The Kellogg-Morgan Stanley Sustainable Investing Challenge seeks to identify outstanding proposals offering novel investment strategies to meet some of the most pressing global challenges ahead. As the world’s population approaches 9 billion people by the year 2050, the challenge of meeting human demand for scarce global resources will intensify. Finance has a key role to play in meeting this challenge. Moreover, an increasing number of institutional investors are seeking sustainable investment opportunities for their portfolios. Specifically, these investors seek to identify investment strategies that can meet the financial needs of their organizations by investing in funds, investment vehicles, or direct investments that are consistent with the principles of sustainability and impact.
Teams are encouraged to think beyond social enterprises, venture capital fund vehicles and strategies.This competition requires you to propose and defend a sustainable impact investment strategy that uses finance and investment tools to create an innovative solution to an environmental or societal challenge. Integral to this competition are first, that you are creating a financial vehicle, and second, that your financial vehicle will have social impact.
Institutions seeking investments may include but are not limited to:
- University Endowments
- Retirement and Pension Funds
- Family Foundations
- Family Offices
The proposal must be a fit for an institutional investor who is seeking:
- Both competitive returns and positive social and/or environmental impact
- Risk management that is commensurate with the target returns
- Transparent performance metrics for both the financial and social return
- Clear linkage between program outcomes and social impact
The institutions are open to multiple asset classes, including but not limited to:
- Private equity/venture capital
- Real assets
- Public equities
- Fixed income securities
- Microfinance lending and investing
The Kellogg-Morgan Stanley Sustainable Investing Challenge is looking for innovative investment ideas that balance the tension between financial and social return rather than sacrifice either priority. There is no limitation on asset class or investment vehicle and teams are encouraged to think creatively. The focus is on investment vehicles and fund strategies versus companies.
Graduate students from around the world are invited to participate in the Kellogg-Morgan Stanley Sustainable Investing Challenge. Teams are limited to a maximum of four members, all of whom must be enrolled in a graduate program at the time of the prospectus submission, and the team cannot include more than one member who is pursuing an Executive MBA. A team may include members from different graduate schools. All ideas must be the original ideas of the team members. Each team is required to submit a two-page prospectus outlining their proposal. From the submitted prospectuses, ten teams will be selected to present at the finals competition. At least one team member should be available to present at the finals competition, if the team is chosen to advance to that round, and all team members attending the finals competition should plan to stay for the entire event. Please note that any team member not in attendance at the finals competition will not share in any prizes awarded to that team.
Entry Submission Requirements
Two-page prospectuses must be submitted by February 15, 2017, 11:59PM CT.
The prospectus should outline a unique sustainable investment strategy.
The selection committee is familiar with the broad area of sustainable investing, so avoid overemphasizing general observations about this section of the market. A list of required elements is below. See our 2012 webinar series here.
Take special note of two short videos entitled “Why You Should Participate” and “Expectations for Your Prospectus.” The judging criteria used in this round is the same as that used in the final competition.
Ten finalist teams will be announced by February 24, 2017. These teams will be flown to New York will be provided with two nights of lodging, and will present their proposal at the finals competition on April 7, 2017.
Prospectus Required Elements
- Investment thesis
- Target geography
- Size of addressable market
- Estimate of scalability
- Risk factors
- Diagram of fund or instrument
- Asset class and capital structure
- Fees and incentives
- Target investor pool(s)
- Fund size
- Investment size and investment criteria
- Due diligence process
- Returns and cash flows (If instrument requires concessionary returns, proposed migration path to achieving market rate returns)
- Time horizon
- Environmental or social impact
- Metrics for social impact
Student Prospectus Submission
Please click on “Submit a Prospectus” to submit your two page prospectus. Remove all identifying student name and school information from the prospectus before submission.
The ten teams selected from the previous round will convene on April 7, 2017 at Morgan Stanley in New York for a day-long competition. Each team will have 10 minutes to present its pitch to a panel of judges and will be expected to answer 10 minutes of questions from the selection panel. Presentation suggestions are provided below. The selection panel will be composed of experienced institutional investors and officers of foundation funds and endowments, as well as other professionals in the field. The same selection criteria will be used in the first and second rounds of competition.
For the finals competition, prepare a presentation for the selection committee that lays out your investment strategy and identifies the environmental and/or social impact that your investment vehicle will address. Presentations should:
- Clearly explain how the financial vehicle will achieve the desired social and/or environmental impact defined in the proposal.
- Communicate the details of the investment vehicle including potential market size, strategy for managing risk, target investor, and why the proposed is a fit with their portfolio, financial viability, potential returns, and investment timeframe.
You may include individual team member names in your presentation but please do not include any identifying school information. You may also include a list of organizations/individuals you have consulted.
The following criteria are applicable to both the first and final rounds of the competition:
Creativity & Financial Innovation (25%)
- Has the team proposed an innovative investment vehicle that is designed to drive both returns and impact? We are looking for either:
- An innovative financial structure or
- A known investment approach applied creatively to a problem previously outside the scope or reach of a social or environmental challenge
- What’s interesting about this project? Is it just like a dozen others or truly innovative?
- Does the proposal have a unique capital structure, e.g., including different forms of capital, employing diverse types of institutional investors?
- Does the proposal uncover new ways to drive returns, a new asset class, or a new cash flow or value stream?
Impact and scale (25%)
- Does this provide a scalable solution that can mobilize sufficient capital and forge significant environmental or human impact?
- Are there specific metrics for impact? Is the impact real and persistent?
- Does the impact derived from the proposed approach stem from the financial levers rather than ancillary charitable remains?
- Has the team demonstrated diligence in defining and projecting impact to be derived?
- Does the investment thesis seem plausible?
- Are there real sources of risk-adjusted market rate returns here? (even if considering a gestation period with concessionary returns)
- Could you see institutional investors responding to and funding this?
- Was the thesis thoroughly researched and is there strong evidence of financial depth that incorporates the overall economy?
Quality of due diligence and financials (20%)
- How thorough and deep is the research on the thesis?
- Do the returns and cash flow projections hold water? Has the team demonstrated strong financial logic and validity of key financial assumptions?
- Have the key investment questions relating to returns, asset quality, underwriting, and risk management (both market-based and non-market) been identified and addressed?
- Does the team have the skills needed to execute? Have they defined the skills needed on the investment team?
- Are the proposed fees and incentives reasonable?
- Has the team been clear, compelling, and concise with their proposal?
- For the final event: Have all team members participated in either the original presentation or Q&A?