By Caroline Luscombe, Assistant Director of Experiential Learning Programs
Earlier this year, Presidio created an internship program by partnering with impact investing organizations to create positions specifically for our students and recent alumni. Our students were mentored and guided by their partner organizations as they developed research, analysis, and recommendations to enhance strategies for investing practices.
The internship program was made possible by the grant we secured from the amazing team over at the Betsy and Jesse Fink Foundation. The Foundation is focused on catalyzing the impact investing industry in a non-promotional way, working with solutions-driven organizations, creating replicable programs, and educating the next generation. The Foundation partnered with us to support the growth of impact investing as it relates to climate change and associated global resiliency efforts. To that end, we created internship positions with a handful of impact investing organizations and allocated portions of the grant to our student interns.
Creating an internship program was pretty simple; far less simple is the concept of impact investing. We’ve created this blog series to help explain not only our internship program and the work that our students have done, but also to shed some light on this newly emerging field of great importance.
I’ve invited the students tell you about their experiences throughout this series. You’ll hear from our Masters in Business Administration (MBA) and Masters in Public Administration (MPA) students and alumni who worked on projects related to sustainable agriculture, energy policy, and fund managers. As the introductory author to this series, I’ll aim to explain the basics about impact investing and why it is so critical and so exciting to our community.
Investing for Impact
The investing world is experiencing a paradigm shift. The theories upon which our traditional investment engines were built no longer provide a solid foundation. Modern Portfolio Theory (MPT), as published in 1952 by Harry Markowitz, examines the relationship between risk and return in order to create an optimal portfolio of investments and remains the key driver for many mainstream investment strategies today. This theory, which teaches diversification as the key for successful investing, relies on many assumptions about markets and consumers that aren’t always true. For example, the theory is predicated on the idea that investors are rational and risk-averse, and that the risk and volatility of an investment are known and understood by investors.
In A New Foundation for Portfolio Management, RSF proposes that MPT is inadequate because it fails to consider integrated risk, which includes “the potential impact of ecological limits as they manifest in business disruptions, shortages, and social/political upheaval.” While not a new concept, impact investing is surging in the wake of the recent financial crisis. It values long-term potential, which can reduce the volatility and risk of investments. Ventures funded by impact investors are often poised to take advantage of new market opportunities. As we consider the fallacy of the assumptions of MPT and acknowledge that there are ecological limits to growth, we can see that new measures of risk and return are both necessary and fortuitous for investors who want to deliver value.
Presidio Graduate School teaches future decision-makers to incorporate environmental and social aspects of business and policy throughout every component of the curriculum, so our students are well poised to thrive in the emerging world of impact investing. We don’t believe that Sustainable Development can be taught in a few electives outside the core curriculum; rather, we take a holistic, systems-thinking approach to make our students masters of this discipline. In every course, we guide them to act upon their values and make a difference.
Similarly, impact investing requires a holistic analysis of costs, risks, and benefits. We are delighted and honored to have created so many opportunities for our students and alumni to get involved and help support this emerging industry that truly values the triple bottom line, and we look forward to telling you about our impact on impact through this blog series in the weeks to come.
Caroline Luscombe is the Assistant Director of Experiential Learning Programs at Presidio Graduate School
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