Giving Compass’ Take:
• Yale Center for Business and the Environment concludes that because of their social impact elements, B Corps and Benefit Corporations have the potential to drive big returns for investors in the long run.
• How do you balance financial returns and social impact? What opportunities exist to invest in B Corps and Benefit Corporations that can provide returns on both fronts?
• Learn more about the complex relationship between corporations and social good.
Since Certified B Corps and Benefit Corporations entered the business world approximately 10 years ago, 40,000+ companies have taken the B Impact Assessment; 2,500 companies have certified as B Corps; and 5,000 entrepreneurs have incorporated their U.S. ventures as Benefit Corporations across 37 states, Washington D.C., and Puerto Rico. Investors have taken notice—from angel investors to private equity firms to family offices—and they have come to the table; almost every Silicon Valley venture capitalist has invested in at least one Benefit Corporation. 2015 saw Laureate Education launch its IPO and raise $450M. This was the first Certified B Corp and the third Benefit Corporation to go public. Investors see value in B Corps for a range of reasons:
- Greater transparency through access to operational, sustainability, and impact data not shared in financial statements;
- Standardized, industry-specific benchmarks for management best practices;
- Third-party audits of progress on performance metrics over time;
- Improved governance standards and public accountability;
- Stronger ability to attract and retain impact-driven talent, particularly millennials;
- Potential to attract and build more trusting relationships with consumers;
- Collaborative partnerships with a community of like-minded businesses.
While the Certified B Corp and Benefit Corporation community has grown rapidly, the potential applications of assessment, certification, and incorporation, as well as the relevance for investors, have yet to be solidified. Although there are stories about the financial value of the B Corp toolkit, B Corps are too new for academically rigorous research on their bottom-line benefits. Many investors are still skeptical about doing well while doing good, despite impact investing research from Wharton and the GIIN that dispelled the myth that it is necessary to trade financial returns for social and environmental impact.
The B Corp movement is, to me, a product of a general improvement in our understanding of economic behavior. Through greater appreciation of the real motives that drive and excite people, B Corporations provide a significant new opportunity for investors. I think they could make more profits than any other types of companies, and this guide helps investors understand why.