James Militzer

Impact Investing Goes to School: What researchers have learned about the sector – and how much they still don’t know

AN INTERVIEW WITH Cathy Clark at Duke’s CASE i3 initiative

The i3 Initiative on Impact Investing is part of the Center for the Advancement of Social Entrepreneurship (CASE), a prominent research and education center based at Duke University’s Fuqua School of Business, which “promotes the entrepreneurial pursuit of social impact through the thoughtful adaptation of business expertise.” Cathy Clark, the founder and director of the i3 initiative, has been working at the crossroads of academic research and impact investing for over two decades. We caught up with her at last week’s SOCAP15 conference to discuss where the field is heading, and how it’s being impacted by the academic community – both students and researchers.

According to Clark, students’ level of experience with impact investing has undergone a major evolution in recent years. “Over 40 percent of the applicants to our program this year came in already having experience in the field of impact investing,” she says. “They’ve worked at OPIC (the Overseas Private Investment Corporation), Arabella, Kiva and many others.” And that’s just one sign of the growing overlap between the academic and impact investing worlds. When CASE started its impact investing initiative a few years ago, Duke was the only university studying the sector, Clark says. “And of course, four years later, the terrain has completely changed. Many if not all of the major business schools in the U.S. … are starting to build initiatives around the idea of impact in finance. And of course that’s being driven by what’s happening outside of academic institutions, where major banks, pension funds and other institutions are joining the pioneer, smaller, boutique institutions that have been doing this for a very long time.”

Predictably, the sector’s growing presence in academia is driven by the interest of millennials, one of the segments of the population that’s most interested in impact investing. And Clark says these young students don’t just bring enthusiasm, but also some highly developed goals. “Maybe five years ago, people came in with this generic sense of ‘I want to do good, and social enterprise sounds good to me, so let me try that.'” she says. “And now we see people coming in with much more focused objectives: ‘I am coming here to do this MBA, so I can start this venture that’s going to do X for Y population, and I need A, B and C to get it done.'” What’s more, these students bring some unique skills and character traits that can help them achieve these goals. “How do you engage with others? How do you continually adapt and learn? How do you test things really fast without getting too attached to them? How do you figure out how to engage constituents early on, so it’s not top-down but more bottom-up? There’s a whole bunch of very practical things that really work when you’re trying to make social change, that millennials are really suited to.”

But that’s not to say that everything is smooth sailing at the intersection between impact investing and the academic world. According to Clark, “If understanding impact investing clearly enough to make better choices about it is a 100 percent continuum, I think we’re at the 5 percent point.” The reason for this slow progress, she says, is that “we are trying to simultaneously understand a bunch of different things” – from the financial return profile for different kinds of investments, to the ways social enterprises can grow their impact to a scale that matters. “I feel like the piece of the field that’s still unwritten is, if you get to the point where you have a very successful and sustainable enterprise, how does that translate into a new status quo in whatever field you’re working in?”

But Clark believes the biggest challenge for the sector as it strives to go mainstream – and also for those who study it – is impact measurement. When it comes to understanding social impact, she puts our current level of progress at just 1 percent. “There is no floor right now for what someone must be or do to call themselves an impact investor or impact investment,” she says. “I feel like that mushy boundary on the bottom threshold of what we’re even talking about is an Achilles heel for the field, because it can be used by people with different motives. And one really bad press story about that could turn us around.”

Clark discusses the reasons impact assessment has been perennially underdeveloped (and how this is changing), what she’d do if she was given $5 million to study some element of social enterprise, and a number of related issues in this wide-ranging interview. You can view her insights in the video below.



James Militzer is the editor of NextBillion Financial Innovation.
Education, Impact Assessment, Social Enterprise
academia, impact investing, impact measurement, social enterprise