Verge Capital: Investing for Social Impact

Verge Capital was a social finance organization in London, Ontario, that connected local aspiring entrepreneurs with funds that would support initiatives with societal or environmental missions that benefited local communities. In 2019, the social finance manager at Verge Capital had to recommend one of two social impact business proposals that the organization should fund a CA$30,000 loan to. The two options were (1) Sri Lankan Foods, which operated a Sri Lankan restaurant, a catering business, and a granola production facility that provided short-term employment opportunities for newcomers to Canada, and (2) Material Impact, which collected and resold used textbooks to fund donations of books and learning materials to South American universities. While both businesses aligned with Verge Capital’s mandate, the social finance manager needed to choose just one. He wondered how sustainable the businesses were and what criteria Verge Capital should consider before investing.

This case study is suitable for use in undergraduate- and graduate-level courses and modules on sustainable finance, private equity and venture capital, project accounting, leadership, governance, or social impact. While the case focuses on impact investing and finance, the calculations are relatively simple to work with; thus, rendering the case effective for multiple courses. This case study walks students through business management decision-making using quantitative, qualitative, social, and environmental criteria. It reviews concepts such as social enterprises, impact investing, and social impact ratings standards. Students discuss how social enterprises measure performance as well as whether, and to what extent, trade-offs between social and financial returns exist. Students also learn how investors might struggle to strike a balance. After working through the case and assignment questions, students will be able to do the following:<ul><li>Define a social enterprise.</li><li>Describe the emerging field of impact investing.</li><li>Explain how to incorporate impact measurement with financial decision-making.</li><li>Evaluate two enterprises in order to make a fund investing decision.</li><li>Outline the process for making an impact investing decision that considers both financial metrics and the potential investment’s ability to match the investor’s social impact investing thesis.</li></ul>

• impact investing
• social enterprise