Faculty Spotlight: Investment, Not Charity, Will Alleviate Poverty in Appalachia

“It is about using business models in service of social and environmental challenges,” Mahoney said. “The idea is, ‘How do we develop financially sustainable approaches to solve the biggest challenges of our time?’”

Mahoney said she became concerned about environmental devastation by the fifth grade and was first introduced to intense poverty at age 19 as a college student taking part in the ship-based Semester at Sea program.

“I had seen poverty in Philadelphia where I grew up, but the deep poverty I witnessed in Brazil, Kenya, South Africa and India was on a different level,” Mahoney said. “The need was so great and it seemed then to my young eyes that even small resources could go a long way and that each of us should do something to help contribute to alleviating that suffering.”

Her first book, “Brussels vs. the Beltway,” explored how public interest advocacy groups worked to shape more just public policy in two of the most powerful political systems on the planet: the U.S. and the European Union.

Once that book was completed, she spent time advocating for the victims of the Darfur genocide, and learned of the plight of refugees. She then wrote “Failure and Hope: Fighting for the Rights of the Forcibly Displaced.” Mahoney focused her work on refugee crises in conflict zones in Africa, Asia, Latin America and Eastern Europe.

“There are currently 70 million people displaced from their homes due to violent conflict,” Mahoney said. “This is the highest number in the history of the world, and by all estimates it is going to continue to increase. Charity and government responses have been insufficient for 60 years.”

Mahoney explored using impact investing – putting money into companies, organizations or investment funds to generate a social and/or environmental impact, as well as a financial return – to help refugees.

By investing in companies that are open to hiring refugees and migrants, for example, “Rather than just providing food aid and a tent for 20 years, we actually give those people a chance at rebuilding their lives and having a life of dignity, getting integrated into the economies they flee to,” Mahoney said.

In 2014, she returned to Semester at Sea, this time as a faculty member teaching social entrepreneurship.

“We visited Mexico, Japan, China, Vietnam, Cambodia, Burma/Myanmar, India, Mauritius, South Africa, Ghana and Morocco,” Mahoney said. “Seeing extreme poverty through the eyes of my students was a strange experience. One impulse was like that of a mother and wanting to protect them from seeing suffering, but then there was also the impulse of a teacher to show them that there are courageous social entrepreneurs working against all odds to create a better world.”

In studying poverty for 20 years, Mahoney says she better understands the deep structural foundations of inequality, but she has found it no easier to accept.

“Some interventions that focus on the symptoms of poverty may help the ‘helper’ feel better –they are doing something to alleviate suffering – but ultimately do not change the system that is resulting in the suffering,” Mahoney said. “I also understand now that a Western conception of financial poverty is incomplete, and rural communities may be deeply rich in non-financial resources, and that richness should be respected and celebrated.”

Mahoney said she wants to engage the private markets in solving the world’s social and environmental challenges in a way that is conscious, proactive and authentic.

“We need the trillions and trillions of dollars in the capital market targeted toward solving those challenges. We can’t just leave the task up to governments and non-profits,” she said.

Ross Baird is the founder of Blueprint Local, an impact investment firm, and has taught entrepreneurship and impact investing at the Batten School, McIntire School of Commerce and Darden Business School. He said Mahoney’s greatest strength is as a bridger of worlds.

“Most people divide the world into two pockets: What’s good for business, and what’s good for society,” Baird said. “Christine relentlessly has turned the two pockets into one, integrating business and societal realities with a desire to support the common good. The ability to pursue both ideas simultaneously is extremely difficult, but the leadership is critical for us to succeed.”

Baird, a 2007 UVA graduate, credited Mahoney with influencing the next generation of leaders coming out of the University, saying they will be smarter and more responsible, compassionate and innovative, thanks to her.

“Christine Mahoney is a visionary,” Baird said. “As an undergraduate, I was involved in a range of entrepreneurial endeavors, but there was nothing like Social Entrepreneurship at UVA. As a lecturer at the Batten School supporting courses in entrepreneurship and impact investing, I’ve seen hundreds of students follow Christine’s vision and leadership for career paths that are merging the two pockets into one.

“It is rare to find a top-rate scholar who is also able to take a vision and translate it into a career, industry and real-world application, but Christine has done both.”

To Mahoney, social entrepreneurship is an effort to change the system of capitalism and steer companies and capital toward social enterprises that seek to achieve more socially and environmentally responsible outcomes. It replaces charity-based models, which she said are limited in their scope.

“Some people talk about [social entrepreneurship] as triple bottom line, with financial sustainability, environmental sustainability and social responsibility,” she said.

Mahoney plans to apply this triple bottom-line plan to Appalachia.

“Appalachia is a place that has been dominated by a single industry – coal – and coal has declined for a number of reasons,” Mahoney said. “As the price of coal has declined, those jobs have largely gone away. Economically, many of these towns used to be thriving. They no longer are. Due to coal layoffs and the lack of economic alternatives, communities are now in a state of extreme, multi-generational poverty.

“There has been some charitable work done there and there are some foundations working in Appalachia, but it is the largest concentration of poor counties in the country,” she said. “And then if you look at other indicators, such as the opioid epidemic, it also has one of the highest levels of that because it ties in with this poverty and lack of opportunity.”

Impact investors look at places such as Appalachia as an opportunity for investments with entrepreneurs whose efforts will buoy the economies and the health of Appalachian communities.

“There are already really incredible, interesting examples,” Mahoney said. “There are breweries and vineyards being built on former coal mines, and there is interest in technology and IT companies moving there because of the energy redundancies from the coal industry. There are solar and eco-tourism opportunities there because it is an incredibly beautiful part of the world. There are innovative finance models. The Nature Conservancy has collaborated with investors to do sustainable forestry and get carbon offsets from the California carbon market to preserve tens of thousands of acres, which is good for the environment and bio-diversity, but also good for eco-tourism and economic development, in a sustainable way.”

Mahoney is co-leading the class with Stephanie Randolph, an impact investor who is establishing a $56 million blended-finance fund for the region, called Invest Appalachia.

A grant from UVA alumnus Richard Tadler and his wife, Donna, will fund fellowships and scholarships to support 20 students each year, for three years, for a total of 60 fellowships.

“Richard had spent part of his career in Appalachia, and he is passionate about seeing a rebirth in the area,” Mahoney said. “He is giving money for scholarships for students spending their winter breaks traveling through Appalachia, learning about the challenges, but also learning about the creative social entrepreneurs who are working there and the investors who are creatively investing there.”

The 15 students in this January’s class were selected from 48 applicants. To prepare ahead of their trip, students participated in a half-day Saturday seminar in December to orient them to the experience. They were introduced to books, articles, local newspapers and podcasts to familiarize them with the region.

“We will have nearly two weeks, day-in and day-out, on the ground, and I think at the end of that program they are going to have a much better sense of the challenges and opportunities of the region,” Mahoney said.

Mahoney said once the students return, they will study existing social enterprises to determine their business models, revenues and what access to more capital would mean for the businesses, as well as their social and environmental impact.

“We will be sharing that information through our network of UVA alumni impact investors who engaged with us as speakers and advisers,” Mahoney said. “Being able to share what we call ‘deal flow,’ we can help connect these business opportunities in Appalachia with a much broader network of investors across the country, which can give the students the opportunity to continue their learning.”

Students can also take advantage of a three-month summer internship with a social enterprise in Appalachia, working on the ground with a business helped by impact investment.

“A couple of students are from the region and they are more interested in learning about impact investment,” Mahoney said. “But many of them have never been to this part of the commonwealth, so it is a great learning opportunity.”

In bringing students to Appalachia, Mahoney hopes to counter negative media coverage of the region.

“The stories of success and innovation and entrepreneurship and people lifting themselves up aren’t being told,” Mahoney said. “We want students to see that side of the story.”

Mahoney also wants students to learn how to measure social impact, noting that just creating minimum-wage jobs may not help, while focusing on creating higher-paying careers will help turn around local economies.

“In Appalachia, you have small communities of maybe 400 people, with many of them unemployed because coal has left,” Mahoney said. “If you have a company that employs 10 people and you double their employment, having those additional 10 jobs in that town now earning a living wage can be incredibly impactful.”

This program is designed to train the next generation of leaders, investors and policymakers.

“UVA graduates students who go on to influence policy and enterprise in Virginia,” she said. “If they understand the reality on the ground in Appalachia, hopefully we will see more effective economic development, investment and policy.”

And Mahoney still maintains her optimism.

“On a micro level, sometimes it feels like it is so difficult to move the needle and it seems that the forces aligned against social justice are so massive,” Mahoney said. “And yet I keep doing this work and have been doing it for 21 years, so on some level I feel optimistic about humanity’s ability to achieve social justice.”