MBF - Impact Investing – Fall UPDATED Exam Questions and CORRECT Answers
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MBF - Impact Investing
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MBF - Impact Investing
MBF - Impact Investing – Fall UPDATED
Exam Questions and CORRECT Answers
Company impact vs. Investor impact - CORRECT ANSWER- - Company impact: Change in
the world caused by portfolio company activities
- Investor impact: Change in company impact caused by investment activities
-> Inves...
MBF - Impact Investing – Fall UPDATED
Exam Questions and CORRECT Answers
Company impact vs. Investor impact - CORRECT ANSWER- - Company impact: Change in
the world caused by portfolio company activities
- Investor impact: Change in company impact caused by investment activities
-> Investor impact is not the impact of the companies in a portfolio, but rather the change an
investor induces in the impact of those companies.
Three recommendations on how investors can have impact - CORRECT ANSWER- 1)
Enable impactful companies to grow
- Allocate capital to young impactful companies in inefficient financial markets that cannot
get sufficient funding from other investors.
- Flexible or concessionary financing to scale positive impacts. - Non-financial additionality:
Management skills, reputations or networks
- Typical asset classes: PE, PD, and VC
2) Encourage improvement
- Typical asset classes: public equity and debt
- Vote shares and engage with management of publicly traded equities (-> Shareholder
proposals / proxy voting / management engagement)
- Focus on specific issues that are supported by a large coalition of investors and demand
changes that companies can implement at reasonable cost.
3) Influence the public discourse by being vocal about what you do
- Be vocal about investment decisions and why you made them. Can be a signal to other
investors and to society.
- Publicly communicate divestment decisions
- Enter coalitions with like-minded investors to join forces.
, Three motivations why to invest sustainable - CORRECT ANSWER- 1) Impact: "I want to
help fighting climate change"
2) Performance: "Considering climate risk will yield better returns"
3) Values: "I don't want to profit from coal mining"
Theory of Change (Definition) - CORRECT ANSWER- Description and illustration of how
and why a desired change is expected to happen in a particular context.
Financial Inclusion (Examples) - CORRECT ANSWER- Access to credit; Access to savings;
Access to insurance; Digital payment services; Financial literacy
Financial Exclusion - CORRECT ANSWER- Bottom of the Pyramid (BoP) population; Lack
of collateral; Marginalized groups, remote locations; Informal employment; Unverifiable
credit history
Poverty Trap - CORRECT ANSWER- Situations where income reverts back to some lower
level. This is often the case when income is all consumed for very basic needs like food, and
there is no way to use income to invest (e.g., fertilizer, education). Then, income tomorrow is
lower than income today, leading to a downwards spiral.
- Common reasons: Lack of money to invest in technology; Lack of sufficient food to be
productive; Lack of access to healthcare or jobs (too far away)
Theory of Change: Poverty Trap - CORRECT ANSWER- Capital injection as a "bridge" to
cross poverty trap (blue arrow); If a person in the poverty trap receives a sufficient cash
shock, then this person can grow its future income.
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