Category: Strategy

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We’ve Been Wrong About Millennial Entitlement… and 4 Other Hot Takes from Diane Abruzzini ’17

This post was written by Kate Barry ’20 and Taran Catania ‘20

In a recent interview with Kathleen Burns Kingsbury in the Breaking Money Silence® podcast, Diane Abruzzini ‘17 gave us a handful of fresh insights on impact investing, millennial entitlement, recession-driven entrepreneurship, and how women do money and business differently. We’ve collected five of our most favorite “hot takes” below:

1. We’ve Been Wrong About Millennial Entitlement

Diane is quick to point out that the concept of “millennial entitlement” on its own is a half-baked concept: “It’s a funny thing to call anyone entitled because there’s more to that sentence — you’re entitled to something.” The stereotype of millennial entitlement to money is not actually engaging with who millennials are. “What might be a truer statement is that millennials are entitled, but they’re entitled to different things. They’re entitled to [the] ethos that we were raised with… of transparency, of equity, of equal access to resources.”

And as Diane puts it — what if this entitlement is a good thing? And what if it’s something businesses can use to help reach and engage millennials, and not simply to dismiss them (as the world makes continuous jokes about the things millennials have “killed”)? The truth is, millennials’ preferences are making big changes in the business world. “And if you want to be able to connect with millennials,” Diane notes, “you’re going to have to be able to reach them in helping them create the world that they want to live in.”

2. Recessions Produce Entrepreneurs

In light of recent events, we have our eyes on the job market and the economy at large as we prepare for our graduation in August. Diane graduated from college during the 2008 recession, which made landing a conventional post-graduation job for her and her peers more difficult than usual. Because of this, many, including herself, turned towards non-traditional and entrepreneurial ventures.

Because of this, Diane is not surprised that millennials are more entrepreneurial than past generations—we live in economically volatile times where flexibility and creativity are key for a savvy millennial. Diane claims, looking at the history books, those who often become entrepreneurs are “people who are usually boxed out of traditional well-paying sustaining jobs.” This list includes immigrants, women, and people who aren’t able to find what they are looking for because they don’t fit mainstream demographics. Millennials, women in particular, are simply doing what they have to out of necessity, to shape a world that works for them moving forward.

3. Female Entrepreneurs are Having a Moment

Historically, women-owned businesses have not been able to pull in venture capital funds at the same rates as their male-owned counterparts. However, as Diane notes, “anytime there’s a group of individuals that have been overlooked, there is untapped potential.”

Luckily, certain firms are catching on that women-owned businesses are offering products that the male-dominated financial world has missed. Diane gives the great example of Burlington-based Mamava – a women-led business that designs lactation suites for breastfeeding moms on the go. While this might sound like a simple idea, as Diane says, “it’s never been done before because no one has taken that design perspective for the young mother consumer.”

Simply put, because women are half the population, products made with them in mind resonate with a significant customer base (duh). So it’s long overdue (in our humble opinion) for Diane’s declaration: “female entrepreneurs are having a moment.”

4. Women Invest Differently

We’re glad Diane doesn’t shy away from this one: “The language in traditional financial services is super male.” Even the way investing is framed semantically is competitive (“outperform”) and individualistic (“winner-takes-all”). But generally speaking, women and millennials alike tend to look towards our own goals: we may not have a goal of a 9% return in the stock market, but we have a goal of paying off our student loans or saving up for a home. So as Diane explains, if millennials and women “can’t connect to the [financial] advice that’s been given to us, …then they’re not going to seek that out.”

Diane wants to change how people view the connection between their personal goals and their finances. “Being able to use your money and your power to fund what’s important to you… [is] really powerful. If more women, [regardless of generation], understood that you can invest according to your goals, there might be a little bit more excitement around investing and using financial power.”

5. Money is Power

Diane cites a shift in finance towards impact investment as her reason for pivoting her career. She, along with many others, see the power of the capital market to instill lasting, sustainable change, and the financial world is starting to shift accordingly. Diane says “The more we can divert capital and money into the future that we want to believe in, then the more emphasis and the more strength is going to be behind that movement.”

And we couldn’t agree more. This is what makes us so excited to take part in the shift to impact investing for VENTURE.co with our practicum project this summer. The private equity market is uniquely positioned to allow investors to make direct impact by supporting growth-stage businesses with social and environmental missions. And the research from our practicum project will do just that for VENTURE.co and its clients.

And one final thought…

If you like the sound of our VENTURE.co practicum project, you can read more about it (and check out all this year’s Sustainable Innovation MBA practicum projects) here.

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Trane Technologies: Building Resilience and Adaptability

This post was written by Jay Kulkarni ’20. Connect with him on LinkedIn.

It is said that businesses don’t compete, supply chains do. Trane Technologies, a climate-innovation company with such heavyweight brands as Trane® and Thermo King® in its portfolio, has a multi-tiered global supply chain that will be put under enormous strain by ‘black swan’ events like the COVID-19 pandemic. COVID-19 presents an unprecedented challenge precisely because it affects suppliers across multiple tiers, with no regard for revenue, size, or location. How can large corporations like Trane Technologies make their supply chains more resilient to disruptions and accomplish their long-term goals of creating a circular closed-loop economy?

Photo by Štěpán Vraný on Unsplash

A global footprint necessitates that Trane Technologies use a digital supply chain management (SCM) tool to map its suppliers, reduce logistics costs, create long-term forecasts, communicate with suppliers, and maintain visibility over inventory and turnover. The company’s Oracle SCM portal allows their factories to put in requests for materials, and shows suppliers what materials are in transit, inventory already at the manufacturing plant, consumption patterns, and overall performance (such as shipping delays).

However, though Trane Technologies may have oversight over its suppliers, it’s likely that COVID-19 will create supply chain issues with their suppliers’ suppliers. Their subcontractors are smaller and typically wouldn’t have the resources to weather long disruptions, and their failure will negatively impact the company’s manufacturing operations and its push towards a circular economy.

So, what is to be done?

In the near-term, the company should analyse all tiers of their supply chain and communicate with key suppliers to ensure that supply continues without disruption. If needed, supply chain executives should attempt to secure alternate sources of supply, logistics, or manufacturing capacity in case vulnerable supply chain partners fail, even though Trane Technologies will have to pay a premium for these resources. To prepare its supply chain and stakeholders for future disruptions, the company should look to forecasting technology to model for and mitigate supply chain risk.

The first step in modelling is to map your supply chain digitally, including all tiers of supply chain partners. Once the nodes are mapped out, the supply chain risk management team can carry out discrete-event simulations to understand how the supply chain reacts to stimuli such as risk events or business initiatives[1]. Another long-term strategy is to shorten or regionalize supply chains; although it smacks of protectionism and anti-globalism, co-located suppliers can act as a supply chain safety mechanism in case international trade is restricted or impossible. Toyota has successfully implemented just such a strategy with its Kentucky operations, which rely on 350 suppliers all based in the US.

Trane Technologies’ ambitious 2030 Commitments include the Gigaton Challenge (reducing not only its own, but also its customers’ carbon emissions by one billion tons); carbon-neutral and zero-landfill operations; and the Opportunity for All initiative that focuses on diversity in leadership positions. Supply chain risk-mitigating strategies make Trane Technologies more resilient to disruptions and better positioned to achieve its strategic and environmental goals.

[1] Supply chain modelling software is a close cousin to the parametric design software used in architecture and aerospace. Both allow designers to see the link between design intention and design response.

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An Industry in Shake-Out Mode

This post was written by Juan Adorno ’20. Connect with him on LinkedIn.

“All I’m saying is simply this: that all life is interrelated, that somehow we’re caught in an inescapable network of mutuality tied in a single garment of destiny.” — Martin Luther King Jr.

Photo by amirali mirhashemian on Unsplash

From Carhart’s landmark 1997 study on mutual funds that found evidence of lack of skills across fund managers[1], to the 2008 Global Great Recession that rattled people’s pockets around the globe, driving historical levels of mistrust in institutions, (particularly government and financial services!), add on the clear signs of the times of the retail investments business: extreme pricing pressures, oversupply, commoditization, and overall industry consolidation, and what we have is — an industry at a crossroads, an industry in shake-out mode! The Active Retail Investments Business is at a turning point! I’d be remiss not to fully disclose that the recent Franklin Templeton acquisition of Legg Mason Asset Management sparked my motivation to free flow some industry thoughts, provided I spent most of the past decade bringing myself up in the business from inside those walls.

In describing the signs of the times, future business history textbooks will reference Larry Fink’s letter to CEOs, A Fundamental Reshaping of Finance [2], as a demarcation point toward a twisty-turny long-winded path toward Sustainable Capitalism. The letter promotes the ideas of long-term value creation and sense of purpose: climate risk as investment risk; the importance of transparency and accountability; and, improved disclosures for shareholders. That “awareness is rapidly changing, and […] we are on the edge of a fundamental reshaping of finance.”[2]

Ubiquitous in nature, in the same way that sustainable investing has emerged as a major trend in the investments space, renewable energies will continue to increase their share of the energy mix [4] as electric vehicles will increasingly make their way on roads [5], and healthier foods will increasingly take share of dinner plates[6]—all interconnected developments that are a part of a wave of consciousness: A Great Awakening. Albeit nature works slowly, demographics, globalization and technology have seemingly spurred an emphatic spark in humanity [3].

“Sustainability,” (in the broadest sense of the word) is a thread that binds the retail investments business with the whole of humanity: a truth best channeled as unlocked blue ocean opportunities for long-term, multi-dimensional value creation. An idea to stimulate the inherent social purpose for corporations. Like concepts such as money and capitalism, it all starts with an idea, like that which says that we are inextricably interconnected to each other and this one planet we all call home. In this spirit, and in tribute to Black History Month, I’ll conclude with words from Martin Luther King Jr.: Commencement address to Oberlin College in June 1965

“All I’m saying is simply this: that all life is interrelated, that somehow we’re caught in an inescapable network of mutuality tied in a single garment of destiny. Whatever affects one directly affects all indirectly. For some strange reason, I can never be what I ought to be until you are what you ought to be. You can never be what you ought to be until I am what I ought to be.T his is the interrelated structure of reality.”

Works Cited

[1] Carhart, Mark. On Persistance in Mutual Fund Performance. https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1540-6261.1997.tb03808.x (1997)

[2] Fink, Larry. A Fundamental Reshaping of Finance. https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter (2020)

[3] Rifkin, Jeremy. The Emphatic Civilization. https://www.ted.com/talks/jeremy_rifkin_the_empathic_civilization (2010)

[4] Nyquist, Scott; Manyika, James. Renewable Energy: Evolution, not revolution. https://www.mckinsey.com/industries/oil-and-gas/our-insights/renewable-energy-evolution-not-revolution (2016)

[5] DiChristopher Tom. Electric Vehicles will grow from 3M to 125M by 2030, International Energy Agency Forecasts. https://www.cnbc.com/2018/05/30/electric-vehicles-will-grow-from-3-million-to-125-million-by-2030-iea.html (2018)

[6] Renner, Barb; Ringquist, Jack. Capitalizing on the shifting consumer value equation. https://www2.deloitte.com/us/en/pages/consumer-business/articles/us-food-industry-consumer-trends-report.html (2015)

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Auto 2.0: How Electric Vehicles are Paving the Way for Modern Mobility

This post was written by Sam Alden ’20. Connect with Sam on LinkedIn.

In the rapidly changing automotive industry, one thing seems certain: the future is electric. From a record number of Super Bowl ads, to Ford’s new charging infrastructure, to Tesla stock surging following the opening of another Gigafactory, firms are jockeying to take advantage of the burgeoning market for electric vehicles (EVs). While this seems like cause for celebration after years of trying to gain traction, EVs are simply the first step in dealing with the larger issues plaguing the auto industry and the future of mobility. Admittedly, it’s a positive step — much like hybrids were an incremental gain on the combustion engine — but larger industry disruption is on the horizon.


Photo, Forbes: The future of autos will soon be defined by ACES trends (autonomous, connected, electric, shared).

Recent excitement and inertia can be traced to rapid advancements in battery technology, an expanding network of charging stations with increased speed, and the success of niche player Tesla. While both battery range and cost have been historically prohibitive, tech advancements have led to an 87% decrease in cost over the past decade while simultaneously increasing their range, as found by a recent report by Bloomberg New Energy Finance (BNEF). It is expected that these advancements will put the cost of an EV level with its gasoline-powered counterpart by 2022, which many experts consider “the point of liftoff” (Deloitte). Automakers are jumping on this, with Ford announcing the construction of North America’s largest EV charging network, “helping customers confidently switch to an all-electric lifestyle”…before they even have a single fully-electric vehicle on the market (Ford). Why? As Ford’s sales decline, Tesla delivered 367,500 EVs in 2019: up an astounding 50% from the previous year (CNN).

So, what’s the problem? 

While EVs eliminate tailpipe emissions, they are only as clean as the source of electricity that powers them. Renewables account for a mere 17% of total electricity usage in the US, making the shift to EVs not quite as clean of a solution as it initially appears (C2ES). Further, as demand for EVs rises sharply over the coming years, the demand for electricity to power them will follow suit, increasing the strain on America’s antiquated energy infrastructure (which recently received a D+ rating by the American Society of Civil Engineers). The future of the auto industry and its push for electrification rests on the ability of the nation’s electricity grid to keep pace with growth. Given recent failures in California, the risk to the industry is already on display. But maybe this type of issue is just the impetus that the renewable energy sector needs to achieve liftoff of its own.

What is abundantly clear is that a transition to EVs ignores the larger issues facing mobility. Rapid urbanization, gridlocked city centers, and the rising costs of owning a car in these areas are the main drivers of change. The emergence of services like Uber, ZipCar, and Waymo One have meant that consumers can increasingly rely on a combination of public transportation and ride sharing services instead of owning a car at all. In fact, it is estimated that US auto sales will decline a staggering 40% by 2040, which paints a pretty stark picture for the auto industry and the need for change (McKinsey). EVs do not provide a solution to these broader issues.

The intent of this post is not to pour cold water on the enthusiasm surrounding the undoubted progress being made by the auto industry. In fact, investment and innovation are both at all-time highs. Rather, it is to make a broader case for sustainability: one that is both strategic and long-term. Yes, the future appears to be electric, but it is also shared, autonomous, and data-driven. Consumers seem to be ready for this transition, but critical infrastructure must be too. As Auto 2.0 enters a make or break period, the industry must get key strategic decisions “right” in order to stay relevant. Firms are starting to realize that their best chance of doing so is by breaking down traditional rivalries and moving forward together. Here’s to hoping that electric vehicles are just the first step.

Sources

ASCE: https://www.infrastructurereportcard.org/cat-item/energy/

BNEF: https://about.bnef.com/blog/battery-pack-prices-fall-as-market-ramps-up-with-market-average-at-156-kwh-in-2019/

C2ES: https://www.c2es.org/content/renewable-energy/

CNN: https://www.cnn.com/2020/01/03/tech/tesla-sales/index.html

Deloitte: https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/manufacturing/deloitte-uk-battery-electric-vehicles.pdf

Ford: https://media.ford.com/content/fordmedia/fna/us/en/news/2019/10/17/ford-introduces-north-americas-largest-electric-vehicle-charting-network.html

McKinsey: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-road-to-2020-and-beyond-whats-driving-the-global-automotive-industry

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The Ethics of Reducing Emissions

This post was written by Jay Kulkarni ’20. Connect with him on LinkedIn.

2019 may go down as the year that the world began to “wake up to the climate emergency.” Inspired by climate activists such as Greta Thunberg and Extinction Rebellion, the non-violent youth climate movement became a global phenomenon that starkly highlighted the apathy and inaction of the political class in most developing and transitioning economies.

Photo by veeterzy on Unsplash

Despite some recalcitrance amongst those aged 55 and older, acceptance of climate science is spreading. Climate change is a scientific fact, and it’s happening now. It will unpredictably impact ecosystems and biodiversity, thereby affecting people who depend on their environment for ecosystem services such pest/ disease control and provisions such as food and water. As the world warms, diseases will spread. Heatwaves will become deadlier. Coastlines will erode. Species will die out.

We must confront our temporally-, spatially-, and ecologically-distributed responsibility to individuals, nations, future generations, and the other species with which we share our planet. Scientists accept that reducing greenhouse gas (GHG) emissions is a requirement to keep the global temperature increase to below 2°C in keeping with the 2015 Paris Climate Agreement. The disagreements now stem from what to do next.

One common refrain from political leaders — like Donald Trump — opposed to the Paris climate targets is that some countries are disproportionately expected to do the heavy lifting of reducing emissions, which is seen as a threat to their economies. The US has stated that it will withdraw from the Paris agreement on November 4, 2020, one day after the 2020 US Presidential election. However, this argument ignores the global and intergenerational dimensions of climate change; even though China has higher annual emissions at present, the US has historically contributed the most GHGs in total. The US, along with other GHG polluters, are therefore attempting to “pass most of the burden of their activities to people in other parts of the world and the future in unfair ways.”

The other ethical phenomenon at play is the tragedy of the commons: as governments and industries act selfishly and short-sightedly, they “deplete a freely available shared resource, against each of the parties’ long-term interest.” Most GHG polluters face no penalties, while the public pay the costs of pollution and climate change through loss of ecosystem services and impacts to health and well-being. In addition, there are skewed vulnerabilities at play, where the countries whose emissions levels have historically been the lowest are those that may be amongst the most vulnerable to the effects of climate change.

It is therefore imperative that large economies acknowledge their proportionate culpability for the effects of climate change, as well as their responsibility to the peoples and ecosystems affected. In addition, we must absorb the lessons of indigenous people around the world, whose observations of the dynamic equilibrium of natural ecosystems have given them an “equanimity and optimism” to better adapt to the coming ecological and societal disruptions wrought by climate change.

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Sustainability and the Craft Brewing Industry

This post was written by Dan Versace ’20. Connect with him on LinkedIn.

Since the craft beer boom of 2012 started, many brewers across the country have found it hard to differentiate themselves from their competitors.  Many have tried to create new and inventive brews and invest in a tap room where customers can come to the brewery and learn more about how the process is done while sampling the products.

Photo by Elevate on Unsplash

But, in recent years the focus has shifted from inventive and innovative products and experiences to differentiation through the process by which the beers are made, with many breweries investing in the sustainability of their product and manufacturing lines. They can do this in a multitude of ways as complex as installing a device called an anaerobic digester to recycle wastewater that the brewery produces, or as simple as working with local farms to use their spent grain as food for a variety of livestock. Some breweries in the UK have even experimented with using stale bread from local bakers as a starter for their beers, limiting the amount of barley or hops that is needed.

With that being said, there is still room for innovation when it comes to the energy used in the brewing process along with the distribution and supply chains linked with the operation of the brewery. Many large scale consultancies such as SustainaBrew are working to refine a sustainability plan that works with the nuances that are inherent with brewing and selling beer, as laws and regulations differ from state to state,  limiting the amount of barley or hops that is needed.

Environmental sustainability isn’t everything though; social responsibility has seen large growth in the brewing sector as well. Take Switchback Brewing for example. They recently shifted from a single ownership model to being 100% employee owned, allowing every single one of their employees to have a meaningful say in how the business operates and what decisions are made on a day to day basis. This has led to a company that operates like a family where everyone is vales and each person employed by the brewery is committed to seeing it succeed.

While it may seem like a no brainer to some, many others are still very wary of implementing these strategies for sustainability as they do run quite a high upfront cost, and can take a lot of resources and time to implement, with no guaranteed pay off.  However,  in a recent study produced by NPR it was shown that consumer’s willingness to pay increases when the breweries they are purchasing from are utilizing sustainable practices, something that is not necessarily true for other products in the marketplace. What is it about the brewing business that lends itself to this outcome? I believe that it is the client base and the values that they hold. The craft brewing industry has grown through, and is held up by the purchasing power of the millennial generation, a young consumer base that has sustainability at its heart and chooses to make purchasing decisions based on their values.

The proof is in the pudding (or perhaps beer in this case). Sustainability efforts in the brewing industry has positive effects on the world, the people who buy the product and work in companies, and, finally, the bottom line. There is only more to come in the future.

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Why I Left the Nonprofit Sector (and It’s Not the Reason You Might Think)

This post was written by Taran Catania ’20. Connect with her on LinkedIn.

Whether I was working in field research for a local conservation group or serving as a legislative representative for a national environmental organization, I loved my time in the nonprofit sector. No matter where I was, I was surrounded by mission-driven people, my work gave me a sense of purpose, and I was always proud to answer the standard icebreaker “so what do you do?”

Nonprofit technician in the field: Taran Catania ’20 flags a Semipalmated Sandpiper as part of ongoing endangered shorebird research for New Jersey Audubon.

But then I left the nonprofit world – and not for the reasons you might think. The assumption when people leave the nonprofit sector to go to business school is that person wants to make more money. Now, don’t get me wrong: there are extremely good reasons the nonprofit sector should stop undervaluing and underinvesting in staff. But the short answer is no, I did not leave for that reason.

The real reason is: I was tired of fighting for change, but not seeing an obvious plan for its impact or scalability. I was tired of “doing good” by rules that limited how much good we could do. I wanted the chance to take risks for something I believed in.

During Dr. Erik Monsen’s Crafting the Entrepreneurial Business Model class, I was introduced to a TED Talk by activist and fundraiser Dan Pallotta called “The way we think about charity is dead wrong.” As Pallotta points out, nonprofits are rewarded more for not acting like businesses (such as severely restricting overhead spending – “For every dollar donated, 83 cents go to the cause!”) than for what impact they have. From inherent rules limiting nonprofits’ ability to competitively compensate staff, market and advertise to generate revenue, or access capital markets to spur growth, the nonprofit sector is at a disadvantage to the business world in almost every way.

To add further limitation, nonprofits are systematically discouraged from taking risks. Risk, which always carries some chance of failure, is a generally unacceptable use of charitable dollars. And as Pallotta puts simply: “When you prohibit failure, you kill innovation.”

In other words, there is a reason there is no “venture capital” of the nonprofit world. No one is looking to make large donations to a nonprofit that wants to take chances, invest in its own growth, and pursue unexplored, better ways to make and scale change.

But as we can tell from the growing list of Certified B Corps and the increasing buzz around Corporate Social Responsibility (CSR), the business world is evolving to pick up where the nonprofit sector leaves off. And it’s doing so with some creative, innovative risk-taking.

So until we can foster a nonprofit sector that operates under fewer limitations, fighting for social and environmental change from a business angle may offer greater opportunities to create positive, scalable impacts. (That is, as long as businesses commit to doing so meaningfully.)

In the meantime, I’ll be here reading anything written by Vu Le at Nonprofit AF, bicycle commuting in my Allbirds sneakers, and pursuing a Sustainable Innovation MBA to be a part of this business evolution.

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The Value of Soft Skills in an Increasingly Automated Workforce

This post was written by Kate Barry ’20. Connect with her on LinkedIn.

How do you stay competitive in a job market that is becoming increasingly more automated? This is a question on many people’s minds in all areas of the workforce today. Tiger Tyagarjan attempts to answer this daunting question in his article from the Harvard Business Review, “To Prepare for Automation, Stay Curious and Don’t Stop Learning.”  Tyagarajan cites a number of possibilities for workers to stay ahead of the curve when faced with an increasing automated workforce, a concept we have talked about in depth in our Sustainable Brand Marketing class this module.

When first faced with the uncertainty of job security in the future, one may have a knee-jerk reaction to fight against the development of artificial intelligence, or maybe try to out-smart it, by developing more highly-technical skills. Both of these options, I believe, will eventually be losing battles as technological advancement will roar on whether or not we are fully ready for it. Perhaps, as Tyagarjan suggests in his piece, instead of fighting the advancement of artificial intelligence, humans can differentiate themselves by embracing their “humanness” through the development of soft skills.

Soft skills are the tools someone uses to interact with others in an effective manner, a concept entirely dependent on self-awareness. They include one’s emotional intelligence, their level of empathy, ability to work in a team, etc. These are the skills that will differentiate humans from artificial intelligence in the workforce moving forward.

Thus far in The Sustainable Innovation MBA program, there has been a large emphasis on the development of soft-skills between our Teamwork for Sustained Innovation class, The Leadership Seminar, and copious amounts of group work. Some of the hesitation in regard to entering into a non-traditional MBA is the larger mix of skills learned beyond the traditional aspects of a business education.  While I have gained a great deal of value and personal development through our work so far, it’s hard to know what the business world is looking for when hiring. It is reassuring to see that the business community values the importance of soft skills, and their many applications in the workplace.

So, how do you stay competitive in a job market that is constantly becoming more automated? Lean into your humanness, strengthen your self and other-awareness, and in the words of Joe Fusco, “have a love affair with the truth.”

Photo by Owen Beard on Unsplash

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Finding Impact in Public Market Investments

This post was written by Peter Seltzer ’19

Impact investing is the hottest trend in finance right now with now over $12 trillion in assets invested. Over the course of the last year I have spent a significant amount of time studying the industry, including being on the winning team of the Wharton Total Impact Portfolio Challenge (TIPC). Throughout the year, I have looked for the best ways to generate impact through public market investments and below is summary of my conclusions.

Invest in Companies with Embedded Sustainability Practices

In the TIPC my team encountered the question, how do you pick the best ESG (Environmental, Social, Governance) or SRI (Socially Responsible Investing) fund to invest in? In our corporate social responsibility course, we learned that the companies with the most successful sustainability efforts are those that embed these sustainability practices into their core business practices. To maximize the collective impact of a public equity investment, you should invest in funds that hold companies that are embedding sustainability into their core business practices.

Photo by Markus Spiske on Unsplash

To determine how well a company is embedding sustainability we used a framework developed by the Sustainable Accounting Standards Board (SASB) to determine what the most material sustainability issues are for the companies being held by a fund. If a company wants to embed sustainability into their core business, then they must perform well on the sustainability issues that are most material to their industry. Based on a scoring system we developed, we were able to quantify this embeddedness for public equity funds.

Balance Long-Term and Short-Term Needs

Public market impact investments are focused on the long-term collective changes that need to happen to create a more sustainable world. It is extremely important that these investments continue to occur. However, while we invest for the long-term, we cannot overlook the people who are suffering right now. It is great to invest in companies that are creating cheap renewable energy, but that does not immediately help the family that cannot pay their heating bill during these cold Vermont winters. Investors need to harness the financial power that is generated through their long-term investments to help address the short-term needs that are so often overlooked.

The most efficient way to create the direct impacts needed to address these short-term problems is through charitable donations. I know! Charity is a dirty word in finance, especially in impact investing. It certainly has its flaws, but it is the most direct way to balance long-term and short-term needs.

Behavioral economics will suggest that those that invest responsibly will be more likely to suffer from the effects of moral self-licensing, which in turn makes them less likely to donate to charity. I propose that those that participate in SRI or ESG investing, allocate a portion of the dividends they receive through these investments to charitable causes that support short-term needs. Typically, dividends will automatically be reinvested back into shares of the fund that distributed them, so this money never enters the metal accounts of an investor. Thus, allocating a portion of their dividends to charity will have no effect on a person’s mental accounting and eliminate any moral self-licensing effects of responsible investing.

In summary, the best way to create impact through a public market investment is to balance the long-term changes needed, by investing in companies that embed sustainability into their core business practices, with the short-term needs of today, by allocating a portion of a portfolio or fund’s dividends to charity.

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Blockchain for sustainable business: new technology & culture in sustainable enterprise management

This post was written by Henry Vogt ’19

As corporations have begun to understand the necessity of embedding sustainability into their core strategy and competencies it has become apparent that holistic management of operations must be done in an intentional and transparent way. It’s increasingly clear that all aspects of an organization – from product design, operations, marketing, HR & more – must collaborate transparently to effectively manage a sustainable enterprise and realize ROI from their initiatives. Companies can promote growth, reduce risk and increase returns though processes that provide clear, concise and trusted information across all departments.  

Photo by Clint Adair on Unsplash

There is no doubt that a robust technological management system is the backbone for implementing a holistic sustainability management program – a system which allows for transparency and trust across all departments. Many organizations are positioned to take advantage of cutting-edge technological systems to give them a sustainable competitive advantage – as long as there is a strong aligned company culture.

Enter Blockchain. Often when Blockchain is mentioned a reaction is one of eyes glazing over, a chuckle and some skepticism due to the mysterious, undoubtably complex connotations that surround this technology. This is understandable. Yet, the reality is that the concept of blockchain is relatively simple. Instead of a central authority verifying a transaction or data set, the verification is distributed and decentralized across a network. The verifications are on a ledger (think accounting), where changes and additions are append only – you can’t go back and change it. Therefore, the transactions become transparent, immutable and tamper proof. Implemented correctly, the potential applications spanning public and private sectors are almost categorically endless.

Has this created a hype bubble around blockchain? Undoubtably, yes. However, as the technology progresses and use cases and applications evolve, the hype around blockchain seems to be looking less like a bubble and more like a paradigm shift. With the possibility to make blockchains customizable – private, permissioned or public – companies can choose from an ever-growing panacea of platforms that can meet their needs. Additionally, companies must approach blockchain by first understanding the problem – then assessing why blockchain could be an effective solution. Just like any technology, blockchain is not a silver bullet solution. It must be asked – “Can this be solved by a traditional database, and does the need for transparency, decentralization, trust and immutability warrant a blockchain solution?”

While blockchain can incentivize effective management through transparency of operations, it is also essential that it be complimented by continuing to invest in human capital – the culture – of the company. Transparency can create accountability, competition and innovation – but the technology itself must not be the crutch. The culture and the affective commitment of the people in the organization will always be at the heart of a profitable, sustainable organization. While technology can be a powerful tool to implement solutions, the investment in human capital cannot be lost.

New technologies hold vast potential to disrupt and improve business and society – but without a mutually inclusive investment in culture any initiative will not reach its potential or may even cause inverse, negative externalities. When culture and values are complemented with decentralized, transparent technologies such blockchain, the future of managing successful sustainable enterprises holds immense potential.