October 3, 2019 / 11:23 AM / 14 days ago

At Harvard B-School, lessons for impact investors

NEW YORK (Reuters) - Harvard Business School is known for guiding the next generation of financial leaders through compelling case studies in management, innovation and global intelligence. Now the curriculum includes impact investing, which incorporates positive environmental, social and governance values into investment decisions.

Vikram Gandhi poses in an undated handout photo provided by Harvard Business School in Allston, Massachusetts, U.S. Susan Young/Handout via REUTERS.

Vikram Gandhi, a senior lecturer, developed the course “Investing in the 21st Century: Return, Risk and Impact” based on years of experience working at Morgan Stanley and Credit Suisse, as well as founding his own company, Asha Impact.

Reuters spoke with Gandhi, a Harvard Business School graduate himself, about teaching the next generation.

Q: Why do emerging business leaders need to learn about impact investing?

A: There has to be a way to do good at the same time as investing. This is not about creating less wealth or making poor investments. You can you make a difference and also bring in returns. Financial return is critical, but social and societal returns are equally important.

Q: Is it hard to teach?

A: It’s an evolving field. There’s no defined framework on how to bring it in and measure it. How do you compare impact across investment like you compare returns? A lot of our teaching is not about imparting conclusions, but it’s putting out alternatives and case studies and having a debate on that.

Q: You break down one particular exchange-traded fund in a case study, the SPDR SSGA Gender Diversity Index ETF, otherwise known as SHE, which holds stocks of companies that have gender diversity in their senior leadership. How does that work?

A: The students may have had some exposure to ETFs. In this case, we go into a deep-dive into how ETFs are created - who are the players, how is stock aggregated? Then we also go into constructing the ETF, what is the data required.

Q: How do you measure an ETF that has a specific focus?

A: You can ask: Is investing in the ETF going to make a difference? Will it change behavior?

Like with most cases, there’s no correct answer. Financial monitoring happens – it will be relative to some index. The goal is that companies which are not in the ETF will say, “Let’s push to have more female representation in leadership in order to be included.” If large pools of capital get behind it, it can change behavior.

Q: What do you expect your students to do with the knowledge gained from your course?

A: It’s two-fold. Some people want to go into impact investing as a professional career. The other category will not go into it per se, but into investing generally. But they are keen to know about impact investing, because over the next 10 years, impact will be integrated into the investment process. Learning about that upfront is important.

Some students will go into development – government or non-profit – where measuring impact and making every dollar spent more effective is important.

Reporting by Beth Pinsker; Editing by Richard Chang; Follow us @ReutersMoney or here Editing by Lauren Young

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