By Marta Maretich, Maximpact
To mark the publication of Impact Investing 2.0, a watershed study of 12 successful impact investing funds, Maximpact talked to one of its authors, Jed Emerson. In the second of a two-part series, Emerson discusses the core skills needed on a “multilingual” leadership team and gives his thoughts on which graduate schools are successfully training the impact leaders of tomorrow.
Maximpact: What core skills are needed on a “multilingual” fund management team?
Jed Emerson: On the one hand, there are skills around being able to maintain financial discipline: analyzing deals, understanding the marketplace in which the deal will function, and looking at various investors’ perspectives on value creation in a possible deal. It’s having the skills needed in order to be a successful financial investor.
At the same time, the management team needs to understand the impact context in which the investment will play out. For example, if your impact goal is job creation but you’re creating lousy jobs, then that’s not a successful strategy.
That financial discipline has to be complemented fully by an understanding of context and social opportunity. If you have both those things, you can then translate that social opportunity into financial metrics. In this way, the impact investment process looks more like a DNA strand than a double bottom line. From this we derived the schematic for the Mission First and Last section of the report.
Maximpact: Can graduate schools create the kind of multilingual leaders you’re talking about?
JE: Not only can graduate schools create multilingual leaders, but they have to! I read a comment in a McKinsey report the other day that said business schools can no longer be teaching business as usual and the incoming classes are increasingly demanding that schools give them the skills and tools needed to execute within this new context of impact generation.
We’ve seen this movement come forward over two decades; and now it’s been fully unleashed. I see the evidence everywhere. For example, I wasn’t able to attend the Net Impact conference this week but I was tracking the Twitter feeds. Boy, could you feel the passion and enthusiasm coming through those posts and tweets! More than that, you could feel the sense of urgency and focused direction from the participants. To me, this is the driving force behind the need to train our future leaders in this multilingual way.
Maximpact: Are any grad schools doing it now?
JE: A good example of a school taking up the challenge is the James Lee Sorenson Center for Impact Investing in Utah. Lewis Hower is their fund director. The interesting thing for me is that they’re using students to engage in the due diligence around impact investing opportunities.
My other observation is that the students who are coming to learn at the Sorenson Center are not just business or economics students. They’re coming out of the humanities and much more traditional liberal arts backgrounds as well. Now, that is the future of impact leadership!
In my view, the Sorenson Center and others are creating an environment with the potential to produce the multilingual leaders of the future. No CEO can aspire to lead a global organization these days and not be aware of all the things beyond the balance sheet that will determine whether that organization is successful. As a matter of course, the leadership of these organizations will be looking to hire managers and team members who can come to the table ready to play on that basis. Business schools and graduate programs will have to provide their students with the education and the tools and the learning they need to be successful in this new market.
Maximpact: How can funds go about building these multilingual teams?
JE: I work with a small set of family offices, one of which is currently recruiting folks to run a new impact fund. I wasn’t sure when we started recruiting what kind of candidates we would see. Truthfully, I expected a lot of candidates with very traditional private equity and venture capital backgrounds who had decided they were done making money and wanted to go “do good.” And I’m not such a big fan of the “do gooder” approach, so I was kind of bracing myself…
But I was pleasantly surprised to see the number of folks that clearly fit our research team’s description of multilingual leaders. Yet the thing that really surprised and pleased me was the high caliber and solid quality of these individuals. The experience has validated my feeling that we’re on the right track and change is happening.
I’d like to point out that the Impact Investing 2.0 report doesn’t say, “This is what needs to happen.” It’s not prescriptive in that sense. What the report says is, “This is what is already happening in the most successful funds.” It describes what is currently the practice of the better organizations. As new fund mangers and new investors come up through these processes, I think we will begin to see the practices we identify in this report as the default operating process of the field. This will simply be the way we do business.
Maximpact: What happens to those poor charismatic leaders once the multilingual team takes over?
JE: (Laughs) I think that the role of the charismatic leader will always be with us. We need those individuals for movement building and for creating so many aspects of organizations. That said, you can’t build a successful organization on the back of an individual!
The most successful charismatic leaders will recognize this multilingual future. As opposed to the classic “founder-syndrome” individual who clutches power until the organization withers and dies, successful charismatic leaders will take on a new role helping position their teams for success.
I see “leadership of the whole” rather than leadership of individuals as the future of this sector. It’s a movement in many ways, but it’s also simply how you build effective, sustainable organizations that are creating value over the long term—over multiple lifetimes and not individual careers. For me, this topic of leadership is really the crux of how we will all and each be successful over the long haul!
Jed is widely recognized as an international thought leader on impact investing, performance metrics and sustainable finance. Originator of the term blended value, he has spent over two decades exploring how capital investment strategies may be executed to create multiple returns. Jed has held appointments at Harvard, Stanford and Oxford business schools and has written extensively on impact investing, social return on investment, and related areas. He is co-author with Anthony Bugg-Levine of Impact Investing: Transforming How We Make Money While Making A Difference. Jed is Chief Impact Strategist for ImpactAssets and chair of the ImpactAssets 50, a field-building strategy that promotes leading impact investing firms. He is co-author of Impact Investing 2.0.
Marta Maretich is Maximpact’s Chief Writer and Blog Editor. Maximpact is a free global portal for the social, impact and sustainability sectors. It operates as a secure web-based listing service that allows sustainability, philanthropy and CSR professionals, as well as entrepreneurs, intermediaries, and funds to share information about initiatives and impact investment deals, online. For more information on the platform or to review the latest impact projects visit www.maximpact.com.
[Image credit: pennstatenews, Flickr]