Morgan Stanley Sustainable Investing Challenge

The Morgan Stanley Sustainable Investing Challenge harnesses the power of capital markets and student creativity to create positive impact in a world of perpetual resource scarcity and continued population growth. A pitch competition for graduate students, the Morgan Stanley Sustainable Investing Challenge focuses on developing institutional-quality investment vehicles that seek positive environmental or social impact and competitive financial returns.

Contestants must propose and defend a strategy that uses finance and investment tools to address an environmental or societal challenge. The competition is an opportunity to apply core finance principles to target the economic, social and environmental challenges that drive the field of sustainable investing. Pitches might focus on areas like water, energy, food, social mobility, climate change, education or healthcare, among others. Contestants are encouraged to apply the entire spectrum of investment tools, styles and asset classes.

The Morgan Stanley Sustainable Investing Challenge seeks to identify the next generation of sustainable finance practitioners, connect emerging leaders with industry professionals, and foster even greater emphasis on sustainability at graduate schools around the world.

Teams of graduate students are invited to submit a two-page prospectus by February 24, 2016 at 12:00 PM (noon) CST that outlines an innovative financial vehicle that addresses a sustainability challenge and meets the requirements of an institutional investor. Each prospectus should appropriately address the guidelines provided. Ten finalist teams will be selected from the pool of submissions and announced by March 11, 2016. Finalists will present their proposals to a panel of judges at Morgan Stanley in Hong Kong on April 15, 2016. A panel of experienced investors and officers who currently manage pension funds, foundations, and institutional assets will review and judge the pitches. Judging criteria can be found here.

The 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 venture capital fund vehicles and strategies.

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 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.

Eligibility

Graduate students from around the world are invited to participate in the 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.

Deliverables

Entry Submission Requirements

Two-page prospectuses must be submitted by February 24, 2016 at 12:00 PM (noon) CST. 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 March 11, 2016. These teams will be flown to Hong Kong, will be provided with two nights of lodging, and will present their proposal at the finals competition in April.

Prospectus Required Elements

• Investment thesis
• Target geography
• Size of addressable market
• Estimate of scalability
• Assumptions
• 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.

Finals Competition

The ten teams selected from the previous round will convene on April 15, 2016 at Morgan Stanley in Hong Kong 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.

Finals Presentation

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:

Feasibility (30%)

• Could you see this as a real financial instrument that could be launched today?
• Does the investment thesis seem plausible?
• Are there “real sources” of returns here?
• Could you see institutional investors responding and funding this?
• Do the returns have the potential to be sustainable and market-rate on a risk-adjusted basis?
• If the instrument requires a gestation period with concessionary returns, is there a clear migration path towards market-rate returns?

Innovation and creativity (20%)

• Is this a unique look at the market and cash flows?
• Did the team find a new way to look at the problem and uncover a new asset class, new cash flow/value stream, an alpha generating opportunity or beta management opportunity?
• Is the team using finance as an innovation to drive returns and impact?
• Is the concept “just like a dozen” other products (i.e., cleantech VC fund)?  If so, what’s interesting about this project?
• Does the proposal have a unique capital structure?
• Does the concept make unique use of different forms of capital (incentives, grants, PRIs, DFIs, mainstream investor capital) and types of institutional investors?
• Does the proposal offer unique ways to drive returns?

Impact and scale (20%)

• Does this “move the needle” on impact?
• Does the instrument provide a scalable solution to addressing a global challenge? Can it mobilize a significant amount of capital?
• Specifically, what impact is being created (environmental or social)?  Were there specific metrics for impact? Is the impact real and persistent?

Quality of due diligence and financials (20%)

• How rich is the research on the thesis?
• Do the returns and cash flows make sense?
• Have the key investment questions relating to returns, asset quality, underwriting, and risk management been 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?

Presentation (10%)

• Has the team been clear and concise with their proposal?
• Does the prospectus contain all of the required elements (listed below)?
  • Investment thesis
  • Target geography
  • Size of addressable market
  • Estimate of scalability
  • Assumptions
  • 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