2 Units, Winter (Paul Brest)

Offered: Winter Quarter 2013

Traditional philanthropy consists of outright grants to organizations to achieve the grantors’ social and environmental objectives. However, the past decade has seen an increasing interest in impact investments–financial investments that seek to generate monetary returns at the same time as they further the investors’ social objectives. Throughout the course, we ask: how investors can (1) measure the social impact of the organizations they invest in, and (2) assess whether their own loans or capital contributions actually make a difference in increasing the organizations’ impact. We begin by reviewing the domains from which impact investing draws: grantmaking to maximize social impact and financial investing to maximize financial return. We then consider examples of impact investing, ranging from below-market equity investments and loans, to investments intended to create social value while achieving risk-adjusted market returns or better. We consider the role of impact investing at various stages, from R&D to start-ups to growing and mature enterprises. We explore these issues through case studies of impact investing both in the U.S. and developing countries. We examine how investors can identify and assess impact investments, the information, knowledge and skills needed to make impact investments, and the role of fund managers and advisors. We also consider novel impact investing vehicles, such as social impact bonds and B-corporations. Time permitting, we will also touch on the related issue of using negative screens for socially responsible investing.