Impact Investing - Recap

First off, a big thank you to our panelists for coming! Elizabeth Glenshaw and Shuaib Siddiqui for sharing your insight and experience in the field. And a huge thanks to Professor Vogel for moderating the panel.

The discussion kicked off with an overview of the investing continuum. Professor Vogel discussed the segmentation of philanthropic investing – ranging from grants and program related investing to impact investing and diversified market rate investing. So what is impact investing? As described by our panelists, it’s social and environmental change through moderate finance return with measurable social impact. But we learned within impact investing itself, there’s a broad range of definitions. For example, the New Hampshire Charitable Foundation works to improve the standard of living in New Hampshire and is considered underneath the impact investing umbrella. At the same time, you can consider investing in GE stock – a firm that promotes clean tech and environmental sustainability as a level of impact investing as well.

Our panelist, Elizabeth Glenshaw, is involved with Clean Yield Asset Management, a firm that allows clients to dictate socially responsible investing. Her belief is that “social responsible investing is about reasoned returns.” Elizabeth discussed one of her client’s desires to double their assets in impact investments form 5% to 10% in the next year. The current portfolio consists of Vermont smoke and cure, organic valley farming cooperatives, Vermont natural coatings, etc. These investments might not be the most profitable, and in fact, might generate negative returns, but there’s no doubt that the firms themselves are making a social impact.

Shuaib Siddiqui, joining us from the Acumen Fund, is focused on non-profit social venture capital investments which provide critical goods and services to growing and impoverished economies. In recent years, they have focused on health, housing, renewable energy, and education efforts. The fund itself holds an expectation of getting 1 x return on their portfolio investments. As described by Shuaib, it’s “patient capital” – eventually, you will earn back your invested capital but this takes a back seat to social impact and innovation of the investments themselves. As an example, Shuaib described one of its recent projects in India – investing in a company that is able to take the “wasted” rice husks and generate energy. Acumen is one of the first base of capital for these entrepreneurial endeavors. This project has grown from 1 to 50 plants over the past few years, but the financial return is minimal compared to the social impact. But that raises the question - how do you measure the impact?

One of the key challenges facing this sector is its ability to quantify social impact. How do the clients know that your investment is benefiting others and on what scale? And how should you reward fund managers in this sector? It’s a strong believe that fund managers should be rewarded based on the overall social impact on their portfolio of investments. But the sector itself is still struggling on how to monetize social value. For example, Acumen Fund invests in a company that creates solar lanterns to replace kerosene in sub Saharan Africa. Can you measure social value from the savings from 3-5 year period that the households save on replacing kerosene with solar lanterns? Or, can you measure the decrease in air pollutants in homes and how the labor market is becoming more productive with reduced pollutants? What are the metrics to measure financial value?

Also, how do you ensure that companies you invest in will stay true to the social impact that they were originally founded on? For Clean Yield Asset Management, there are periodic audits on the company as the company holds them. For Acumen, they mitigate this risk by evaluation the values of the entrepreneurs and making sure they are aligned with Acumen funds shared values.

Great discussion and dialogue in this panel! After today’s panel, we hope many of you will consider a career in impact investing!

Debrief on the Healthcare Panel

This morning's health care panel was a huge success. It was a dynamic, engaging, and lively debate between moderator President Jim Kim and our four expert panelists - Dr. Derek Yach of PepsiCo (also the Conference's keynote speaker), Dr. Vas Narasimhan (Novartis Vaccines and Diagnostics), Dr. Jaime Bayona (Dartmouth Center for Health Care Delivery Science), and Dr. Paul Chew (Sanofi).

President Kim, known for his tremendous public speaking abilities, was especially impressive today as he arrived to host the panel after enduring a morning of last-minute oral surgery to repair a chipped tooth. He admitted right away that as a University President, he is used to delivering many speeches, but "giving a speech with a mouth full of novocaine is just about the most maacho thing we do."

Despite the dental work, President Kim was an active and highly engaged moderator, pressing the panelists on tough issues. How can big drug companies get interested in investing millions of dollars to develop new malaria and tuberculosis therapies for patient populations in developing countries when these markets are notoriously unprofitable? If companies choose to bring drugs into these markets, how can they ensure that local physicians and nurses are trained to help procure and deliver the drugs to patients? How do companies manage the complexities of these health care ecosystems, where infrastructure is poor and patients think mosquito nets that should be used to prevent transmission of malaria are better suited for fishing and clothing?

The panelists offered facsinating anecdotes from their highly diverse backgrounds. Derek Yach told the story of his recent meeting with the CEO of PepsiCo and the head of the World Health Organization (WHO), Margaret Chan. At the conclusion of the meeting, Dr. Yach showed his CEO a beloved statue that sits in front of the WHO building - a statue of a child leading a blind man. According to Dr. Yach, this statue epitomizes the mission of one of Merck's programs to eradicate river blindness around the world. Dr. Yach turned to his CEO and asked "What's our equivalent?" What strategies does PepsiCo have to tackle major public health challenges? Dr. Yach conveyed his passion for public-private partnerships and articulated the need for corporations to build new business models that allow companies to meet the health needs of customers and be profitable. "We have to focus on the 'and."

Vas Narasimham leads the vaccine division of Novartis, where "working with public health agencies is most of what we do." He described three distinct phases in the history of the vaccine industry. From the 1980s to 1990s, the industry relied upon donations, and poor nations had to wait because of severe technological deficiencies and a lack of infrastructure. The era of the 2000s was defined by new global frameworks and international organizations like UNICEF that began to enable counries to introduce vaccines at lower cost via novel "pull mechanisms." Today, in the most recent decade, economies have slowed, and markets of enormous potential such as Africa, India, and China represent the new frontier for many major companies. Access to vaccines and clinical therapies has improved enormously, but now the question is, how do we ensure equality in access?

Dr. Jaime Bayona told the fascinating story of his time in Haiti and Peru, where he worked tirelessly to build an infrastructure on the ground to deliver treatment for multi-drug-resistant tuberculosis (MDR-TB). Dr. Bayona's primary observation is that infrastructure and systems are the problem. Drugs can be developed, but how to procure and distribute the drugs, and how to ensure that patients have access continue to be major hurdles in underprivileged nations. The governments of Peru and Ecuador engaged with international aids organizations such as Partners in Health (PIH) to put MDR-TB treatments in the hands of local doctors. Dr. Bayona, as part of PIH, led national training sessions on procurement and quality control to lay the groundwork for a sustainable health care delivery system in these two countries. "It is about creating a large partnership together in a setting where everyone's input is value." Starting at the top with a cohesive training program was the most effective way of ensuring that comparable processes trickled down to the local level.

Finally, Paul Chew spoke of the R&D strategy at Sanofi of "no profit, no loss." Sanofi has developed a successful method for bringing new drugs to underprivileged markets without substantial financial loss. Manufacturing is done close to the intended source of distribution, providing a boost to the local jobs economy and giving the Sanofi team an opportunity to observe the health care market first-hand during the course of development. Creative and cost-effective solutions are devised when the company encounters resource-based hurdles. For instance, in Africa, many communities do not have scales, so Sanofi created a conversion table to distribute to local physicians to get around the inability to do weight-based dosing.

All the panelists agreed that the most significant pressure on the industry comes from financial analysts. Analysts stress the need for major profits and massive cost-cutting. Pharmaceutical companies - and in particular the R&D teams - want to fight for important projects but if these projects threaten the profitability of the company, they become difficult to justify to shareholders.

President Kim left the audience with the thought that "the plural of anecdotes is not evidence." Thus far, the pharmaceutical industry has made huge strides in improving access to clinical therapies, but we have so far to go before comprehensive systems for health care delivery are in place. Global health experts, physicians, and other researchers have many individual anecdotes, but these stories, when combined, do not yet tell a complete story of success. As business school students, we can bring to the industry a strategic mindfulness and an ability to communicate across stakeholders. Pharmaceutical companies as well as government organizations and foundations will need the fresh perspective of recent graduates, who can bridge the gaps and recognize opportunities to build new systems and business models.

Driving Change in the Energy Sector Recap!

Sorry for the late post, the cocktail reception and after party got in way of my blogging time. Anyhow, wow, that was an amazing session! Our moderator, Armond from the Clean Air Task Force provocatively kicked off the panel discussion. He challenged the panelist with the gleam outlook of the clean energy sector. He pointed out that:

• Renewable energy is growing but overall size is tiny compare to conventional sources. Why are we focusing on renewables?

• Carbon dioxide emissions continue to grow even after Kyoto Protocol. What’s wrong?

• China has built a ton of renewable generation capacity, but even more coal plants. Is that green?

• Clean energy investment dropped significantly recently. Is it still wise to invest in this industry?

• Renewable levelized cost of electricity is not competitive with conventional generations like coal, combined cycle gas or nuclear. What is the business justification for renewables?

With that stage set, the panelists discussed their views of the outlook and their short-term and long-term strategies given the industry situation.

The panelists all agreed that technology cost is definitely one of the biggest challenges in renewable energy space. But there has been significant cost reduction recently and the progress will continue to make renewable more and more competitive.

Seth Dunn from GE indicated that his firm has been investing heavily in increasing efficiencies in areas such as wind/gas turbine, solar module, production process, and construction cost. Reliable project cost will minimize development over-run and deliver immediate results to GE’s clients. Technology investments are long-term plays to make renewable more competitive. In addition, GE is also looking into innovating business models to adapt to the diverse regulatory and economic environments internationally. Lastly, given the uncertainties in terms of which market will grow the fastest (residential vs. commercial; US vs. international) and which technology (Solar: Cad-Tel, Cry-Si, or CIGS) will eventually succeed, it is important to taken a “portfolio approach” to include investments not only in renewables, but also in nuclear, oil & gas, etc.

Daniel Hullah from RockPort Capital offered a very optimistic view of the renewable / clean tech industry. He said that despite the complications and challenges in the industry, the size of energy market is gigantic and problems are huge; therefore, it creates opportunities. But he is less optimistic about renewables being the resolution for climate change, mainly because renewables are only a small fraction of the overall pie and likely to continue to stay in the same order of magnitude in near-future.

Given the nature of a VC, RockPort is looking at shorter investment-return time horizon. With that said, RockPort understands the implication of the industry subsidies very well and seeks to invest in firms that can be successful even if stand-alone. RockPort is also cognizant of the industry’s cyclical nature and make investment accordingly – not only in renewable generation (supply), but also innovations in agriculture, water, material science, transportation, demand-side management (efficiency), and oil & gas. Lastly, VC’s look for disruptive innovations that can shift the cost curve downward. There are plenty of pockets of area where solar can provide very competitive if not cheaper electricity than conventional sources.

Sienna Rogers from PG&E indicated that regulations play a significant role in California, where PG&E operates. The 33% renewable portfolio standard (RPS) by 2020 poises a tremendous challenge. Given the price of natural gas in the near-future, combined cycle plant seems to be the natural fit to replace coal generation as they go offline. But, PG&E is constantly seeking to procure renewable generation that can be competitive. Currently, many purchasers’ decisions of renewables procurement are mandated by regulation, renewables needs to become competitive on its own in order to incentivize organic growth.

Overall, the panelists and Armond, agreed that energy R&D investment is significantly lower than other industries. Not only additional R&D investment is needed, transfer of knowledge from healthcare, aviation, material science is also needed to enhance innovation. They also agreed that current regulations for this industry are mainly set at the state-level –a coordinated decision making effort is needed at the national level to guide US towards the right direction. Furthermore, energy efficiency needs to be re-examined and perhaps be looked at as a "source” of energy.

Lastly, career advices! The panelists and moderator advised that we should follow our passion! Paraphrasing a few things they said:

• Don’t just focus on pure-play companies. A lot of companies are just dipping their toes in the water right now and may go into renewables in the future – Seth from GE

• Do entrepreneurial things, whether it is in a small company or a big company. Make friends with engineers – Daniel from RockPort

• This is an industry that takes a long-term approach to tackle complex, challenging problems. It is a balance of innovation and affordability. Join a utility if you want a stable career! – Sienna from PG&E

• Work in the private sector first before joining a NGO or government. You need to build technical understanding and know the economic realities – Armond from CATF

Alright, that’s enough writing. Thanks for coming!

-The Energy Panel Organizers

The Time Value of Trading Off: Derek Yach's Opening Keynote

Dr. Derek Yach, SVP of Global Health and Agriculture Policy at PepsiCo, gave a riveting keynote address to open up the conference. A key question he asked was “How do we trade off today’s tangible pleasures and profits against tomorrow’s possibly greater but uncertain rewards?” How do we weigh 15 more minutes in our warm bed against the potential health benefits from a crisp jog in February? Maybe it’s all the discounting analyses we’ve been doing in Corporate Finance, but I’ve been thinking a lot lately about the social psychology of time and the opposition companies and individuals and governments face when they make decisions that leads to a little pain right now in exchange for uncertain outcomes in the future. Dr. Yach pointed out that the
real challenge lies in not allowing the urgent to crowd out the important. Culprits include today’s digital information overload, increasing pressures for constant growth, and a lack of executive accountability thanks to short tenures. Dr. Yach was able to draw a lot of provocative analogies from his experience in public health: how do hospitals and our healthcare system, with limited
financial resources, weigh the value of today’s “curative load” with preventative health measures? How does a clinic team in Africa weigh the treatment of one car wreck victim with vaccinating a village of children? These translate so clearly into climate change – how do we, as individuals, forego the convenience of bottled water and plastic bags when we have no idea what benefit will come to us from carrying a Sigg or reusable bags around? As an executive, how do you make the choice to take a hit on this quarter’s profit – on which your compensation depends – when it is unclear that your efforts to reduce your company’s carbon footprint will make an impact?

The Holy Grail, if you will, is to be innovative and find the solutions that allow you to increase profits now while having a positive social or environmental impact that allows those profits to remain sustainable. PepsiCo’s “Performance with Purpose” seeks to do just that. In Ethiopia, PepsiCo works with local chickpea farmers to improve their yield and productivity of their land. The increased chickpea yield goes toward ready-to-use local food supplements that is used nourish children during food emergencies, and Sabra brand hummus! Just think – when you snack on Sabra from Byrne, you’re eating chickpeas that are from the same farms as those that feed hungry children all the way across the world in Africa. PepsiCo benefits from a steady agricultural source for their products while the community benefits from improved farming and childhood nutrition … and of course I, the consumer, benefit from delicious, delicious Sabra.

There will be instances, however, when we aren’t always able to attain that Shangri-La of the triple bottom line, and tradeoffs will be necessary. I believe our experience at Tuck empowers us to make conscious, responsible decisions in these circumstances. At Tuck we are well accustomed to trading off present pleasures in exchange for the potential for greater future rewards. Just think of all the time you spend on corporate recruiting – unsure of whether you’ll land that job at Goldman or McKinsey – when there’s always a birthday to be celebrated at Murphy’s, or a goal to be scored in hockey. Remember in your future corporate life that there is value in foregoing quick, easy profits in exchange for the good it may do for your world, or your childrens’ world, or even your childrens’ childrens’ world and always keep an eye out for the idea that doesn’t force you to make that tradeoff.

Sarah Stern T'13

The BSC Begins!

Welcome to the 10th annual Business and Society Conference at Tuck!

First things first: many, many thanks to our fearless co-chairs Rosanne Palatucci and Brian Meyers – none of this would have been possible without them!

A key focus of Dean Danos’s welcoming address was the tradeoffs businesses are facing given the global economic crisis. Although he optimistically sees crises as drivers of important change in industry, he recognizes that the tradeoffs that business are facing in light of the global economic crisis are real. Now more than ever, however, businesses have a duty to take this opportunity to grow and build and incorporate social and environmental considerations into their core activities. He closed by noting that a great business school has to be responsive to great movements in business: CSR and sustainability will become just as important a topic as other sources of change – such as the information technological revolution and globalization. I hope you’re all as excited as I am to be a part of this movement at Tuck, and to bring lasting change into your future careers!

Sarah Stern T'13

Design Thinking Workshop Update!

I’ve had the pleasure of spending the last few months working with a bright and energetic group of Tuckies to organize the Business and Society Conference and, more specifically, the Design Thinking workshop.

I was asked to join the team based partly on my undergrad experience in Industrial Engineering and Design and, as the meetings began and I learned more, I realized two things: How interesting this concept of Design Thinking is and how little my prior experience was applicable.
As an aspiring management/strategy consultant, I was pleased to see how prevalent Design Thinking was in the consulting world, from companies like IDEO and Innosight up to and including "The Big Three".

For those interviewing for or entering consulting, this will be a great workshop and should be immediately applicable. Clients are now expecting (if not demanding) that these concepts be present in final recommendations. It will also be really fun. This year’s workshop features a
case that Merritt Patridge* (Townsend) and I wrote about the Upper Valley Haven. Andrew Waldeck, a partner at Innosight, will be facilitating the case along with some of our wonderful Tuck professors (including our back-flipping classmate’s favorite), Renee Weeks from the UVH and two students from Dartmouth’s Design for America team. It was a really cool experience to help write a case from scratch as opposed to reading one and hoping not to get cold called.

Anyway, come enjoy free breakfast and lunch and experience a really cool workshop that should pay dividends no matter what you will be doing this summer or fall (unless you are sponsored and will be working at the Bridge Program - then you should just come for the free food).

Matt Zepernick T’13

*When I say “Merritt and I” I mean Merritt did almost everything. Thanks Merritt! She worked incredibly hard and did a fantastic job on this case. If you enjoy it, please thank her as well.

Investing with Impact Update!

Whether you call it ‘profit with purpose’ or ‘happy
returns’, impact investing has received quite some press recently as an
emerging new asset class. J.P.Morgan in late 2010 published a report in which
the firm was very bullish about impact investing, predicting that by 2020
between $400 billion and $1 trillion would be invested this way. But what
really is impact investing? As The Economist put it in a recent article: “Five
years ago anyone wanting explicitly to combine financial returns with virtue
was limited to investing in social housing for poorer people in rich countries,
microcredit and a handful of ethical mutual funds that shun sinful shares such
as tobacco and defense companies.” Today, not only the number, but also the
range of impact investors has grown and so has the variety of investments they
make.

Our panel will not only consider how we can define and
better understand this trend, but also address the opportunities and practical
challenges around impact investing today. Elizabeth Glenshaw, portfolio manager
and managing director of Clean Yield Asset Management, and Shuaib Siddiqui,
portfolio manager at the Acumen Fund, together with our moderator Professor
John Vogel, bring diverse experiences and perspectives to the topic. A key
challenge is how to develop better metrics to measure performance, and we will
hear first-hand examples at how firms like the Acumen Fund try to measure and
‘monetize’ social impact. And we will ask some thought-provoking questions such
as whether traditional venture capital structures and mandates need to change
for us to really start making an impact.

It’s great to see so much interest in linking investment
choices with better social and environmental outcomes, but is it really
possible to move away from the profit imperative we hear so much about at
business school? With impact investing becoming such a hot topic, this panel is
a must-attend for any Tuck student interested in finance, investing, banking or
private equity.

We look forward to seeing you on Thursday at 3:30pm in
Frantz II!

For in-depth background reading, see the 2010 J.P.Morgan
report on impact investment here.

For a quick update on recent developments, see this
Economist article here.

Submit your questions here.

Social Impact as Strategy Update! - Walmart example

What does it mean to talk about social impact “as strategy”? Social responsibility is often considered a corporate communications function, not a strategic function. Some would claim that social impact is strategic only for brands with a social image, such as Patagonia or Whole Foods. Our response is that social impact and shared value can be a critical part of strategy for any company, and I thought I’d illustrate it with an example from an infamously profit-focused, hard-nosed company: Walmart.

Not strategic: Philanthropy
Corporate social responsibility often includes philanthropy, such as Walmart giving $20K to a local Florida anti-hunger organization. These efforts have some return to Walmart in the form of improved reputation, but the fundamental goal is good community citizenship – not value creation and profit maximization.

Not strategic: Simple cost reductions
Often, when talking about social impact, people think of environmental sustainability.
Using fewer resources is of course ecologically responsible and it does improve the bottom line. For example, Walmart designed a new store prototype that uses 30% less energy, helping the planet and the bottom line at the same time. However, these types of easy wins are easily
replicable, aren’t core to Walmart’s strategy, nor do they involve the kind of hard choices that we’re trying to examine at the conference this year.

Strategic social impact and shared value:
So what counts as strategic? Porter’s framework points us at decisions that have societal benefits, but are also key to providing competitive advantage to the firm or ensuring a positive industry environment. For example, in 2009 Walmart lobbied for laws mandating employer-provided health insurance. In an environment where every retailer provides health insurance, Walmart’s employees and customers are better off (social impact), but Walmart is also better able to bear the increased cost, increasing its competitive advantage. As another example, in
2006 Walmart began a process of requiring all its seafood to be sustainably sourced, thus helping to ensure fish remain relatively abundant and thus available and affordable for its customers. In another case, Walmart worked with its vendors to recycle plastic and cardboard waste from stores into an exclusive line of pet products, thereby cutting disposal costs and creating unique, lower-cost products.

Learn about other ways companies can strategically share value at our panel at 2 PM this Thursday!
- Kaia Dekker, for the Social Impact as Strategy Panel

Driving Change in the Energy Sector Update!

Hi all!

Today I wanted to increase your awareness of the energy panel within the Business & Society Conference, titled Driving Change in the Energy Sector.

The energy community at Tuck gets bigger and bigger each year, and we are excited to see companies as PG&E, General Electric, Enernoc, Siemens, FirstWind, Eaton, O-Power or SunEdison looking for Tuckies. As a consequence, we wanted to have a panel in the conference that dealt with the latest happenings in the energy world and its perspectives.

We thought that the best way to have a real perspective of these happenings would be to bring together all the players in the industry: equipment manufacturers, investors, utilities and nonprofit. And I have to say that the caliber of the professionals that are going to be present in the conference is astonishing. Seth Dunn, the renewables policy leader at GE Energy, will provide the perspective of one of the biggest manufacturers of wind turbines and solar panels in the world. Daniel Hullah, from RockPort Capital, will provide first hand insights about investing in new technologies. Sienna Rogers, from Pacific Gas & Electricity, will bring to the table what
a large utility thinks about investing in renewables and what are the challenges they face at the time of doing so. Finally, Armond Cohen, from Clean Air Task Force, a nonprofit devoted to increase air quality , will moderate the table with the freedom needed to get insightful answers from the panel.

The panel will discuss issues as relevant as the role of distributed generation in the future of renewables, the impact of shale gas on its price competitiveness, its subsidy dependency, the role of China in its development, or what are the next technologies in the R&D pipeline.

I hope to see you all there!
Remember to register at http://tuck2012bsc.eventbrite.com/

Energy Panel

Healthcare Panel Update

I hope everyone is getting excited for the Business & Society’s Healthcare panel! Dartmouth’s
President Kim has even cleared his calendar to come moderate this panel which is full of industry experts representing a wide range of backgrounds and opinions. Panelists will include Dr. Jaime Bayona who helps run Dartmouth’s Center for Health Care Delivery Science, Dr. Paul Chew the current Chief Medical Officer at Sanofi U.S., Dr. Vas Narasimhan who was recently promoted to
run Novartis’s global vaccine development, and Dr. Derek Yach the conference’s Keynote speaker and Senior Vice President of Global Health and Agriculture Policy at PepsiCo.

What really strikes me as I look at the panelists are their in-depth experiences at different places in the health care system. Dr. Bayona fought to get medicine to multi-drug resistant tuberculosis patients in Peru while he headed up Partners in Health, Peru. At the same time, Dr. Narasimhan was busy getting Menveo, a vaccine for meningitis, approved by the FDA and into doctors’ offices. If we are going to learn anything about how to make health care equitable and how to effectively deliver care to those who need it most, this is the group to teach us!

Following the panel, there will also be an opportunity to meet more personally in small groups with many of the panelists as well as Dr. Srishti Gupta, one of McKinsey & Company’s Global Health experts. It will be a great chance to get to know some of the people who have dedicated their lives to improving health care and are making a difference every day.

Mark your calendar for 10:00AM on Friday February 10th, I am looking forward to seeing you there.

Our 2012 Conference Theme

We’re less than two weeks away from Tuck’s 10th Annual Business & Society Conference, and I wanted to talk a little bit about this year’s conference theme: “Trading Off: Impactful Business Strategy in Uncertain Times.”

Impactful Business Strategy

Our executive committee spent a lot of time this past summer and fall discussing what we wanted the 2012 conference to focus on. We discussed a wide variety of social impact topics, including renewable energy, sustainable supply chains, socially responsible investing, affordable healthcare, and more. What we kept coming back to was that no matter the industry, we need to recognize that in order to be most successful, social impact should not function in a vacuum – for example, in one division of a company, separated from the rest of the business. Corporate responsibility and sustainability need to be integrated with everyday business decisions. We, as future business leaders, need to learn how to incorporate these issues into the overarching strategy for the business.

In Uncertain Times

We also recognize that once we arrive at a solution, we then face the challenge of how to push that idea through an organization. And in times of economic hardship, an uncertain regulatory environment, and demanding shareholders, moving a “social impact” idea through an organization can be difficult. So how do we innovate, who do we influence, and what makes us succeed? It’s not enough to find answers; we also need to understand how to implement them.

We have more than 40 Tuck students helping to organize this year’s conference, and we look forward to hosting you at the BSC this year. In addition to our formal sessions, we’ll have coffee breaks, lunch, and a cocktail reception where participants can mingle with each other and our speakers. We aim to raise the level of discourse about social impact, and we hope that you will join us!

Register now:
http://tuck2012bsc.eventbrite.com/

Welcome T'14s!

Congratulations to the incoming class of 2014 on your admission to Tuck!

We at the Tuck BSC would like to invite you to attend the Business and Society Conference this February 9th and 10th. This is a great chance for you to preview the Tuck community's commitment to business issues that reach beyond the bottom line! At the conference you will have the opportunity to attend panels on energy, healthcare, social impact as strategy, impact investing, and design thinking. If you have any question about visiting Tuck for the conference, please direct them to Sarah Stern T'13 at bsc.tuck@gmail.com.

We look forward to seeing you there!

Save the Date for the 2012 BSC!

It's official - Save the date for the upcoming Tuck BSC!

The 10th Annual Business and Society Conference will be held Thursday, February 9 to Friday, February 10 at the Tuck School of Business at Dartmouth College in Hanover, NH.

The theme for this year's conference, courtesy of the BSC marketing team, will be:

Trading Off: Impactful Business Strategy In Uncertain Times

Business norms are changing. Companies face increasingly complex tradeoffs between surviving quarter-to-quarter and being held accountable to the societies in which they operate. Meanwhile, the costs of healthcare, energy, and compliance are increasingly volatile, exacerbating the challenge of making these tradeoffs. Furthermore, in the wake of the global credit crisis, the call for business accountability has reached a fever pitch.

How should business leaders make these choices? How can we transform from a paradigm of singular responsible decisions to an underlying dynamic of sustainable business strategy?

Tuck’s 10th Annual Business & Society Conference will bring together students and business, government, nonprofit, and thought leaders to discuss how businesses should manage the realities of short-term tradeoffs while remaining focused on long-term growth.

If you are interested in learning more about the conference, please:

• Sign up on the BSC website


• Follow @TuckBSC on Twitter


• Bookmark this blog and check back for updates on panels & panelists, marketing efforts, and weekend activities!

For those of you needing further inspiration to come visit New Hampshire in February, here are just a few of the myriad ski mountains within an hour's drive of Dartmouth's campus:

• Killington


• Mt Sunapee


• Okemo


• Whaleback


• Pico Mountain


• Dartmouth Skiway

Keynote Speaker: Harvey Pitt

To kick off the conference, Harvey Pitt, former Chairman of the SEC, gave a thought-provoking keynote address, speaking about the current difficulties facing the United States government, the public sector and government regulators. Touching on the challenges of creating and enforcing effective regulation, Mr. Pitt spoke of his criticisms of the Dodd-Frank act, what regulation the United States needs, and what business leaders need to do in the future to both be successful and avoid another crisis.

Mr. Pitt began by noting that often the debate focuses on whether we have “too much regulation or not enough.” But that focusing on this is wrong and distracts us from the true issue, which is that there is “not enough smart regulation and not enough smart regulators.” The Dodd-Frank act however, does not address this issue, but instead layers on more bureaucracy to the system and opens regulatory agencies like the SEC and the Federal Reserve to increased political pressures. But we must acknowledge that this is going to be the law, and we must operate within the new regulations.

Further, Mr. Pitt stressed that companies must realize that good governance is good for business, and that companies must understand and manage risk. Mr. Pitt then outlined specific recommendations for how business and government should interact, including:

• Business should be required to furnish government with a steady stream of data
• Mandate that the government analyze that data and disseminate in real time
• Authorize the government to set trip wires so that potentially significant economic trends can be halted while the government determines if trends are dangerous.

As a business school student, I was particularly inspired by Mr. Pitt’s call-to-arms of sorts for future business leaders. There are challenges ahead, certainly, but there are ways to prepare, educate, and mitigate those challenges. Here are Mr. Pitt’s points on what good business should do (please note that I’m paraphrasing Mr. Pitt’s remarks):

• Advance planning is critical – if you haven’t started already, you’re late
• Hope for the best, assume the worst
• Avoid negativity
• It is important to educate federal regulators – the implicit assumption that government always knows what it is doing is dangerous and often untrue
• Can’t use the excuse: “that’s the way everyone’s doing it.”
• Avoid conflicts
• Having a solid management team is essential
• Risk management is essential
• Whistleblowers are coming, so be prepared. Businesses must reinvigorate ethics and compliance programs.
• If business doesn’t speak up, it won’t be heard.
• Get your boxing gloves ready. Be prepared to deflect or rebut arguments that your company poses a systemic risk to us markets
• Maintain a sense of humor

It’s a tall order, but one that I believe myself and my classmates are ready to undertake. This keynote speech created a wonderful platform for the rest of the conference; we were able to address issues of jobs, systemic risk, and corporate social responsibility. Can We Innovate Our Way Out? By asking the hard questions and engaging in these discussions, we’re putting ourselves on the right track.

Aligning Corporate Responsibility and Business Strategy

Looking back to the Body Shop case that all Tuck first year students study in their fall semester Analysis for General Managers class, memories of vigorous debate over whether businesses are right or wrong to consider the social impacts of their decisions come to mind. We heard over and over again from our investment banker classmates that it was wrong, because businesses have a fiduciary responsibility to the shareholders to make the greatest profits possible regardless of the cost to society. Well after listening to our panelists on Thursday, it turns out that we were both right…and wrong.

Does environmental responsibility align to the goal of fiduciary responsibility? Barry Caldwell of Waste Management says yes. Barry’s words couldn’t have been more straight, “Sustainability is not an altruistic thing! It is a way to drive cost out of business.” Barry continued to describe how Waste Management’s business requires the support of their local communities due to the highly regulated nature of the business at both the state and local level. By being socially responsible, WM is able to be a good neighbor to the communities that are home to its landfills. As Barry put it, this goodwill translates into votes when WM needs them to continue to build its business. Furthermore, WM is doing a lot more than reducing its costs along the way. WM has been acquiring businesses and technologies that in some way make the business of waste more sustainable and more profitable as well. Companies owned by WM include Bagster, Greenopolis, and Terrabon.Their landfill gas-to-energy and waste-to-energy operations provide enough energy to power a million homes each year…and growing! I dare say that both Anita Roddick and our good friends at Goldman Sachs would approve of this business strategy.

Of course, it’s not always so cut and dry as Jonathon Jacoby from Oxfam was quick to point out. Too often companies find it difficult to properly align their business objectives with their CSR goals and end up falling short on at least one. However, PG&E is a great example of a company that has thrived at both, and its Melissa Lavinson shared insight on how they accomplish this. PG&E believes that all of their actions must be rooted in a set of core corporate values that include being “passionate about meeting our customers’ needs and delivering for our shareholders” and “accountable for all of our own actions: these include safety, protecting the environment, and supporting our communities.” These core values are considered in making every decision and are often reviewed during meetings, ensuring alignment between business and social objectives comes naturally. While these values may be at odds at times, PG&E works hard to make them complimentary objectives and has led to major decisions including the formation of the USCAP (US Climate Action Partnership), investment into cleaner energy sources, and withdrawal from the US Chamber of Commerce. PG&E considers its future to be dependent on the state of our planet both now and in the future, as short term gains now won’t mean much if there’s nothing left in 100 years. While PG&E has demonstrated their commitment to this space through their own activities, they’ve used USCAP as a way to unite leading businesses from all industries in their goal of making environmental sustainability a policy mandate. In the interim, PG&E has made the decision to invest in efficient, clean, and renewable technologies as its current infrastructure ages and needs to be replaced or rebuilt. Melissa pointed out that these investments are paid for by PG&E’s shareholders- not by increased rates to PG&Es customers, but the benefits will be enjoyed by all as traditional energy sources grow more costly due to resource scarcity and the eventual cost of carbon. PG&E is protecting its customers from major rate shocks and its shareholders from future industry liabilities.

So what does this all mean? Businesses owe it to both their shareholders and society to maximize cost savings and profits through sustainable activities. While we’ve focused on the environmental side of things as it is most easily tied to public policy, there is plenty of evidence that a wide range of types of corporate social responsibility activities lead to an improved bottom line for businesses, including more favorable reputations among customers, increased employee satisfaction, talent recruiting advantages, and the ability to charge brand premiums. So next time you think you have to make a choice between making money and doing right by society, take another look and consider both the obvious and the creative alternatives. After all, whether you want to work for an NGO or a bank, everyone at Tuck wants to succeed at both; because there’s nothing more central to business school than money and there’s nothing more central to Tuck than supporting your community!

How are we going to create and protect jobs going forward?

The issue of job creation and protection is pressing as I embark on my internship search for this summer. The New York Times Magazine published an article last month about the glut of recent law school graduates in this country. According to this article (and from my first hand knowledge of my friends’ experiences), we are educating more lawyers than there are lawyer jobs, leaving many with crushing debt and few job prospects. What about the MBA job market, then? Is the 21^st century American goal of becoming as highly educated as possible just about obtaining a coveted commodity (an advanced degree), instead of helping us actually get better, more satisfying, and higher paying jobs?

I had all of these issues on my mind as our panel team planned the Creating and Protecting Jobs panel at the Business and Society Conference. Our team sought to bring together representatives from big business (Reid Jackson T’96, President and CEO of Compusearch, and Barry Doggett, Sr. VP of Public and Community Affairs at Eaton Corporation), government (Steven Greenfield T’71, Chief Operating Officer at the Vermont Economic Development Authority), and experts from research and academia (Brink Lindsey, Senior Fellow at the Kauffman Foundation, and Professor Robert Hansen, Senior Associate Dean at Tuck). This diverse group provided valuable insights on the jobs outlook on both the local and national level.

Uncertainty was an issue discussed at length. For both small and large businesses, uncertainty about the economic outlook is a key roadblock to job creation—businesses don’t want to expand staff if they are uncertain about whether cash flows will be constant in the future. Perhaps, then, the role of the government is to offer predictability in regulatory standards and fair tax policies. The panelists all discussed a need for government to establish clarity in procedure and implementation.

International exchange, in both goods and services, was another topic discussed. One very interesting point from Brink Lindsey was about high-skill foreign workers coming to the US. Lindsey mentioned that we attract the best talent from around the world through our prestigious universities, but then chase them away with our restrictive visa policy. Furthermore, immigrants (high or low skill) are more likely to start businesses that create jobs. Thus, one way that our government can drive jobs and innovation would be to relax immigration policy for high-skill foreigners.

The issue of entrepreneurship is also important when thinking about job creation. I have always heard that my generation will not have the benefit of job security and we will float around to several different jobs over our working lifetime. My take on that is that we have a more entrepreneurial approach to our careers: instead of waiting for a company to provide us with our next opportunity, we take our destiny in our own hands. Furthermore, some of the most exciting opportunities may not be with established companies—some of the most important innovation happens at small startups.

To circle back to the New York Times article on the oversupply of lawyers, I think that the most important skill that newly minted professionals can have is the ability to be entrepreneurial. We are entering the workforce in a climate of uncertainty, and to have the flexibility and creativity to seek out new opportunities will be invaluable as we progress in our careers. For the US to continue to lead in innovation and ingenuity, our professional sector must have the courage and resourcefulness to create. Thus, perhaps my internship search Plan B to start my own business should be moved forward to Plan A!

Fueling Innovation: Government’s role in Supporting the Development and Deployment of Clean Energy Technologies - Panel Recap

A huge thank you to our moderator, Andy Revkin of the New York Times, and panelists for what was a lively and insightful discussion. I can only assume that others in the audience were as inspired as I was by the obvious passion our panelists had for their respective work.

Summarizing the key issues and take-aways from a panel that touched on (and not always with panelist agreement) everything from U.S. competitiveness with China to government’s role in the innovation ecosystem, is a difficult task. So, I enlisted the help of my father who joined me at the conference and, as a former journalist, is much better equipped to rise to the challenge. He had this to say in summary:

The globe needs revolutionary change in both energy technologies and infrastructure, but the United States lacks a clear, long-term vision on where it wants to go and how to get there, a panel of energy experts agreed.

That lack of clarity makes it difficult for U.S. companies to make long-term investments in urgently needed cleaner energy sources, said the experts at Business & Society Conference at Dartmouth University’s Tuck Business School. It also impedes international agreement on clean energy incentives, they said.

“You need some clear, long-term vision,” said Michael Horn, Renewable Energy Policy Modeling Leader for GE Energy. Government should set policies and incentives for long-term transition to new forms of energy, suggested Horn and other panelists. But, stated Owen Barwell, chief operating officer of the Loan Programs Office in the U.S. Department of Energy, “We don’t have a precise and articulated policy.”

“Culturally, this country’s not there yet,” agreed Tom Zarrella, CEO of SustainX, Inc, a renewable energy company. While Europeans have long paid $5 or $6 per gallon for gasoline, U.S. consumers have not. In the U.S., heavy reliance on oil, for instance, “is not hurting us, we do not see it in our pockets.”

Panelists said private sector investment should lead the transition to renewable and less polluting energy, but they noted the absence of market incentives to pursue certain public goals—such as reducing carbon emissions that are widely thought to be changing global climate.

The Tuck panelists agreed that energy changes will be critically needed in the next 10 or 20 years, as the global economy builds vast numbers of new electric generation plants that will last 40 to 60 years. GE’s Horn made clear that most of these will be built in developing countries such as China. “They need new power and they’re going to build it from scratch.” The U.S., in contrast, faces relatively little need for new power, but must scrap many old generation plants and replace them with new sources of energy.

Though the U.S. tends to innovate well, panelists said, China appears better prepared to develop cleaner generating plants. Phil Giudice, undersecretary for energy in the Massachusetts Department of Energy and Environmental Affairs, said China is building the world’s most efficient coal plants and 30 nuclear power plants. Speaking of cleaner energy plants, David Wells, of Kleiner Perkins Caufield & Byers, said “they are going to develop it and sell it to us.”

How can U.S. policymakers promote cleaner energy? While some panelists wanted to raise the cost of carbon emissions with cap-and-trade policies or taxes, none of them thought these were currently feasible politically.

Some panelists praised the use of “feed-in tariffs” in Europe—guaranteeing high rates of return for renewable energy—to quickly expand investment in clean power. But they noted those could cause distortion of markets and also face resistance in the U.S.

Giudice said states like his are leading the way by mandating that power companies get a growing share of their power from renewable energy.

“We need government to be the grownup here,” said Wells. Few panelists, however, expected federal leadership to issue a clear, comprehensive energy policy anytime in the near future.

Preventing the Next Crisis - Panel Recap

I would like to thank both Professor Slaughter and Mr. Flexner for a rousing and candid discussion on Preventing the Next Crisis.

The potential downside of the "Charlie Rose format" is that the audience may receive an overdose of one viewpoint. For this format to succeed, the questioner must be talented, dynamic, and willing to push the guest. Professor Slaughter was all of these things, presenting alternate viewpoints with his questions and continually pushing Mr. Flexner to support his assertions. The result was a substantive discussion as dense and insightful as one would expect from a Squam Laker and Citigroup's Global Head of Real Estate.

The themes for the first segment--how did we get here?--were conjuncture and interconnectivity. Conjuncture, as defined by Mr. Flexner, is the unexpected correlation of normally unrelated events or conditions. In the context of the financial crisis, the industry's reliance on value at risk (VAR) modeling produced a risk management regime that ignored low probability, high consequence risks. This statistical model had a blind spot: the conjuncture of falling housing prices, subprime mortgages, and the overnight downgrading of many AAA positions to CCC positions. In response to this conjuncture, firms began managing down their inventory exposure but it was all for naught thanks to the interconnectedness of (i) geographically diverse real estate markets by subprime mortgages, and (ii) the various investment houses. Ultimately, Mr. Flexner concluded that there were a number of elements that created the "perfect storm," but ultimately the root cause was an intellectual failure of economics. Mr. Flexner explained that markets cannot always internally correct, and that more than a light regulatory touch is needed but that the regulation must be sensible.

The themes of the second segment, addressing this question of sensible regulation, were that the Dodd-Frank Act is not the answer and that we must decrease interconnectivity between banks.

- The Dodd-Frank Act: Much like Mr. Pitt's keynote address, Mr. Flexner expressed concern that the law of unintended consequences will consume Dodd-Frank. Specifically, the line between proprietary trades and client services is sufficiently blurry that drafting effective regulations on the issue may be impossible. Even in discussing the Act's one admitted strength--derivatives regulation--the admission was prefaced by concerns about the second and third order consequences. Mr. Flexner's preferred alternative to Dodd-Frank is something akin to the Basel II & III agreements, which itself is a double-edged sword because (i) the implementation timeline is unacceptable for banks, which can't simply standby until 2017; and (ii) it heavily discriminates against all non-investment grade businesses. Notwithstanding its feasibility, Mr. Flexner's Basel advocacy is reminiscent of Mr. Pitt's sentiment that "American geocentrism is a disease," and that regulatory competition is necessary in the near future.

- Interconnectivity: Mr. Flexner stated that there is no such thing as too-big-to-fail but there is such a thing as too-interconnected-to-fail. Similarly, Professor Slaughter emphasized that we need to find a way "to allow bad firms to die without taking others with them." Both comments indicate that sensible regulation must focus on decreasing interconnectivity between banks. The two first-order suggestions for accomplishing this were capital requirements and liquidity requirements. Mr. Flexner insisted that not only do we need higher capital requirements for banks, but that the type of capital should be true common equity, not AAA rated mortgage-backed securities. On liquidity, Mr. Flexner suggested that we start using prospective stress tests to determine firm resilience, e.g. a 1-year net stable funding ratio.

- Mr. Flexner's third, more general, suggestion for sensible regulation is to plug the regulatory cracks so that Wall Street "cockroaches," as he jokingly referred to them, can't get through. When new regulation decreases returns, the natural human response is to take on more risk. Thus, if there are cracks in our regulatory response to this crisis, the "cockroaches" will have their day.

As in-depth as this panel discussion was, the topic is an exceedingly complex one and raised new questions for this listener:

- The panelists indicated that the VAR model's shortcoming means regulation is the safeguard against low probability catastrophes. However, one need look no further than the BP oil spill to see that government has difficulty with this. At the same time, complex statistical modeling is the financial sector's bread and butter. Thus, the issue of who should manage these conjuncture risks remains unsettled.

- We are still at the whims of obviously fallible bond rating houses. Do we need to rethink this reliance?

- To paraphrase Mr. Pitt: like it or not, Dodd-Frank is law and we have to learn to deal with it. Today's panel provided many suggestions for how to improve upon Dodd-Frank, but whether such reforms are possible is uncertain at best. Thus, as the new regulations are promulgated we will have to learn to manage our systemic risk within this framework. The obvious question, then, is: are there are ways to shape the forthcoming regulations to improve Dodd-Frank's risk management impact?

I would enjoy hearing others' thoughts on these questions and any others that the panel raised. Also, I welcome anyone to point out errors or omissions in my coverage of this very dense discussion.

Wrap up Discussion: Policy Prescriptions to Encourage Economic Growth

As we close the conference, we invite a panel of our own to help us answer the questions raised over the past day and a half. Welcome to Dean Robert Hanson, Dean Matthew Slaughter, Professor Richard D'Aveni, and Dartmouth Professor James Feyrer.

The discussion started with Matthew Slaughter soliciting recommendations for 3 policy prescriptions that could be important drivers to encourage growth in the economy.

James Feyrer offered:

1. Simply get prices right. In the context of the last panel's discussion around energy, it is important to get subsidies right and price carbon correctly (if we can even get there).

2. Fix patent policy. Defensive patenting has distorted the landscape.

Robert Hanson's suggestions involved removing wedges from markets and limiting mandates from the Federal government about quality levels that could be better set by the market.

1. Reform personal income tax and corporate tax system - make personal tax levels easier to predict and business taxes more competitive globally.

2. Redo healthcare reform because the large expense may not improve the level of quality. Furthermore, health care should not be tied to or burden the employer.

3. Put an energy policy in place. There should be a price on the carbon externality through a carbon tax.

[He wasn't able to get to immigration, education, etc.]

Though Richard D'Aveni points out that he is not as well educated as the economists on the panel, he does remind us of his closer ties to reality. D'Aveni does not believe that we can innovate or educate our way out, or progress through tax reform. These approaches haven't worked. Our antiquated system is set up to create efficient markets to benefit investors - who are no longer all Americans. We should be looking after the optimal use of American human capital, not just the efficient use of investment capital. More generally, economic models do not fit the reality with which we are faced.

1. Believes in more economic nationalism than current open trade policy because capital and jobs are leaving the country. Practically, we need to negotiate harder with China, Japan, and Germany using non-tariff barriers that are acceptable by the WTO.

2. Reduce the amount of finance capitalism that we have in the world, which prioritizes shareholder interests over public benefit. This could be done be reducing the power of shareholders and governing boards, shifting power to CEOs.

3. Historically, we have encouraged a consumption-focussed economy that has decreased our rate of savings and reinvestment in the economy. Using a consumption tax, we would incentivize personal savings.

Dean Slaughter next asked what policy each would recommend that the President do to spur growth and avoid:

Feyrer

Do tax reform. Avoid picking technology winners.

Hanson

Reform corporate tax. Avoid nationalistic reasoning to limit free trade.

D'Aveni

[aside from asking President to resign] Get the deficit and debt under control. Don't run for reelection.

Thank you to the panelists for the academic, humorous, and sometimes contradicting suggestions on how policy can change to spur growth!

Senator Jeanne Shaheen

It was very exciting to have Senator Jeanne Shaheen speak to the Tuck School.
Senator Shaheen began the discussion by asking, “Can we innovate our way?” Her response was emphatic, “Not only can we, but we must. Our future is to be the global leader in science and technology.”
How can we do that?
Senator Shaheen stated that business, and not government creates jobs. But government has to foster a positive business climate. And how can government do that?
By:
1) Boosting research and development
2) Having a well-educated workforce
3) Increasing exports
4) Decreasing the federal government debt
5) Implementing a comprehensive energy policy

Senator Shaheen started by talking about the federal investment in R&D. That spending has been declining, as a percent of GDP—which is the wrong way to go.
The reason is that federal government research has led to everything from the internet to thermal gloves and boots (which, the Senator pointed out, is quite the boon to New Hampshire residents when the temperature is 5 degrees).
Senator Shaheen emphasized the need to stimulate private sector innovation, citing the fact that government has a role to play because companies underinvest since they don’t reap all the benefits of their R&D spending.

Next, Senator Shaheen turned to the need to improve science, math, technology, and engineering education, as these will be the fastest growing occupation fields in the next decade.

Third, Senator Shaheen discussed the need to source customers for products and services, and a major way to do that is through reducing trade barriers to increase exports. There is tremendous room for growth exports—and legislation such as the Small Business Jobs Act helps to increase exports by advising small businesses on how to manage trade rules and make contacts abroad.

With respect to the national debt--a problem, Senator Shaheen cited, as one we need to address--we need to do more than just cut wasteful programs. There are no easy answers, and we need to look at both the spending side and the revenue side. Examples in Europe show us the consequences of failing to deal with our debt responsibly.

Finally, Senator Shaheen addressed the last topic of the speech--the need to establish a national energy policy. Senator Shaheen stated that the world is on the verge of the most significant transformation since the industrial revolution, because it will go to the heart of how we produce and use energy. Moreover, the jobs in that revolution will go to countries that invest first—which is currently China, Germany, Brazil. Senator Shaheen emphasized that we need a national policy that is going to ensure the US is a world leader in energy.

In closing, Senator Shaheen ended on an upbeat note--that we shouldn't believe for a minute that our best days are behind us.

Overall, it was a great session and quite a treat to have Senator Shaheen join us!