Amid the rise of ESG investing, universities are expanding their courses to better navigate the field. Harvard Business School took a particularly innovative step in 2021 with the launch of its new Impact Investment Fund Course. This class not only teaches students investment skills but also puts the lessons into action by providing direct financing to local minority-owned businesses, combining a teaching opportunity with new ways to use Harvard’s endowment for ESG goals.
The Harvard Business School Program
Immigrant business owners and business owners of color are more likely to experience obstacles to raising money for a business venture. Entrepreneurs of color face a funding gap of $574 million in Massachusetts alone, according to The Color of the Capital Gap report. The Harvard Business School launched its Impact Investment Fund Course in part to address this local and national disparity.
In the course, MBA students and their professors researched local minority-owned businesses in order to curate a list of recommendations for the HBS Impact Investment Fund, which then considered making investments of $25,000–$50,000 in those companies. The course worked with community organizations including the Boston Impact Initiative, the Business Equity Fund, LEAF, the Cooperative Fund of New England, and Common Capital to build recommendations on which businesses to consider supporting.
The Class Investment Process
The teams of business school students conducted commercial, financial, and operational due diligence on businesses in order to choose which minority-owned business applicants to recommend. As part of their research, students built relationships with the local business owners to gain business and investment experience. Meanwhile, participating business owners received market research and financial models put together by the MBA students.
The student teams finished the course by presenting their findings to the HBS Impact Fund Investment Committee, made up of HBS alumni and impact investors with experience in these communities. They discussed whether or not they would recommend a given business for investment, the financial model backing up their recommendation, and an impact plan showing how an investment could help. The committee could then decide whether to write these local business owners a check.
This course found success in providing valuable capital to local entrepreneurs, offering hands-on experience for students, and demonstrating Harvard’s support for ESG goals. Ultimately, the university plans to offer this course again in Fall 2022.
Other University ESG Initiatives
ESG investing has also entered the course catalogs of other top institutions. Some notable examples include Columbia Business School’s course on ESG equity investing, The University of Chicago’s ESG training course, and Berkeley Law’s class on sustainable capitalism and ESG. Oxford University has also launched a partnership with asset management firm Lombard Odier to create an endowed professorship in sustainable finance aimed at promoting more research and projects in this area.
ESG investment education benefits from being more than simply an academic exercise. Given the size and influence of university endowments, Harvard’s hands-on program could offer a new model for teaching ESG investing and provide much-needed capital to underserved communities.
Any company, security, fund or other investment identified herein is provided solely for illustrative purposes and should not be construed as a recommendation or solicitation for the purchase or sale of any such investment.