theses of change and assessing impact) into our courses, so that once students follow the course sequence, they can apply those skills in the broader array of extracurricular programmes. We are also building the support systems these students need through other departments: CASE i3 has supportive staff and services available in Fuqua’s Student Life and Career Management Offices, among others.
Key questions to consider:
- What is the goal of the impact investing education within your school? Your goals and strategy should ground all programming, including the type of student you are reaching and what success looks like. Will your strategy be around broad engagement for everyone, deep preparation for some, or both? For example, what are the career goals of students interested in impact investing, and what skills do they need to be successful? What partnerships and research capabilities would add value to the assets already present at your university/business school?
- How will you serve the students most interested in impact investing as a career path? If you are going for a “deep” strategy, recognize that students who are professionally interested in impact investing need a variety of skills to become multilingual leaders in an emerging field, and cultivate programming to meet this need. This is not just finance with a fancy name, and students may need different kinds of career coaching and support.
2. Create holistic programmes that give you flexibility to learn as the field learns. Our solution to supporting students who wanted a deeper impact investing experience in a field that was still evolving was to create a signature two-year fellowship programme, which provides an intense end-to-end experience for students, offering a range of opportunities that we could change and adapt over time. Students who opt in and are accepted to the CASE i3 fellowship programme receive course instruction, hands-on consulting experience, deep exposure to practitioners and thought leaders, a peer cohort and an alumni network. We have approximately 8-10 fellows per year, a small group that gets most of our attention and support and is self-governed by two student co-chairs each year. The fellows come from diverse backgrounds and have career plans in law, wealth management, social entrepreneurship, consulting, private equity and operations.
A highlight of the fellowship is a for-credit consulting experience, the CASE i3 Consulting Practicum.20 Students work in teams, led by second-year fellows and staffed by first- and second-year associates, to help real practitioners address significant problems and issues. In the past two years, we have had over 75 students in the programme and many have rated it as one of their favourite academic experiences. We recruit for projects in August of each year and the teams work from October through April, giving students a multi-term leadership and learning experience in which they define a research question, work to assemble data, and design an engagement process with their team and client to develop actionable recommendations. Consulting projects are sourced through the CASE i3 advisory board network and social media outlets like Twitter and LinkedIn. While some of the proposals come from organizations with which we are already familiar, many represent new contacts and groups working on exciting and innovative ideas.
Consulting projects are inherently flexible – allowing students to work in impact areas that interest them, as well as explore every role across impact investing. Last year’s cohort, for example, included local and international clients, encompassing entrepreneurs, investors, intermediaries and advisers. Students apply many different MBA disciplines to this work: one CASE i3 fellow, for example, was interested in agriculture and led a project to build a revenue model for a local agricultural intermediary and then tested its investment thesis with agriculture funders across the US. Another CASE i3 fellow interested in institutional investment worked with the World Economic Forum to help develop research-driven guides for engaging university endowments in impact investing. Other students have worked on social impact bonds, angel investing, fund performance analysis and environmental investment vehicles – a diverse range of topics.
Key questions to consider:
- How will you serve students across impact areas? Impact investing is a wide field, but students care about specific impact areas and industries, like education, the environment, healthcare, etc. Find ways to allow them to pursue those interests in a deep enough way to get real experience and develop skills and networks that will provide the foundation for a successful future career.
- How will you build in flexibility? Flexibility in programming prevents specializing too deeply in one particular area and allows your organization to remain nimble as new research opportunities emerge in a rapidly changing industry.
3. Identify your core capabilities and leverage relationships across academic curricula, faculty research and practitioner engagement to work collaboratively. At CASE, we believe that our “special sauce” is not only preparing MBA talent for social impact careers but also utilizing our deep experience in social entrepreneurship to conduct research that is easily understood by practitioners and can improve practitioner effectiveness. To do this we find points of confusion, questions or areas where patterns seem to be emerging but are not yet clear, and create analytical frameworks that we test and share with others. This became the focus in the first year of CASE i3, where we took on projects that explored the correlation between growth and impact for domestic impact enterprises and their funders, gleaned lessons from the investing experience of a global angel investment network and created a guide for new global investors, and undertook an in-depth analysis of high performing investment funds.21 This research is supported by students through the CASE i3 fellowship, partnerships and grants with external groups, and CASE, Fuqua and Duke-wide faculty and staff. Once completed, we share our findings with our partners and supporters, at conferences and symposia, and engage relevant practitioner networks to promote new ideas and lessons to their members.
Building on these core research capabilities, last year CASE added another signature programme, SEAD, the Social Entrepreneurship Accelerator at Duke, focused on helping global health entrepreneurs to scale their impact, as part of the Higher Education Solutions Network of the United States Agency for International Development (USAID). CASE i3’s emphasis on impact investing as a means to help enterprises scale their solutions was an important asset USAID recognized and is a core component of SEAD’S work.
Through SEAD, we select a cohort of global health entrepreneurs and work with them over several years to scale their impact. We do this in partnership with colleagues inside Duke with deep expertise in health and health systems, including Duke Medicine, the Duke Global Health Institute and the International Partnership on Innovative Healthcare Delivery (IPIHD), and outside with other experts, such as with Investors’ Circle and the USAID mission in East Africa. Tenured research faculty from all over the university are engaging to help ask and answer questions about scaling global health outcomes, and they recognize the expertise we bring in both enterprise development and investing.
Key questions to consider:
- How can you leverage your activities across different stakeholder audiences, across curricula, research and practitioner engagement? We can develop a scaling readiness assessment tool in an MBA class, test it with some of our SEAD innovators, have a student intern implement it in India that summer, fund a researcher to study the impacts the next year, and report all of this back to an impact investor, whether that be an angel investor, a fund manager or a local ministry of health. The synergy possible in this field when you blend enterprise, investor, government, student and faculty perspectives is very powerful.
- How can your programme engage with the practitioners in the field, so that as they learn, you learn too? This can be as simple as bringing in guest speakers, or as complex as bringing in full-time expertise as adjuncts or staff, as many other programmes have also done.
- How can you engage with faculty across your campus? Impact investing is never just about business, and the depth that experts in other fields can provide is invaluable. Robert Malkin, Founder of the Developing World Health Care Technologies Lab at Duke’s Pratt School of Engineering, engaged one of our CASE i3 fellows after graduation to develop a business model and investment case for the Pratt Pouch, a single serving antiretroviral foil pouch for antenatal treatment his lab developed that has been recognized by the World Health Organization and USAID. The pouch is currently in clinical trials in Ecuador and Zambia.
- How can you use your power as a convener and objective university voice to help others learn what you are learning about the impact investing field? We do this through papers, blogs, reports, books, convenings and several very active Twitter feeds.
We are excited about the development of impact investing and the role that universities can play in leveraging their assets to help social innovations access the capital they need to succeed. We also know that impact investing is a complex topic that has attracted some of the best and brightest minds across the fields of finance, entrepreneurship, philanthropy, policy, non-profit management, social enterprise and inclusive corporate engagement. We are currently working with over 24 researchers at 14 universities to help create better peer-reviewed research in the field. We very much hope that other universities will see this as a potent area of future exploration and work to find a niche in it that works for them. And we look forward to learning from them!