Social Investing and Strong Returns go Hand in Hand, says UBC Sauder Prof

An increasing number of investors today are demanding more from their investments than just capital gains. They want to know that their money is supporting businesses that share their ethics and values.

According to James Tansey, the executive director of UBC Sauder’s Centre for Social Innovation & Impact Investing, it’s possible to have both.

As a professor at the UBC Sauder School of Business, Tansey sees the importance of business ethics teaching, research and outreach, and teaches impact investing in the Bachelor of Commerce and MBA programs. Today, he shares his insight into how impact investing is attempting to solve the social and environmental problems of the future, while still providing significant returns for investors.

How is responsible investing different from impact investing?

Within public markets, we talk about responsible investing as an approach in which investors can invest in public companies. They can screen out the worst ones — avoiding tobacco, weapons companies and that sort of thing — and then screen the remaining companies for positive attributes like good governance, balanced boards and good community commitment. So, anything within the public market really falls under the responsible investing banner.

When we talk about impact investing, it’s really more about private equity investment. This has been largely driven — at least initially — by family offices and high net-worth individuals. If they want to do something more than just cut a cheque or make a donation to a cause, they believe that part of the solution is to invest in enterprises and ventures that supply business solutions to some of those difficult social and environmental problems.

You’ve got large organizations as well, like the Rockefeller Foundation or companies like Morgan Stanley, that have shifted more and more of their philanthropy away from just charitable gifts and grants and donations. They’re trying to support, build and grow social ventures that really make a difference.

What are the perceived drawbacks of impact investing and how accurate are they?

A lot of research has compared the performance of impact investments with conventional investments, and the assumption has always been that if you try to fulfill social and environmental goals as well, then you’re always going to be less profitable. There’s lots of evidence to prove that isn’t true, and that there isn’t a financial trade-off associated with impact investing. You can get strong financial returns alongside having impact.

Why is impact investing so important for the millennial generation?

I’ve just come out of a classroom with 55 students who are all under 30 years old, and what I hear from them all the time is they have a different view of their career. They want a job where values are front and centre, and they want to be able to make sure that their own money is invested in ways that align with their personal values. However you draw the boundary around millennials, this more recent generation cares a lot about that.

Some of the things that the students have been doing under their own initiative are really testament to how seriously they take this. The UBC Social Enterprise club ran a conference last weekend. They had 250 students in the room on a Saturday afternoon learning about social enterprise. It’s hard to ignore how important this is to the students in terms of what they expect from a university and a business school. There are some days where I feel like I’m running to keep up with the students’ ambition, which is great.

Do you think impact investing will ever become the status quo?

I think that across the spectrum, from responsible investing to impact investing to ethical investing, it’s definitely not going away, and I don’t think it will ever be 100% of the basis for investments. But I think we’ll see more pension funds and institutions going down this route — particularly if you can show that there’s no real trade-off regarding financial performance.

Most people don’t want to deliberately do harm through their investing, so I just think that what’s happening in the market is that companies in every sector are under increasing pressure to do disclosures, to tell their customers what they’re doing. Even if that’s just risk mitigation, it’s still important.

How is UBC Sauder supporting the growing demand for impact investing?

We’ve run a social venture accelerator – the Coast Capital Savings Innovation Hub – for five years, and that’s been a really important vehicle for creating and developing this new generation of ventures. We’ve had a really big impact just through that.

On the programming side, we’re doing a lot. We have an impact investment class that I run for the undergraduate course that caters to 25 students. We’ve got responsible investing classes across the board as well.

We’re just about to launch the E@UBC Impact Fund. It’s a fund that allows donors and philanthropists to donate money to a fund that’s then used to invest in some of these early-stage ventures. It’s a way for them to get involved in impact investing, and they get a 74 percent tax receipt for that donation. Then an investment committee invests in some of the ventures that are coming out of UBC. Any profit that comes from those ventures is recycled back into the fund. From the donors’ perspective, they’re doing the right thing and they’re getting a pretty good tax receipt from it as well.