Educating the impact of finance

Creating a more sustainable future requires a collaborative effort from all industries and the finance sector is no exception. The financial sector holds enormous power in funding and bringing awareness to environnemental and societal issues, whether by allowing for research and development of alternative energy sources or supporting businesses that follow fair and sustainable employment practices. Enter centre stage : Impact Finance

So what is Impact Finance ?

Impact finance is the intentional use of financial capital to bring about a measurable and positive social and/or environmental change. It is an umbrella term to include all aspects of sustainable finance, green digital finance, Fintech and sustainable growth. Impact finance includes a range of capital investments, that seek a market-rate financial return alongside a social/environmental and governance (ESG) impact. The defining features of impact finance are:

• The impact is intentional
• The impact is measured and managed
• The impact is positive
• The impact is additional (Impact is ‘additional’ if it creates change beyond what would have happened anyway). The need for impact finance is great.

There is an estimated $2.6 trillion annual funding gap to achieve the UN Sustainable Development Goals (SDGs) by 2030. More than 3 billion people live on less than $2.50/day, and climate change threatens to have catastrophic and irreversible consequences for our planet.

At the same time, with new technologies and global connectivity, there has never been so much potential to find world-changing solutions at scale. However, it is clear that creative impact investment models and innovative government policies will also be central to paving pathways to scale. And here lies society’s challenge.

The current Impact Finance challenge

The impact finance market is growing rapidly but still represents a small fraction of total global assets under management – less than 1%. In order to grow this market sufficiently and address today’s global concerning problems, a radical change is required in the finance sector..

However, the growth of the impact finance sector has been hindered by a lack of robust data around return expectations and standards for impact measurement. It is essential therefore to develop academic programmes and research, practitioner based teaching, and knowledge-exchange to remove these barriers to growth.

A number of academic initiatives are bringing impact finance into the limelight such as the Oxford Impact Finance project will work on key issues to drive the exponential growth of the field, including: building public data sets; conducting rigorous data analyses of risk, understanding return and impact; exploiting new fintech technologies; and enhancing public policy[1]. Additionally, the CFA institute proposes a solid certification in ESG financial investment [2]. Education therefore needs to be at the forefront of delivering comprehensive programmes, built in collaboration with key industry practitioners, to prepare today’s generation for the sustainable priorities of our planet. In doing this, the acceleration of the transition to a clean and environmentally sustainable economy by channelling capital at a pace and scale that increases prosperity for all will be ensured.

DO YOU WANT TO MAKE AN IMPACT ? Join us on the MSc Impact Finance and Fintech management programme, starting October 2023.

[1] https://www.sbs.ox.ac.uk/research/research-overview/responsible-business/oxford-impact-finance-initiative

[2] https://www.cfainstitute.org/en/