Inequality, public health and the environment may keep you awake at night but do your investments and pensions support your values? Could investment managers be supporting companies that damage the world with your money?
There is increasing evidence that more investors are demanding a more responsible approach. Earlier this year, the findings from a survey from global wealth manager Schroders, found that investors across generations are calling for more socially and environmentally conscious investment choices.
It’s not just about wanting to avoid companies in taboo sectors, such as tobacco and alcohol. Investors today want their pension funds and wealth managers to be actively searching for businesses that are changing the world for the better.
The Student Impact Investment Fund
This is why, with the support of the School’s lively and popular Social Impact Club, Josh Bell MBA2019 founded our first Student Impact Investment Fund (SIIF). The fund was set up last year to invest in social enterprise start-ups.
The aim is that eventually it will be profitable and that all financial returns will be reinvested into more social enterprises, businesses that aim to apply commercial strategies to address social and environmental challenges and improve the wellbeing of people and communities.
The SIIF is thought to be the first impact fund set up at a graduate business programme in the UK and was largely borne out of Bell’s desire for more experiential learning opportunities - giving them that practical out-of-the-classroom application of their learning that employers are increasingly looking for.
The fledging fund has recently reached a key milestone. Its founder, having graduated, has handed the reins to the next generation of London Business School (LBS) investors.
Giulia Poletti de Chaurand and MBA2020 classmate Amanda Barros Ambrogini are now tasked with taking the fund to the next level.
“Working in an impact fund management really gives me satisfaction,” de Chaurand says. “It is a reason to work late at night and it has become something I do because I enjoy it, not something I have to do.”
Amanda Barros Ambrogini and Giulia Poletti de Chaurand both MBA2020
“The SIIF is thought to be the first impact fund set up at a graduate business programme in the UK”
She explains that the impact targets of the fund are as strict as the criteria for financial returns. “This dual mandate is the challenging part that I really like,” she says.
“I feel lucky to be at LBS at this time because Josh did a fantastic job last year in setting the fund up, in terms of the structure and bringing together all the stakeholders.
“His effort in the first year was focused on actually creating the structure and attracting all the people that will support the fund in the future. And it is such a great idea that it will perpetuate well beyond his time at LBS.”
How does it work?
The LBS SIIF is led by students who source, conduct due diligence and propose investments into seed-stage companies with both growth potential and measurable social impact. The investment takes the form of a minority co-investment alongside a like-minded seed investor or investors.
From sourcing to execution on a deal usually takes three or four months. One investment is made each year but this number could expand in the future as the fund’s assets grow.
The profits from the chosen social enterprise start-ups are reinvested at the end of a five-to-seven year period.
For Barros Ambrogini, the experience of being involved in the fund is one of the most important lessons she hopes to take back to her native Brazil.
“London Business School’s involvement can be the difference maker.”
“I had no background in impact investing before coming to LBS,” she says. “I did have experience working in the third sector. I come from Brazil, and we have several NGOs and Foundations that bravely fight for great causes, but all of them lack the funds to scale up impact.
“Impact investing combines features of a for-profit-businesses with social impact development. I believe it’s a much more sustainable model to scale impact, especially in economies where people don’t have the resources or the culture to donate and contribute to NGOs and social causes. It combines the best of traditional investing and philanthropy.
“I want to learn more about impact investing so that I can push good investment practices forward when I go back home.”
First investment for SIIF
“We are about to close the first investment. We are still negotiating the term sheet, but we have approval from the investment committee,” says de Chaurand.
“Josh is still involved, as part of the executive committee. He is taking a step back but he is still a very approachable adviser.
“I think the next step is to publicise it outside the School, because the more people know about us the better and the more companies we will have coming to us.”
As part of this, the SIIF team is also looking for a philanthropist to donate £50,000 to kick the fund off under a donor-advised model. It is hoped donors will be attracted to support the scheme to give students an immersive education experience in this important growth area that also results in growing an impact start-up that can change lives.
The London Business School effect
“Deal sourcing is a key differentiator in generating outsized returns in early-stage investing, and one of the School’s core competitive advantages is its global network,” says Bell.
This global network is often strongest across Africa, South Asia and South America, where social enterprises are engaged with the most pressing development challenges. “For these enterprises, London Business School’s involvement can be the difference maker,” he adds. “It can move them along the funding cycle from seed stage to series A and beyond, to really push them to deliver on their impact potential.”
The LBS Social Impact Club has more than 2,000 members and growing quickly. As well as LBS SIIF, our Social Impact Club supports:
Social Impact Week: a week of events showcasing how business can, and is, playing a crucial and positive role in shaping our future world Debuting in 2019, the The week-long schedule of events demonstrates our faculty’s leadership and influence in this space, makes social impact relevant for our students andalso includes a Social Impact Careers Fair.
Invest for Good Conference: the finale to the inaugural Social Impact Week. With 240 attendees this was one of the largest conferences on campus. It brings students and industry- leaders together to explore the latest trends and the possible future of sustainable, responsible and impact investing.
Competitions: there are big opportunities to put social impact skills to the test as part of international business school competitions. These include the Clean Tech Challenge and the competition run by MIINT, the MBA Impact Investing Network and Training.
If you or your organisation would like to help the LBS Impact Fund or you would like to get involved, you can contact Barros Ambrogini and de Chaurand at email@example.com and firstname.lastname@example.org.