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Investing in Social Impact

By John Bain

This October, the Good-b team attended as media sponsor the Columbia University’ Business School’s Aligning Strategy to Maximize Impact Conference, a gathering of entrepreneurs interested in making a social impact through their investment.

But these weren’t just investors: what first struck me at the panel I attended was the level of involvement these innovative men and women had with their business projects. Almost every one had an anecdote about their boots-on-the-ground time in rural Africa, encouraging economic development in areas without cell phone coverage – or sometimes, even running water.

Along with that involvement comes a no-nonsense approach to business on a realistic, tactical level that I frankly wasn’t expecting from a business conference. As I settled down into my seat, I was ready for a few comforting buzzwords and a fifteen-minute introduction. Instead, the speakers immediately got down to brass tacks, sharing candid and useful advice about their time investing abroad.

I was actually stunned – just as I’m getting out my notebook, already someone is listing off real, vital information about investing in the developing world. No fluff. Pure strategy. The conference was designed for experienced business people and business students, so it’s no surprise that it got technical at times, but the speakers were so articulate and used such common-sense language that even I got the point.

Within minutes, I knew a lot of stuff about the challenges to impact investment in rural, developing countries that I did not before. The speakers discussed challenges for investing in these areas: government corruption and bribery (which increases consumer costs and reduces returns for investors), lack of infrastructure, lack of reliable creditors and available investment capital, and lack of quality control, which leads to less consumer incentive to buy better products. These are only a few of the problems that the speakers elaborated on; one of the most salient among the others was the fact that wages are so low in these countries, leading to an extended discussion on methods of offering credit and leases for green products in order to get them into consumers’ homes.

Of course, all of these challenges were discussed within the context of impact investing, with a specific focus on producing environmentally sustainable products for low-income markets. The sector also has unique rewards and incentives for investors. For instance, many developing countries have no “incumbent” companies to challenge a newcomer: your company may be the only one to offer affordable personal solar cells within a given country, for instance.  That means there’s a vast pool of as yet unconvinced consumers there – if you can muster the resources and talent to tap it.

The moments I found most interesting, however, were when the speakers discussed real strategy, the how of impact investing when the why (making the developing world a better place, both for those living there and for investors) is already obvious. These ranged from long-term, multiple-partner problems, like convincing governments to provide infrastructure and funding for green projects, to near-term, boots-on-the-ground dilemmas like how to keep capital in your venture and out of the greased palms of corrupt bureaucrats.

Within these challenges were also opportunities: most of the developing world is already buying non-green energy, like kerosene, by the barrel. The question is, how can we convince them to buy green, considering all the difficulties and costs associated with it?

None of the speakers, of course, had the answer to conundrums like this. But that’s what a conference is for, isn’t it? The collaborative spirit was very present at this event, which was overtly geared towards building a better future. The atmosphere and terminology were that of traditional business, but something very selfless – and sustainable! – lies at the heart of impact investing.

Nowhere was that more obvious than at Columbia’s B-School Social Enterprise Conference.

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John Bain is a recent graduate of New York University and an associate editor at Good Business New York.

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