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 following criteria are applicable to both the first and final rounds of the competition:
- 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?
- 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
- 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