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An increasing number of social entrepreneurs and investors are realizing that social enterprises of all sorts, including many organizations regarded as charitable nonprofits, can generate returns acceptable to the financial markets. The key is to view the funding of social enterprises as a problem of financial structuring. If they treat charitable donations as a form of capital that seeks social, not financial, returns, organizations can then tap traditional sources of funding: venture capital firms, banks, mutual funds, bonds, and so on. And with access to these sources, they can make use of all the tools for transferring risk and return, allowing them to free up capital and grow. For this to succeed, the social enterprise sector will need to create greater precision and transparency around measuring and reporting social outcomes, and policy makers must build the necessary market infrastructure and legal frameworks. With these efforts, social enterprises could have a larger universe of investors than conventional businesses do. This would be a significant step toward a greener, healthier, and more equitable world.

The cumulative effects of individual purchase decisions are responsible for anthropogenic climate change. These very same private investment and consumption decisions are at the center of climate change mitigation efforts. This article shows that new market-based, incentive-compatible mechanisms could encourage win-win (green and profitable) behavior by private investors. Despite their availability and financial viability, people often overlook more efficient technologies in favor of the less efficient but familiar ones. The article provides a framework that shows how local policies can act as catalysts in providing profitable opportunities for private investors to bridge this so-called "efficiency gap."

The goal of strategy is clear--to increase shareholder value. But in volatile markets, it's difficult to predict how a particular investment will affect a company's value. In this article, Martha Amram, a partner with the consultancy Onward Inc., and Nalin Kulatilaka, a professor at Boston University's School of Management, explain how managers can draw on the frameworks and information of the financial markets to make better, more sure-footed strategic investments. The financial markets are adept at calculating the value of an investment under uncertain conditions--exactly the challenge faced by business strategists. By applying the discipline of the markets, executives can avoid basing important decisions on subjective judgments about the future. The application of market discipline to strategy involves three components. First, the decision is framed in terms of the real options it creates. Second, in evaluating an investment, all the relevant information on value and risk available in the financial markets is taken into account. Third, actual financial transactions are used, when appropriate, to acquire options or otherwise mitigate risk. In a series of cases, the authors show how applying market discipline can help illuminate a range of common business decisions--whether to add production capacity, or to invest in a new venture, or to upgrade an information system, for example. By providing disciplined insight into the uncertainty present in all markets, the real-options approach lets executives think more clearly and realistically about complex and risky strategic decisions.