Risk, Return, and the Missing Third Dimension
Why impact belongs in the MBA core curriculum
In 1908, the iconic American actress Bette Davis was born in Lowell, MA. Just down the road in Cambridge that same year, another icon was born: the MBA. The degree debuted at Harvard as the inaugural offering of its Graduate School of Business Administration, with courses in accounting, commercial law, economics, and the relatively new study of management science. In 1940, Davis played Regina in The Little Foxes, a woman so fixated on profit that she loses sight of what matters. She might have benefited from a business ethics course, not yet on offer at Harvard.
MBA core curricula vary somewhat, but nearly all US programs require the same foundations: finance, accounting, statistics, micro- and macroeconomics, operations, strategy, marketing, and leadership. (Operations was my favorite, despite having no professional reason to care about supply chains for physical goods or optimal inventory management.) Business ethics usually appears too, at least peripherally.
These requirements haven’t changed much in decades, even as calls have grown to update them for shifting societal norms and values. I’d go further: business schools should add not just new filters on old concepts, but less traditional material that shapes how future leaders see the world, like catalytic capital, the role of business in society, philanthropy, stakeholder capitalism, and nonprofit practice. Such classes would help students confront the complexities of a global economy facing everything from climate change to income inequality to biosecurity.
2020: A call for ESG in business schools
Business schools do evolve, as evidenced by the incorporation of environmental, social, and governance (ESG) concerns into business and investing concepts. The AACSB (Association to Advance Collegiate Schools of Business), the accreditor for US business schools, recognized this in 2020 and released new standards that require schools to commit to making the world better through their strategy, curricula, and scholarship. Unfortunately in most cases, that requirement hasn’t shifted the conversation much. From the AACSB:
One of the biggest challenges is that schools have not yet found effective ways to encourage faculty to add ESG principles to their classes... program directors might believe that all ESG topics can be addressed in specialized courses. Consequently, students receive a patchy ESG education with gaps and overlaps across a program.
A recent article, “Why Sustainability-Related Education Does Not Stick in Business Schools—and How to Fix It,” argues that schools may add sustainability content without changing the underlying mental model. Such education fails, the authors say, because business disciplines reduce systemic issues to firm-level optimization problems; schools should reorient around complex problems and systems thinking rather than bolting incremental material onto existing paradigms. That’s the heart of my argument: we need a fundamental shift in how we educate business leaders.
Note: 2025 saw a backlash against ESG considerations. I read this as more rhetorical than a real rejection of ESG’s importance to how businesses are run; London Business School has a good piece on the topic.
Beyond ESG: The role of impact in business
Teaching computer science, physics, or astronomy the way we did 30 years ago would be unthinkable at a modern university. Too much has changed, and stagnant material would leave students at a disadvantage. Yet in many business schools, that’s roughly what’s happening. New concepts about the role of business in society, its outsized effect on the environment and human health, and its potential to help solve humanity’s problems, aren’t making it into core courses. Most of these concepts orbit a single theme: impact.
For most of modern history, investing has been two-dimensional: risk and return. Sir Ronald Cohen, a British venture capitalist turned impact investor, argues we are shifting to a third dimension. In Impact: Reshaping Capitalism to Drive Real Change, he describes how 19th-century investors thought mostly about return, 20th-century investors learned to weigh risk against return, and 21st-century investors will weigh risk, return, and impact. If that’s right, it’s hard to justify teaching corporate finance as if the third dimension doesn’t exist.
The counter-position is old and famous: Milton Friedman’s 1970 essay declaring that the social responsibility of business is to increase its profits. This essay codified the shareholder-primacy doctrine that underpinned my own core education, but alternatives exist. In 2019 the Business Roundtable (181 CEOs of America’s largest companies) issued a new Statement on the Purpose of a Corporation, committing to serve all stakeholders: customers, employees, suppliers, communities, and shareholders. Seven years on, the verdict is mixed: stakeholder thinking has gained real traction, but most signatories’ boards never formally approved the pledge, and their governance documents still name shareholder value as the objective. This is a live, unresolved debate about the purpose of the corporation, and exactly the kind of discussion that could shape future leaders if held in an MBA classroom.
New organizational forms have also appeared in recent decades. Public benefit corporations are for-profit corporate entities that are legally required to generate a positive impact on society and the environment, in addition to making a profit. Often called B Corps, these business types now number in the thousands worldwide, and the model is growing, not fading.
Capital is moving toward impact, too. The Global Impact Investing Network’s State of the Market 2025 puts impact assets under management at roughly $1.6 trillion, growing 21% annually since 2019. Within that sits catalytic capital: investment deliberately patient, risk-tolerant, or concessionary in order to unlock impact that conventional capital can’t. The MacArthur Foundation’s Catalytic Capital Consortium, launched with the Rockefeller Foundation and Omidyar Network, has committed $150 million to building the field. Yet you could earn an MBA and never hear the term.
But... electives!
Business school administrators would be quick to point out that such concepts are more niche, and therefore belong in electives where students can self select. Once we completed our core classes, my classmates and I were able to choose from a menu of electives. Given my interest in nonprofits and mission-driven work, I gravitated to courses on how business intersects those areas.
One of my electives, Executive Leadership, leaned on classic literature and philosophy to make the case that leadership isn’t only about making money, and that business carries real social responsibility given how much of modern life runs through it. This is the course where I first heard about “stakeholder capitalism.” I also had to wait for electives to learn about B Corps, impact investing, nonprofit finance, and sustainable building and supply chains. UC Berkeley Haas has plenty of faculty who care about these topics, and some are working to bring them into core classrooms. But mostly, these timely discussions were left to electives.
The case for moving some of this content into the core
Debates about requirements are probably as old as academia. In grad school at MIT, every bio student had to take a punishing genetics course from a Nobel laureate, regardless of focus. Left to choose, I’d have skipped it since my work was in theoretical ecology and population dynamics. But with hindsight, this would have been a mistake. That’s the point of a core: to give everyone entering a field a shared baseline to build on, whether or not they think they need it.
When I asked my professor why Executive Leadership wasn’t a required course, he said he preferred students drawn to the topic over students forced into it. I understand this since engaged students make better classrooms. But it also demonstrates that electives only reach the already-converted. The student who would never choose a course on stakeholder capitalism is precisely the one whose future decisions it might most influence. Core courses don’t just transmit skills; they install defaults. When every finance and strategy problem is framed around maximizing shareholder value, students absorb that as a given rather than one view — and an elective, arriving later and marked optional, can’t undo it.
New courses may not even be necessary; the concepts can live inside the existing core (perhaps through case studies). Finance can cover impact investing, grant capital, blended finance, and long-term externalities. Accounting can cover nonprofit statements, restricted funds, and true-cost funding. Operations can cover service delivery under resource constraints. Marketing can cover donor behavior, trust, and public accountability. Strategy can cover systems change, field building, and power. But it has to be a priority, revising how courses lay out their systems of thought, not simply tacking a topic onto an existing syllabus.
Why this matters now: Business leaders as philanthropists
Nearly 40% of Fortune 1000 executives hold an MBA (Fortune, 2023). Imagine them all graduating with a real grasp of nonprofits, philanthropy, and impact. The sector is more than large enough to warrant it: Independent Sector’s 2025 Health of the US Nonprofit Sector counts 1.9 million registered nonprofits, more than $1.5 trillion contributed to the economy in 2024, and 9% of the US workforce employed by nonprofits.
This matters more as successful businesspeople become philanthropists and philanthropy is increasingly asked to shoulder society’s needs. The Center for Effective Philanthropy’s State of Nonprofits 2025 survey found roughly 1 in 3 nonprofits had lost or feared losing government funding, and 87% of foundation leaders reported rising demand for grants. If philanthropy is going to fill gaps that size, the people making the money need to understand the space.
The MBA is well into its second century. It was built to bring rigor to the industrial economy of 1908, but today’s economy asks more of its leaders. The graduates of these programs will run companies, sit on nonprofit boards, and increasingly give away significant wealth. In The Little Foxes, Regina’s daughter is the voice of reason against her mother’s single-minded pursuit of profit, a demonstration of the younger generation questioning the status quo. Business schools should encourage this questioning. They have spent a hundred years teaching students how to create value. The next hundred should help them ask what we mean by value, and who it’s for.
