MBAs will turn brownfields into green—if investors help them out

April 11, 2014
April 11, 2014

Last month, a column in the Guardian argued that business schools’s academic traditions present a “fatal barrier to the sustainability agenda” as “social issues count for little in mainstream business education.”

But a number of MBAs might argue otherwise, particularly those competing in the numerous social venture competitions that have become a rite of business school spring.

Take Fresh Coast Capital, a team of students from Kellogg School of Management, who see promise—and profits—in America’s contaminated wastelands.  The group, which won the Morgan Stanley Sustainable Investing Challenge last week, has a plan to help address the $650-billion problem of the nation’s brownfields—that’s 5 million acres of land in the US blighted by industrial contamination—by planting poplar trees. And they say they can make money doing it: The trees would detoxify the land and increase its value to the tune of 10% returns.

Business pitch competitions have become important launching grounds for social enterprises, as “impact investing”—which seeks to fuse profits and purpose—is increasingly popular among MBAs, tapping into millennials’ aspirations as changemakers in what some call the purpose economy. In addition to Morgan Stanley’s competition, co-sponsored by Kellogg and INSEAD, this season’s social innovation challenges include: Harvard’s Pitch for Change; Wharton and Bridges Ventures’ MBA Impact Investing Network & Training Program competition; Tufts’ New Venture Social Entrepreneurship track; and the Global Social Venture match-up.

These events also suggest that impact investing may start making more headway in commercial capital markets: As well as the competition for MBAs, this year Morgan Stanley created both an Institute for Sustainable Investing and its multi-billion Investing with Impact Platform. Goldman Sachs and Bank of America have also recently upped their commitments to impact investing, through social impact bonds and other kinds of community investment initiatives.  Internationally, the G-8 Social Impact Investing Task Force, formed last June in the UK, met again this week in Paris to prepare recommendations for fostering the market worldwide.

Despite the momentum of impact investing, not every social or environmental problem has a market solution, and many “innovations” do not succeed beyond the business plan. Even if they do, hard-nosed investors seek profit and require data and scale: this is why Morgan Stanley sought proposals for financing instruments rather than operating enterprises—what they call “institutional quality investment vehicles”—that can produce positive social or environmental benefits and “competitive” financial returns.

The “poplars team” outperformed submissions from 230 students across 40 schools and 10 countries, including proposals to securitize timber rights in Costa Rica, lease residential solar lighting in Nepal, and lend to small-scale fisheries in the US. The judges said the winners presented the most compelling thesis: plant poplar trees to decontaminate brownfield sites, and generate financial returns from the remediation service, the appreciation of the value of the land, and sales of timber products.

Next up, the true challenge: moving from the classroom to boardroom, and finding investors.

We welcome your comments at ideas@qz.com.

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