Written by Ryan Steinbach
Two weeks ago I took this question for granted: should social finance be incorporated into the business curriculum? To me the answer was yes! Social finance is an emerging approach to managing money that delivers a social and/or environmental return in addition to an economic return. Why wouldn’t we include such an offering in the curriculum? After spending two weeks talking with professors and industry professionals as to why social finance isn’t more prominent in college education, I’ve come up against some serious reality checks. Here’s what I learned:
The majority isn’t convinced: When you get as caught up in the hype surrounding social finance like I have, you tend to forget it actually represents a tiny piece of the total finance market. The most optimistic reports estimate the near-term market potential of social finance at $650 billion which is 2.5% of the $26 trillion investment management industry in the U.S.
When I asked the Director of the Masters Program in Finance here at the Smith School, Michael Faulkender, if social finance is a topic of discussion in graduate level classes, he explained that it’s brought up anecdotally when discussing unique investor needs, but the simple fact is that an understanding of financial markets based on maximizing long-term shareholder value is what is required for an overwhelming majority of finance.
They aren’t hiring us: Last week I attended an impact investing panel with representatives of some of the biggest names in social finance, thinking I would find a nice counter argument in favor of social finance in college education. Wrong. When asked what job opportunities there were in social finance for future graduates, the panelists politely explained that they were looking for experienced deal makers with strong affiliations to target emerging economies. Basically, there are no formal entry level positions.
Well this sucks! Not only is social finance a nonfactor in most situations, but the places where it is a factor aren’t even hiring college students. So how can we possibly justify social finance in college education?
Millennials are convinced: While today’s investors expect companies to maximize financial return, the millennial generation is proving to be far more socially conscious. As the percent of total investments shifts toward the millennial generation, the expectations of firms might also shift. Even Professor Faulkender admitted that the success of companies with a double-bottom-line or triple-bottom-line is conditional on investors having a duel objective or a triple objective. Social finance is small but there is evidence it’s growing rapidly.
We’re more hirable: I can’t speak for everyone, but it seems the traditional corporate 9-to-5 job is not what college students have in mind. More and more are fascinated by jobs in hybrid business models, start ups, and social ventures. While these opportunities are exciting and different, most are small scale operations constrained by traditional funding. Alternatives for seed, scaling, and growth capital are needed. Some options already exist, but they are hard to find and current employees often don’t have the time or understanding to pursue them. I don’t know about you, but that sounds like a huge opportunity to get your foot in the door to me.
Understanding the options and models in social finance won’t just make you more appealing to start-ups and social ventures. Everyone needs money, and growing interest in social financing could fundamentally shift how companies are financed in the future. I’m not saying that one day the stock market will be based on hugs and smiles, but I do think that social financing options will become a critical consideration for any company looking to grow or develop.
While we shouldn’t get ahead of ourselves, it is important that colleges recognize this space for what it is – an opportunity. But is that opportunity still too far in the future to be spending tuition dollars on? What do you think?
Ryan is in his last year of undergrad business school at the University of Maryland-College Park, majoring in Marketing and Management. He is also the online manager of UnSectored and a social media intern at the Newberry Group. Formally, Ryan worked as a New Media intern for Calvert Foundation. When not immersed in social media, Ryan explores and writes about social innovation and his millennial generation. If he were to ever pursue a career (wait, what’s that?), it’d be in writing, brand management, and/or digital marketing. Twitter handle: @R_Steinbach