Student-Run Funds with a Conscience

The notion of pairing student-run investment funds with socially responsible business practices is a fairly new concept for b-schools: more and more schools are looking beyond simply teaching students how to make money to teaching how to create value in a socially conscious way. Students and faculty at Columbia Business School and the University of California, Berkeley’s Haas School of Business launched funds this fall directed at socially responsible investing. These funds are an extension of a flurry of new electives, specialized research institutes, student clubs, and internships focused on social and environmental issues.

This new breed of student-run funds has taken a variety of forms, from funds that invest in mainstream index funds to nonprofit arrangements aimed at helping “micro” entrepreneurs, and students can’t wait to apply what they’ve learned to the financial markets.

The Haas Socially Responsible Investment Fund, launched just this fall with a seed gift of $250,000 from Haas alumnus Charlie Michaels, has since managed to raise a total of $1.3 million for the fund, which will be managed by four MBA students and two master’s in financial engineering students. Most of the students running the fund were required to take a class in socially responsible investment techniques, offered by the school for the first time this semester. They spent the past few months developing their investment criteria and plan to evaluate firms on their social, environmental, and financial performance. By January, they expect to start investing in companies.

At Columbia, students are hoping to make a dent in global poverty by creating a nonprofit investment fund dubbed the Microlumbia Fund. The students will make two to three low-interest “micro” loans a year to small, entry-level microfinance programs or banks in developing areas. These groups will then assist would-be small business owners in their communities. The idea developed last year, when a group of first-year students took a class in social entrepreneurship. Since then, about 20 students have gotten involved with the group and have raised $10,000 for the venture. They hope to raise $100,000 and make two to three investments of approximately $25,000 each by the end of the year. The mission, says Columbia MBA student and blogger Laura Bogomolny, is to make investments that benefit those in desperate poverty around the globe.

Social investing can play a significant role in a business school curriculum; students say it’s one thing to read about it in the classroom, but quite another to see if it actually works out in practice. Something to think about when you head off to b-school.

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