Building on Nobel Prize-winning research, nearly a decade of experience investing in impact funds, and a lifetime of social and economic justice advocacy, Daryn Dodson's Illumen Capital, an impact investment fund-of-funds, was at a critical juncture. Prior to founding Illumen in 2017, Dodson struggled with finding a way to transfer the success he had experienced in building awareness across teams at institutional asset allocators on topics of diversity, equity, and inclusion to long-term organizational change. Instead, he observed that the investment teams-those with the most power and leverage-rarely engaged in the work, and many investments were underperforming from both a return and impact perspective because of racial and gender biases. Indeed, research consistently showed that diverse managers offered alpha enhancements for investors-not just because diversity at the general partner level led to better investment decision-making and differentiated deal flow, but because diverse managers drove diversity at the portfolio company level as well. This meant a staggering missed opportunity considering that just 1.4 percent of the $82 trillion of the asset management industry was overseen by firms owned by women and people of color. Through Illumen's proprietary bias reduction programming, and because of its powerful fund-of-funds structure, Dodson was well positioned to reduce bias and unlock impact and returns. Specifically, the 10-year curriculum was a means of spurring long-term institutional change beyond one-off trainings; however, Dodson knew that changing one firm in an entire ecosystem was not enough. To elicit lasting change, he would have to enlist many firms working together to create field transformation and capitalize those firms with specific plans to reduce bias. Further, the fund-of-funds structure was a leverage point in the system; its top-down effect allowed 10 times more impact than investing at the company level.

In 2016, Stephen M. Liberatore, CFA, lead portfolio manager for and head of Nuveen's impact fixed income strategies, received a phone call from the World Bank. The call was not unusual; in fact, Nuveen had collaborated with the World Bank in the past as lead investor on a new type of Green Bond for the World Bank's private sector arm, the International Finance Corporation (IFC). While Green Bonds had been in existence for nearly a decade, the IFC Forest Bond was the first government-related credit focused on channeling private funds toward forest protections. The call that day, however, centered around an entirely new concept-a Blue Bond. Like most fixed income products, Blue Bonds were a debt instrument providing capital to issuers who repaid the debt with interest over time; however, the use of proceeds was earmarked for marine projects and ocean conservation. While the Nuveen team was familiar with and open to the more esoteric transactions presented by the World Bank, they had a series of challenging tasks ahead of them. First and somewhat simultaneously, they had to assess the security on a total return basis incorporating, among other assessments, fundamental credit analysis, an evaluation of terms, liquidity analysis, and relative value analysis, while ensuring that the investment adhered to their impact framework. This included not only direct support of measurable social and environmental impact but an emphasis on competitive, risk-adjusted return potential. This was particularly challenging given that the issuance was the first of its kind and comparable securities did not exist. Additionally, measures of impact remained immature as this was an inaugural transaction, so determining impact targets was not feasible. The team also had to determine the size of their commitment. While they could have funded the entire deal, they wondered if it made more sense to incorporate other impact investors. Finally, the team had to ensure that that the investment and

After completing a successful two-year pilot, the Los Angeles Cleantech Incubator (LACI) was ready to launch its inaugural Debt Fund. The goal was to capitalize companies solving the greatest challenges related to climate change across three priority spaces in cleantech: transportation, clean energy, and sustainable cities. Spearheading the effort was Alex Mitchell, senior Vice President of Unlocking Innovation through the empowerment of start-ups-one of the three pillars of the organization's theory of change-in addition to Market Transformation through partnerships and pilots, and Enhancing Community through workforce development and programs. For over a decade, LACI had worked with nearly 300 start-ups through its incubator program to help sustainable start-ups, particularly those founded by and serving underrepresented individuals and communities, gain access to capital and scale their businesses. The Debt Fund would draw heavily on LACI's expertise and existing portfolio to provide loans with interest rates at or below market rates to companies that had achieved market traction but did not have the cash flow required to qualify for traditional loans. Specifically, the Debt Fund would focus on capitalizing minorities who were disproportionately affected by the cost and lack of access to equity funding. As its incubator program portfolio was nearly 33 percent women and 33 percent underrepresented founders of color, Mitchell needed a plan for preventing biases from imbuing the lending process at LACI while staying true to the organization's social mission of building a more sustainable and equitable ecosystem. In addition, while LACI had developed an impact framework for the incubator program that not only aligned with portfolio companies but underscored the importance of start-up engagement in the process, he struggled with how best to do the same with the Debt Fund. Finally, LACI would be partnering with other cleantech start-ups ("incubator partners") in the

For five years, the private equity impact team at Nuveen led by Rekha Unnithan, CFA, had been watching Samunnati, a specialized agriculture value chain solutions provider located in Chennai, near the southeastern coast of India. Its mission was to support smallholder farmers, who comprised roughly 87 percent of Indian farm workers, by providing financing and capacity building for farmer collectives and larger, more diverse agri-enterprises. Through market linkages and working capital, Samunnati sought to raise the access, purchasing power, and connectivity for agricultural value chains in India. Launched and led by a career banker with deep expertise in rural and agricultural finance, Samunnati was poised to transform the agriculture ecosystem in India while improving the income and livelihoods of hundreds of millions of smallholder farmers. First introduced to Samunnati in 2014, the Nuveen team had followed the company's journey from a pilot project in the unbanked tiers of a single state in India to an agritech enterprise operating in 14 states and over 30 value chains across India. In early 2019, Samunnati began raising its Series D round of financing to further its growth, and the team at Nuveen was ready to take a closer look. Despite Samunnati's success to date, agriculture had historically been a risky sector with significant volatility, particularly at the value chain level. In addition, the company was in its growth stage, so its systems and processes needed to further mature-specifically its information technology strategy, impact framework and reporting, and preparations as a Systemically Important Non-Bank Finance Company, a designation assigned to Samunnati given its size and significance in the economy. Finally, given the marginalization of smallholder farmers throughout history, the Nuveen team was sensitive about safeguarding this vulnerable member of the agricultural ecosystem; specifically, they wanted to ensure that the investment would not

In April 2019, just two months shy of his graduation from Stanford Graduate School of Business ("Stanford"), Cody Evans was looking forward to converting his professional and academic experiences to real-world impact. Having worked at both the largest private equity firm in the world and an energy infrastructure developer in Africa, Evans brought a unique blend of investment rigor and entrepreneurial spirit to Stanford. More importantly, he was driven and inspired by energy as a fundamental building block for economies. During his time at Stanford, he was drawn to new legislation meant to spur economic growth and job creation in low-income communities through tax-advantaged investment. These emerging Qualified Opportunity Zones (QOZs) were the topic of multiple articles published by Evans alongside distinguished professors, specialists, and leaders in the economic and community development fields. With expertise in the area and a passion for energy infrastructure projects, Evans wondered if he could combine the social benefits of QOZs with the environmental impact of existing solar incentives. The U.S. Internal Revenue Services (IRS) had not yet written the rules on the innovative concept, so the risk levels were high while the return was uncertain. With graduation approaching, Evans would have to make some key decisions. In addition to settling on a viable investment thesis, he would have to assemble a team and think about how best to raise capital.

In February 2022, nearly three years after the launch of the REDF Impact Investing Fund (RIIF), a 501(c)(3) debt fund providing financing and capacity building to grow social enterprises employing individuals overcoming barriers to work, CEO Carrie McKellogg was both humbled and hopeful. Much had been learned in her time at the helm of RIIF, both within the portfolio and in relation to the employment social enterprise (ESE) sector as a whole. Specifically, she recognized that the ESEs with whom REDF had worked for over two decades had difficulty gaining access to and were not comfortable with credit; in fact, she had identified that the traditional underwriting process and credit risk methodologies that they were using perpetuated barriers to accessing credit. Indeed, the inequitable effects of the pandemic paired with ongoing racial injustices and structural challenges highlighted the role of RIIF as an important tool to accelerate the growth of the ESE field, and their crucial work to provide a more inclusive economy for all.

Much like the famous philosophical thought experiment, impact investing raises questions about perception, observation, and reality. What is our sense that an investment results in social, environmental, and financial return? What changes can we observe taking place? What is the state of the situation as it exists (perhaps by measurement)? This case study applies this framework to our analysis of the social, environmental, and financial impact of forestry and timberland investment.

In January 2021, Chesca Colloredo-Mansfeld (MBA '92), cofounder and executive director of MiracleFeet, a nonprofit dedicated to eradicating untreated clubfoot for good, found herself at yet another crossroad. In just over a decade, the organization, which partnered with local clinics to provide low-cost, nonsurgical solutions to one of the world's leading causes of disability, had treated just over 50,000 children in 29 countries, nailing nearly every ambitious goal to date. Notably, it had accomplished this with just over $31 million in funds raised. And with programming costs of just under $500 per child, treatment with MiracleFeet had proven to be one of the most cost-effective, high impact health initiatives in the world. But a hole remained. Over the prior decade, Colloredo-Mansfeld had faced a number of challenges. These included how best to harness the power of data to operate more efficiently and effectively, deliver the highest-quality programming, and provide meaningful data for donors that, in turn, informed the programming process in a continuous feedback loop. Indeed, Colloredo-Mansfeld had figured out how to use data to drive performance, retain and inform major donors, and manage impact but she struggled with how to scale the organization beyond the low-income model. Since inception, MiracleFeet had focused primarily on countries with poor access to health care. However, in order to solve the issue of untreated clubfoot globally, Colloredo-Mansfeld would have to figure out how to leverage data to forge a new pathway beyond low-income countries.

Thorough analysis of various nonprofit business models requires an understanding of each firm's economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Providing further practice beyond Nonprofit Business Models and Financial Statement Relationships (A), this case presents the "common-size" condensed annual balance sheet, income, and cash flow statements for eight nonprofit firms in the U.S. for the 2018 or 2019 fiscal year (compiled from either audited financial statements or Form 990s).

Thorough analysis of various nonprofit business models requires an understanding of each firm's economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. This case presents the "common-size" condensed annual balance sheet, income, and cash flow statements for eight nonprofit firms in the U.S. for the 2018 or 2019 fiscal year (compiled from either audited financial statements or Form 990s).

In February 2008, as world markets slid deeper into economic decline, J. Michael Pearson joined Valeant Pharmaceuticals, a specialty pharmaceuticals company, then based in a quiet suburb of southern California. By August 2015, the stock price peaked, valuing the company at nearly $90 billion, up from $2 billion in 2008. In that time, Valeant had made over 100 acquisitions with total revenues growing from roughly $750 million in 2008 to over $10 billion in 2015. The explosive growth of Valeant in just seven-and-a-half years was not without purpose.

In January 2015, Jennifer Carolan, who had served as the managing director of the NewSchools Venture Fund Seed Fund ("Seed Fund"), spun off from the nonprofit venture philanthropy firm to create a for-profit social impact fund focused on education technology (edtech). Through a unique joint venture with NewSchools Venture Fund ("NewSchools") called NewSchools Capital, the new venture fund, Reach Capital, would allow Carolan to not only raise more funds and scale more effectively than it otherwise could have as a nonprofit, but also support portfolio companies as they matured. Having invested $9 million across 39 for-profit and 4 nonprofit companies for the Seed Fund, and with the support of such renowned anchor donors as the Michael & Susan Dell Foundation, the Bill & Melinda Gates Foundation, and the Sobrato Foundation, Carolan felt confident in Reach's ability to invest successfully in scalable, high-growth edtech companies that prioritized social impact. Still, Carolan was challenged with executing an efficacious spin off, establishing a compelling philanthropic value proposition, and finding a way to effectively measure performance focused on the double bottom line. This case describes the challenges faced in the formation of a sustainable for-profit impact venture capital fund. It covers the origin of the fund, a background of the education technology industry, fund terms, as well as a discussion of performance measurement.

In November 2004, as presidential hopeful John Kerry conceded the presidential race to George W. Bush, husband and wife team and Democratic supporters Tom Steyer (MBA '83) and Kat Taylor (JD/MBA '86) found themselves at an impasse in their political endeavors. The lost presidential bid was not only disappointing but left the couple seeking out new avenues to benefit from their time, passion, and energy. For Taylor, the idea of a beneficial bank was not new; in fact, the notion of starting a bank to help underserved communities had been suggested to her almost 20 years earlier when Taylor sought career advice from then-economic advisor to Governor Jerry Brown of California, Michael Kieschnick. At the time, the idea seemed implausible but now, with their newly unleashed resources, the idea of community banking as a leverage point in both communities and the overall financial system seemed almost compulsory. Specifically, they wanted to create a triple bottom-line bank that produced social justice and environmental well-being while also being economically sustainable not just in the community but across the financial system. Still, determining how best to structure the organization in order to ensure the fulfillment of its intended benefits presented a significant challenge to the couple. This case describes the founding vision and organizational structure for a triple bottom-line bank. It covers governance issues, regulatory considerations including Dodd-Frank, a discussion of the bank's business model including competitive strategy and the importance of human capital, and measures of impact.

In the summer of 2015, after reporting another year of strong growth in programming and fundraising at miraclefeet.org, a nonprofit dedicated to providing treatment to children born with clubfoot in developing countries, co-founder and executive director Chesca Colloredo-Mansfeld (MBA '92) found herself wanting to do more. While miraclefeet had reported record numbers in each year since its 2010 founding, she knew that she had the capacity to not only treat but also eradicate untreated clubfoot, one of the most common congenital deformities of the feet, and one of the leading causes of physical disability in the developing world. In order to achieve this vision, Colloredo-Mansfeld would have to alter the organization's current funding strategy, which relied heavily on high net-worth individuals. Finding the ideal combination of fundraising opportunities in a timely manner was critical to not only Colloredo-Mansfeld's eradication plan but also the long-term financial sustainability of the organization. This case describes the challenges of fundraising as it relates to the financial sustainability of a growing non-profit organization. It covers the founding vision and business model, a review of financials, impact metrics development, as well as a discussion of strategic opportunities.

Amid worldwide market and economic uncertainty, Tesla debuted its stock in June 2010 on the NASDAQ Stock Market (Ticker Symbol: TSLA). The stock price jumped over 40 percent in its first day of trading to close at $23.89 in an upsized deal that valued the company at $2 billion and raised over $226 million. It was the first initial public offering by an American automaker since Ford's debut in 1956. While the primary market showed strong enthusiasm for the stock, the secondary market was much less convinced. Concerns were raised about the long-term viability of the company stemming from a limited operating history, a long history of losses, liquidity issues, unreliable consumer demand, expensive battery technology and competition from traditional automakers. As a result, the stock was frequently the subject of high short interest, a predictor of lower investment performance. The question plaguing investors was: were the short-sellers correct in their bearish sentiment, or was a short squeeze imminent? This case describes Tesla's road from founding to outsourced manufacturing of the Roadster, the first fully electric sports car, to in-house capacity production of the Model S, its highly regarded fully electric luxury sedan. Specifically, it focuses on the long-term viability of the growth company along with questions related to quality of earnings.

Normally, serving on a company's board of directors is not a full-time job, but in the summer of 2002, Nick Donatiello (GSB 1986) found himself in exactly that position. As a member of Gemstar-TV Guide International's (Gemstar's or the Company's) board of directors and its Audit Committee, Donatiello was caught up in a storm of accounting issues, shareholder lawsuits and a power struggle between the Company's largest shareholders. Donatiello, one of only three independent directors on the board, wanted to do what was right for shareholders. However, the decisions required to arrive at that outcome were far from clear. This case centers on accounting and governance issues that arose during the 2001 audit of Gemstar TV Guide International. In summary, although management and the company's auditors, KPMG, agreed with the recognition of certain revenues, the company's audit committee believed that those revenues should be restated. The case discusses the specifics of two accounting issues, in particular, and also provides an overview of the company and the various parties involved.

This case takes an in-depth look at the events and causes leading to the U.S. government bailout of American International Group. Source material includes testimony before Congress, AIG's public disclosures and various news articles. The case tells the history of AIG, its Financial Products division and credit default swaps. The case then highlights several external and internal factors cited by management, experts and the press as having a role in AIG's failure. These factors include AIG's governance, compensation and risk management policies, as well as the roles played by the rating agencies, accounting standards (specifically mark-to-market accounting) and regulation.

Dennis Kozlowski took over the helm of Tyco International, Ltd. (Tyco) in 1992. By the end of its 2001 fiscal year, Kozlowski's Tyco had made over 100 announced acquisitions with total revenues in excess of $30 billion (Exhibit 1). Kozlowski's strategy, called "growth on growth," fueled Tyco's aggressive approach toward acquisitions and took the company from just over $3 billion of sales in 1992 to $36 billion in 2001. Investors supported Tyco's strategy as evidenced by the tenfold increase in Tyco's stock price over the same period (Exhibit 2). Analysts also lauded Tyco, issuing reports with titles like, "The Proof Is in the Great Numbers! Buy." But was the proof really there? This case describes Tyco Corporation's mergers and acquisitions activity from its founding through the Kozlowski era. In particular, it focuses on accounting practices used in concert with M&A activity that served to manipulate Tyco's earnings. It goes into detail regarding the CIT acquisition.

As the chief financial officer of The Walt Disney Company, Tom Staggs was responsible not only for the financial management of the company, but also for the communication of the company's financial and strategic objectives to its investor base. Because of Disney's stature as the world's most iconic entertainment brand, the company had a particularly broad investor base: over 991,000 common shareholders in fiscal year 2006 compared with 51,400 for Time Warner. Staggs had to develop and implement a communication strategy that was appropriate for the diversity of this investor base, which included individual, institutional, brokerage house, and mutual fund investors. In doing so, he had to be mindful of the fact that these constituencies often had different time horizons and investment perspectives. In addition, Staggs had to bear in mind several other factors. First, he had to consider that any message delivered was perceived by investors as a direct reflection of management's capability and credibility. Second, he had to consider how the company's stated objectives influenced the behavior of its employees. Third, he had to decide how to implement the communication strategy across a wide array of channels, keeping in mind the purpose of the forum, regulatory requirements, and investor expectations.

In July 2002, a legal watchdog group, Judicial Watch, announced that it was suing Halliburton Company for overstating revenues during the period 1998 to 2001. The group's contention was that Halliburton used fraudulent accounting practices to boost revenues and hide a deteriorating financial position from investors. Specifically, the lawsuit centered around the way the company recognized claims recoveries on long-term construction projects. Prior to 1998, the company's policy was to book cost overrun expenses as soon as they occurred, but not to book claims recoveries as revenue until the repayment amount was agreed to with the client. In 1998, the company changed policies to begin estimating future recoveries and recognizing them in the same period that overrun expenses were realized. The company, which had been suffering from a recent slowdown in business and large litigation losses from asbestos lawsuits, claimed that its accounting practices were permitted under generally accepted accounting principals (GAAP). Judicial Watch, however, claimed the accounting policy inflated revenues over the four-year period by as much as $534 million. This case focuses on the accounting issues and disclosure policy of the company during the 1998 to 2001 period. Readers of the case are asked to assess whether the company's policies and decisions were appropriate in the relevant areas of accounting and disclosure.