If you think impact investing is just for the venture capital space, think again. Increasingly, institutional investors are seeking to maximize impact across asset classes — venture capital, public equities, fixed income, alternatives, and more. Enter the Total Impact Portfolio Challenge (TIPC).
Now in its third year, TIPC is a year-long, graduate student impact investing competition produced in collaboration by Wharton Social Impact Initiative and SOCAP Global. Students gain knowledge and experience in designing investment portfolios that embed impact into overall strategic asset allocation.
How It Works
Students from graduate schools all over the U.S. form small teams and apply to the program. In the 2020–2021 cycle, students hailing from 29 universities including Boston College, Emory University, New York University, University of Arkansas, and University of Denver joined the program.
The challenge? Putting theory into practice to create a “one hundred percent impact portfolio” for a hypothetical client — this year, a fictitious $75 million family foundation looking to move their portfolio to impact after witnessing the effects of the pandemic in their community and continued racial injustices. The student teams were tasked with building a portfolio and demonstrating how the portfolio meets the foundation’s impact goals, financial return goals, target asset allocation, and risk tolerance.
Students spend the academic year identifying specific securities, funds, and investments to include in their client’s portfolio. They submit their final portfolio as well as a clearly communicated strategy detailing their approach in early March. Finalists are selected in late March and are invited to present their pitch at the final competition.
For the second year in a row, the competition finals were virtual. The virtual format meant anyone could tune in from around the world. Attendees included students, industry practitioners, and academics.
“We were all so impressed with the level of detail and different perspectives from each student team,” said Yuri Seung, program manager at Wharton Social Impact. “It was clear that these students carefully considered the investor’s preferences and anticipated risks accordingly. Their investment proposals were really put to the test during the question and answer portion with the judges. It was terrific to see students step into the role of being wealth managers as they explained the strategies they spent two semesters designing.”
Over 125 people tuned in to watch this year’s competition, with four finalist teams hailing from Bard College, Duke University, Fordham University, and the University of Southern California. The finalist teams’ submissions showed creativity and demonstrated a rigorous, methodical approach to portfolio construction.
Stephanie Lavallato, Lindsay Moreau, Delicia Nahman, and Leigh Anne Statuto from the Bard MBA in Sustainability program won the competition, with their “one hundred percent impact portfolio” that blended best-in-class, negative screens, and mission-aligned investing strategies to achieve “holistic impact.” All four Bard team members are professionals from outside the finance and investment industry.
“In addition to the impact goals of the Foundation around children, education, health, and equity, climate change was also very critical to us,” said the Bard team. “Investments focused with future generations in mind would be poorly served without addressing the long-term impacts of climate change.”
They added, “Our approach was to lead with impact while meeting return objectives by identifying managers who are market leaders in ESG and leveraging different asset classes to achieve both financial and impact objectives. From there we developed a system to measure the quality of each investment’s impact to enable the Foundation to transition its portfolio towards transformative impact over time.”
Welela Makonnen, Katherine Marx, Madeline Robbins, Blayke Tatman, and Melissa Wongso from USC Marshall School of Business were the runner-up team. They said, “After witnessing the past year, we understood the Foundation’s new investment strategy need for addressing racial inequalities and the coronavirus pandemic’s outsized impact on low-income communities nationwide and created a portfolio that would support the country’s rebuilding and restoring of justice to drive social and economic vitality for America’s children.”
“To achieve the greatest impact, we believe in supporting diversity, equity, and inclusion efforts in the impact investing space. In particular, capital should be invested through underrepresented fund managers who have valuable perspectives on how to deploy capital for positive change,” said the USC team.
Judges for the 2021 competition were Mary Stokes (Managing Director, Bank of America Private Bank), Ruth Shaber (Founder and President, Tara Health Foundation), and Mary Green (Vice President, Client Portfolio Manager, Federated Hermes). They were impressed with students’ presentations and attention to detail. Following each presentation, the judges engaged with the student team for a detailed question and answer session, simulating the experience of a presentation and feedback from clients. The students appreciated the judges’ comments as they gave valuable insights into how institutional investors think about impact investing portfolios.
Guidance from Bank of America
Throughout the year, over 80 volunteers from Bank of America — wealth advisors, analysts, portfolio managers, and sustainability experts — served as coaches to Total Impact Portfolio Challenge teams. They provided guidance to students as they worked through the program and built their investment portfolios for the illustrative family foundation.
“We’ve been delighted by the enthusiastic participation of hundreds of our colleagues over the first three years of this program, which has served as a wonderful complement to our Sustainable and Impact Investing work,” said Devin Taylor, vice president of sustainable & impact investment strategy at Bank of America. “Our coaches have been able to share their experiences of working day-to-day with private clients and institutions pursuing both competitive financial returns and positive social and environmental impact. Working collaboratively with the students on aspects of their proposals that are not yet fully standardized in the industry, like impact reporting, has definitely been a mutually beneficial exercise.”
“Our BofA coaches were instrumental to our team’s success,” the Fordham team said. “We really appreciated how our coaches helped orient us towards the wider set of opportunities that exist in the impact investment world, which was invaluable as we sought to craft a portfolio that reflected both superior financial performance and a deep level of impact on both national and local scales.”
The Duke team shared, “[Our coaches] helped us think through our recommended allocation by asset class-based both on historical and projected returns to maximize the Foundation’s returns through their risk framework and distribution needs.”
Other Industry Resources for Students
Not all asset classes offer easy-to-find, investable opportunities. Students were encouraged to be creative in their approach and definition of impact.
Luckily, they also had a set of industry resources to help them look for investment opportunities. Earlier this year, Martin Jarzebowski, director of ESG & responsible investing at Federated Hermes, hosted a webinar for TIPC students on the topic of responsible investing and portfolio construction. Additionally, Matt Christensen, global head of sustainable and impact investing at Allianz Global Investors, offered students advice on topics ranging from impact metrics to intentionality on another webinar.
Net Impact, Wharton Research Data Services (WRDS), Toniic, Arabesque, Commonfund Institute, and Align Impact served as content contributors and supported students through networking, investment tools, webinars, and case studies.
“One of the most exciting parts of finishing our third year of the program has been seeing several TIPC alumni find jobs in impact investing roles after graduation,” said Alex Kravitz, director at SOCAP Global. “Even the students who don’t decide to pursue career opportunities in the space are hopefully walking away with a new skill set and perspective on how they can align their own portfolios with their values. We believe this is the future of investing and would encourage all graduate students with any interest to check back in August as we open applications for next year’s program.”
Learn more on the Total Impact Portfolio Challenge website. A special thank you to Bank of America and Federated Hermes for sponsoring TIPC and to Net Impact for helping spread the word about the program across campuses nationwide.
— Nisa Nejadi
Posted: May 25, 2021