Issue link: http://www.e-digitaleditions.com/i/201447
really knows what happened to Sufiya Begum, and no one really knows how much impact microfinance can have. I quote Starbucks' CEO Orin Smith: "Aligning selfinterest to social responsibility is the most powerful way to maintaining a company's success." To my students I suggest, "Let's roll up our sleeves and get to work. But let's temper our work with realistic expectations. Microfinance will not relegate poverty to the museum, and Michael Porter's concept of shared value is still largely theoretical." Ending on the Sweet Spot We finish on a more upbeat note by delving into social impact investing—the sweet spot where the business and development worlds intersect. Social impact investing is a hybrid of philanthropy and private equity, because its investments are aimed at solving social and environmental challenges, while generating sustainable financial returns. It is a disruptive notion, challenging my students' assumption that for-profit investments are organized solely around the bottom line, while social problems should be left to philanthropists and government. It is also a fundamentally optimistic notion, built on the idea that business can promote a common good while also generating profits. Students thrill to this premise. Many of the development students have discovered how much NGO time is spent wooing donors rather than doing good; they are well aware of the inherent unsustainability of pure philanthropy. At the same time, many of the MBA students have discovered that they're 48 November/December 2013 BizEd Business schools must teach students that business can be both successful and responsible. uncomfortable focusing solely on profits in a world dealing with climate change and impoverished indigenous populations. Thus, social impact investing appeals to them. At this point, it is a market in its infancy, dogged by weak infrastructure, a minimal track record, and a lack of standardized metrics for measuring impact—but the students see its potential. First we consider Social Finance UK's successful placement of a Social Impact Bond in September 2010, an innovative new instrument that is used to fund social programs aimed at reducing prison recidivism. Investors reap the rewards from their investment if these programs succeed in cutting recidivism by a set amount—surely a win-win outcome by any measure. Then we turn to Leapfrog Investments, which invested US$6.7 million in AllLife, a South African company that provides life insurance to people living with AIDS. What seems like a laughably awful business model—offering life insurance to people with a terminal disease—makes more sense when students learn that the insurance is only provided if clients take regular blood tests to prove that they are taking lifesaving anti-retroviral drugs. The company charges a high enough rate to ensure strong profits; the clients are incentivized to stick with a difficult and demanding drug regimen. Another win-win. I conclude by reminding students that there are moments in history when the needs of an age create lasting, positive innovations in the world of finance. Think of the home mortgage, which created a class of homeowners. Think of project finance—which repays investors out of the cash flow generated by the project itself—and which has enabled huge projects from oil wells to Tokyo Disneyland. We now know that pure philanthropy is unsustainable and often ineffective in solving social and environmental challenges; we also know that a narrow focus on profit maximization leads businesses down an ugly, even destructive, path. It is time for business schools to lead the way in teaching students that business can be both successful and responsible. Then other educators might get emails like the one I recently received from a former student, who had just accepted a job working for the first solar power company in Thailand. "It was all because of your class," she told me. "I want to work for a business that does good and does well at the same time." One student at a time, one business at a time, we move closer to that fabled intersection. Jane Hughes is director of knowledge management at Social Finance US, a Boston-based nonprofit that mobilizes investment capital to drive social progress. She has taught at Brandeis University International Business School, SUNY Levin Institute, and SIT Graduate Institute, and is currently an adjunct professor at Simmons College School of Management and Boston College's Carroll School of Management.