The Brief | September 9, 2024

The Brief: How business schools help students make real world impact with student-led funds

ImpactAlpha
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ImpactAlpha

Greetings Agents of Impact! 

In today’s Brief:

  • Impact funds gain steam on college campuses
  • New climate funds ahead of Climate Week
  • Electric-powered steel in Indonesia

Business-school funds give MBA students a jump on careers in and out of impact investing. At Northwestern University’s Kellogg School of Management, professor William Towns pushes his students to get comfortable with being uncomfortable. “Somebody might end up calling your baby ugly,” Towns says he tells them. His recent class, “Venture equity: Dismantling barriers to capital,” included founders of six Chicagoland companies as well as MBA students. Both cohorts pitched startups for an investment from Kellogg’s new student-led impact fund that Towns oversees. The $750,000 fund and accompanying course, on offer again, help future investors learn to uncover and deliver bad news about weak business models – and explore wider careers in impact. The experience of making a pitch helps entrepreneurs steel themselves to absorb tough feedback and make painful changes. For students, the funds are “seeding an impact mindset,” says Adwoa Asare of Turner MIINT, a global competition for student teams diligencing impact investments. “It’s being able to share with your future colleagues that there are other really valuable ways to consider investing that go beyond setting a bottom line.”

  • Climate skills. More student-led funds are keying in on opportunities to address climate change and ride policy tailwinds. This fall, Berkeley’s Haas School of Business is kicking off a student-run Climate Solutions Fund, through which student investment managers work with outside investment partners to structure real-world deals. The evergreen equity fund, which has yet to make its first investment, is overseen by Haas professor Adair Morse, co-founder of Haas’s Sustainable and Impact Finance center. The fund was informed by Morse’s stint at the Treasury Department’s Office of Domestic Finance and by the historic opportunity to tackle greenhouse gas emissions and support underserved communities. “There was a concern that money from the Inflation Reduction Act would come, and there wouldn’t be students fresh from business school that had the skills to deploy that money, because they’d just been trained in traditional investing,” says Haas’s Megan Morrice. At an upcoming pitch competition, student managers will select one company in which to invest up to $300,000. Also new at Haas: a joint MBA and master of climate solutions.
  • Impact state of mind. The student-led impact funds have grown from informal student clubs to become part of comprehensive curricula for advanced degrees in impact, the environment and sustainability. They’re usually seeded by school alumni to make investments of $12,500 to $300,000, usually as debt. Unlike traditional VC funds, student-led funds don’t charge management fees or collect carried interest, or profits, from their investments. Most are “evergreen,” plowing returns back into the fund for future investments. Even before they get jobs in finance, students are learning how to create positive social and environmental outcomes while generating a financial return. “We always say, even if you don’t go on to work at a fund, take what you’ve learned about impact into every profession,” says Sarah Mottram of the Microlumbia Impact Fund, a $155,000 student-led fund at Columbia Business School.
  • Breaking barriers. The funds have an ethos of sharing that is unlike traditional venture capital. At Kellogg, Tania O’Connor says the student-led fund seeks “to break down the barriers that underrepresented founders have to capital.” The fund’s other goal: teaching students “to avoid the heuristics,” or cognitive biases, that can cloud traditional VC decisions about what’s investable.

Sponsored by SOCAP Global

SOCAP24: Going deeper and catalyzing systems change. The leaves are starting to turn, so you know the impact investing conference season is here! In late October, SOCAP will convene more than 2,500 impact investors, entrepreneurs and other Agents of Impact in the heart of San Francisco. The theme of this year’s conference: “Going deeper: Catalyzing systems change.” Over three days, participants will be invited to explore if and how the capital they deploy contributes to systems change, SOCAP Global’s Michelle Arevalo-Carpenter shares in a post on ImpactAlpha. “Are we delving into underlying systemic issues, moving beyond surface-level solutions? Are we looking beyond our echo chambers to address the root causes of global challenges? Do our investment approaches consider long-term perspectives?”

  • Mainstage speakers and content tracks. SOCAP will feature thoughtful conversations with influential leaders, including Global Optimism’s Christiana Figueres, Lever for Change’s Cecilia Conrad, and Transcap Initiative’s Dominic Hofsteter. Content tracks will include “Deploying climate capital,” “Regenerating food systems,” and “DEI, ownership and impact.”
  • Subscriber discount. ImpactAlpha is a media partner of SOCAP24 and is pleased to offer subscribers $250 off the SOCAP24 ticket price with the code s24_ImpactAlpha. Check out more partner events and discounts below.
  • Keep reading, “SOCAP24: Going deeper and catalyzing systems change,” by SOCAP Global’s Michelle Arevalo-Carpenter on ImpactAlpha.

Dealflow: Climate Finance

MCJ raises $80.6 million for early stage investments in climate resilience and the energy transition. Boston-based venture capital firm MCJ has backed dozens of early stage climate tech companies since 2020, including carbon capture and storage startup Heirloom, ductless heat pump maker Quilt, and fusion “micro-reactor” designer Avalanche Energy. Its second fund will write pre-seed to Series A checks averaging $500,000, with reserve capital for follow-on investments, MCJ’s Cody Simms told ImpactAlpha. MCJ counts strategic corporate investors in insurance, maritime shipping, construction, steel and other industries among its limited partners. Members of the impact investing network Toniic also participated.

  • Funds raising. Announcements of new climate funds are rolling in ahead of this month’s Climate Week NYC. New Jersey-based Aiga Capital Partners closed its inaugural climate infrastructure fund with over $240 million from seven institutional investors. The fund will invest in “ready-to-build” sustainable infrastructure in North America. Ardabelle Capital, launched by Virginie Morgon, former CEO of French private equity firm Eurazeo, is in the market with a €500 million ($554 million) climate buyout fund.
  • Climate network. MCJ Collective, which stands for “My Climate Journey,” is a “member network for tech and industry leaders who are building, working for or advising on solutions to address the inevitable impacts of climate change,” said Simms. With its second fund, the organization is calling its venture arm simply MCJ. The fund fell short of its $125 million target.
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Indonesia’s GRP aims to cut steel carbon emissions with a $60 million IFC loan. Steel is essential to energy and other critical infrastructure, but coal is no longer essential to steelmaking. To support Indonesia’s green transition, International Finance Corp. issued a $60 million loan to steel manufacturer PT Gunung Raja Paksi, or GRP, to expand low-carbon steel production using electric arc furnace technology. EAF, which uses electricity rather than coal as an energy source, can reduce the carbon intensity of steel production by up to 80% or 90%, depending on the source of the electricity. GRP is looking to halve the carbon intensity of its steel production and increase its metal recycling capacity. 

  • Steel decarbonisation. Coal-dependent Indonesia’s demand for steel is growing at a time when efforts to decarbonize its power sector under an international Just Energy Transition Partnership have stalled. “The steel industry is critical to the prosperity of Asia and the wider world, but the science is clear, we must rapidly decarbonize as a sector to withhold and grow this prosperity for future generations,” said GRP’s Kimin Tanoto. “If steel companies are not willing to embrace the green transition, their assets are at risk of becoming stranded.”
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Dealflow overflow. Investment news crossing our desks:

  • Mirova raised €211 million ($234 million) for its first impact private equity fund to invest in clean energy, the circular economy, natural resources, agtech and smart cities in Europe and North America. (ESG News)
  • Chloe Capital, which backs women-led tech companies, invested in Pittsburgh-based NOCTEM Health, a software startup focused on sleep disorders. (Chloe Capital)
  • Agriculture-focused impact investor AgDevCo secured £25 million ($32.8 million) from the UK’s Foreign, Commonwealth and Development Office to seed AgDevCo Ventures, a new unit that will invest in East African agribusinesses. (AgDevCo) 
  • Spain’s Adara Ventures landed €35 million ($38.8 million) from the European Investment Fund to support early stage energy transition startups in Europe. (Adara Ventures)

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Active Impact Investments taps Sophia Kathryn Khan, previously with Struck Studio, as principal… BlueHub Capital welcomes Jackie Barry Hamilton, previously with Sense Labs, as chief financial officer. Elizabeth Glynn, previously with BlueWave Solar, joins BlueHub as senior vice president of climate lending for the BlueHub Loan Fund… Social Capital Partners adds Katherine Janson, formerly with Samuel Centre for Social Connectedness, as communications director.

Opportunity Finance Network is recruiting a chief financial officer in Washington, DC… Prologis has an opening for an ESG regulatory reporting director in Denver… In Chicago, Builders Vision is on the hunt for an energy vice president, and Impact Engine is looking for an investment analyst… Lafayette Square seeks an originations business development associate.

Tikehau Capital is hiring a regenerative agriculture investment associate in Paris… Tapestry Community Capital seeks an impact investment manager in Toronto… SoCal Grantmakers will host “Unlocking capital: Demystifying impact investing for foundations,” a breakout session at SCG’s 2024 Annual Conference, on Thursday, Sept. 26 in Los Angeles.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Sept. 9, 2024