If there was any doubt that the impact economy has arrived, 2020 was the proof of concept. The past year has exposed deep systemic vulnerabilities and magnified the need for an intensified use of capital to address splintering social and environmental dynamics across the globe. With increasing pressures around climate change, a rampant global pandemic, burgeoning inequalities, lockdowns leading to the verge of economic crisis, and mass movements against racism, there was an explosion of passion and renewed calls for change. The World Economic Forum has labelled this movement the “Great Reset”.
“To build back better, we must reinvent capitalism.” This provocative call by Peter Bakker and John Elkington issued in the early months of the Covid-19 crisis highlights the need to integrate social and environmental considerations into decision making. Investors have gradually been making this shift. Almost a third of global assets under management now have some sort of impact filter.
There is also a growing move towards deeper intentionality, measurability and accountability of the impact of capital. Similarly, innovative financial mechanisms are increasingly being used to forge pathways of change that produce financial returns alongside impact. One of the driving forces behind this movement is the millennial generation which is expected to receive the greatest wealth transfer in history in the next 30 years and has signalled a tendency to align its capital with its heart.
This all sounds like good news, but as things stand, the impact ecosystem needs to be more prepared for this groundswell. We don’t yet have enough of the institutions and professionals or the financial mechanisms to enact the radical change that is now demanded. Changing this has to happen at multiple levels and business schools have a critical role to play in five key spheres.
1. Training the next generation of impact professionals and investors
As institutions responsible for teaching and training the next generation of business professionals, business schools are ideally placed to shift the status quo. As Professor Kosheek Sewchurran of the University of Cape Town Graduate School of Business (UCT GSB) articulates in his recent article in Daily Maverick, it is imperative that business schools recognise new ways of teaching economic stewardship that shape a different form of logic to shift the way things are being done.
So too, educating professionals and investors by providing them with an advanced understanding of the impact ecosystem, best practice, strategic insights as well as practical skills development is an essential step towards a more resilient and sophisticated impact economy.
Impact investing courses such as the UCT GSB Impact Investing in Africa specialised short course and the Oxford Impact Investing Programme equip investment professionals with practical financial tools and industry insight needed in this fast-emerging industry. Business schools are also increasingly integrating core and elective modules on social finance, managing for societal value, responsible investing, sustainability and inclusive innovation into their programmes.
Creative partnerships are also needed to equip people wanting to work in this space with valuable experience that allows them to apply what they learn in the classroom in the real world. Organisations like University Impact provide practical training and work experience to undergraduate and graduate students by involving them in financial and social impact analysis on potential investments in early-stage businesses across the world. Hands-on education, such as that provided by University Impact, not only helps develop impact-driven professionals and investors but also cultivates a heart in the market through real-world experience.
2. Advancing the development of social entrepreneurs
It is imperative to also inspire and equip the demand side of the impact market. Social entrepreneurs and leaders of small- and medium-sized enterprises need to gain relevant skills and knowledge that empower their development and increase the pipeline of businesses ready to absorb impact capital.
To do this, business schools need to take a crucial step beyond equipping and inspiring to providing supportive platforms for growth. For example, university-linked incubators such as Stellenbosch University’s LaunchLab and others offer support to help refine students’ business ideas. Similarly, access to early-stage financing is essential to getting these ideas off the ground. Initiatives like the SA SME Fund’s recently launched University Technology Fund and the Student Seed Fund enable students to raise seed funding for their impactful ideas.
3. Generating actionable insights, tools and testing new financial vehicles
Going further, these novel ideas and fledgling social enterprises need to be given the scope to thrive in a wider context. Specialised impact centres established within business schools also have the opportunity to take a step beyond teaching and research by using their facilities to address market gaps by designing and testing innovative solutions that catalyse private capital towards the impact economy.
For example, Harvard Business School’s Impact-Weighted Accounts Project is focused on reimagining capitalism by creating an integrated view of performance that captures external impacts in a way that drives investor and managerial decision making. Similarly, the Center for the Advancement of Social Entrepreneurship (CASE) at Duke University is developing a massive open online course (MOOC) that teaches investors and enterprises how to use impact measurement and management to align and contribute to the Sustainable Development Goals.
Novel innovations like the Green Outcomes Fund – a first of its kind financial mechanism that incentivises local South African fund managers to increase investment in green small, medium and micro-sized enterprises by paying for outcomes – would arguably never have been created without the collaboration and support of many partners, including GreenCape and academic partners like UCT GSB’s Bertha Centre.
4. Convening practitioners and researchers to support learning and innovation
Specialised impact centres are also well positioned to provide a forum for practitioners, researchers and students who share a focus on advancing the impact economy to come together and generate applied research. These networks facilitate important connections that link research to the real world and allow ideas and insights to flow to a broad group of role players.
For example, as a neutral market builder, the Bertha Centre houses the secretariat for Impact Investing South Africa’s National Advisory Board, which allows it to have a strong voice in conversations that are building the impact investing ecosystem in the country.
5. Sustainability in the boardroom
Finally, addressing the grand challenges that the world currently faces demands change at a systems level. Bakker and Elkington note that these shifts require business leaders to look beyond corporate responsibility to align their strategies with social and environmental systems that they rely on. The call for stakeholder-focused models of management that create inextricable links between purpose and profit have been highlighted by Larry Fink, BlackRocks’ Chairperson and CEO, in his annual letter to CEOs over the last few years. This campaign needs to be picked up by more business schools to look beyond traditional theories of shareholder maximisation. They have a role to enlighten their students with business models, methodologies and tools that drive learnings in the classroom to actionable steps in the boardroom with the lens of a sustainable future.
A great reset that is underpinned by inclusive and sustainable change to our current society is long overdue, but change is difficult, and it requires interventions at multiple levels. Business schools are uniquely placed to influence change at a variety of levels and many of them are powerful, well-respected and well-resourced institutions. The impact economy is here, and the world desperately needs its business schools to be the ones sounding the bugle. DM
Stephen McCallum is a senior analyst at the Bertha Centre for Social Innovation and Entrepreneurship, a specialised centre at the UCT Graduate School of Business.
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