Investments to Social Impact Investing and banks new roles

Transcription

1 From Textmasterformate t Socially t durch Klicken Responsible bearbeiten Investments to Social Impact Investing and banks new roles Prof. Dr. Henry Schäfer University of Stuttgart and EccoWorks GmbH Presentation to the Global Sustainable Finance Conference July 15, 2016, Karlsruhe

2 Agenda b I. Zweite From Ebene SRI to SII II. What is the social impact of an investment? III. Investment targets of Social Impact Investing IV. Banks roles IV. Conclusions and Perspectives

3 Agenda b I. Zweite From Ebene SRI to SII

4 The two elementary terms (not only for today s presentation) Sustainable and Responsible Investment (SRI) b Zweite An approach Ebene to investing that takes into account the long-term economic, Dritte environmental Ebene and social risks and opportunities facing the global Vierte economy Ebene and dthe ethical priorities iti of an investor. This can take a variety of forms, from excluding investments in companies that violate basic international norms to ESG factors in investment analysis and company engagement. Sustainable and responsible investing seeks competitive financial returns. Social Impact investment (SII) Actively providing capital to enterprises and funds that contribute to defined social goals and at least return nominal principle to the investor. Impact investors are willing to relax expectations for risk-adjusted returns in exchange for substantial and tangible social impacts

5 What is it for? 17 Sustainable Development Goals (SDGs) für 2030 Quelle:

6 Selecting ESG performing firms for SRI investing with impact e.g. FTSE All World Index Examples: Textmasterformate t t durch Klicken bearbeiten Governance b Transparency International Zweite Ebene Environmental EMAS, CDP Front up impact scheme Social ILO Guidelines, SA 8000 General ESG issues General grid of ~ single criteria & weights Absolute Relative exclusion of polluting firms or integration of leading firms in pollution control selection of firms polluting on a relative low level Combination Sustainable Investment Universe (e.g FTSE4GOOD) selection of leaders in pollution control and firms with a relative low level of pollution

7 Selecting social purpose vehicles for SII impact with investing Social Business Examples: Environmental renewable energies, e-mobility, water Social prisoners rehabilitation, poverty, unemployment Front up impact scheme Specific impact issue Special grid of impact criteria, targets Absolute Relative reduction of prisoners relapse rates to zero reduction by x% compared to Feedback loops monitor, sanction, abandon, Social Impact Universe

8 SDGs with closest link to social impact investing Quelle: finance-in-motion 2015/

9 From one way Philantropy to two way SRI and SII + Social Return SII Venture Philanthropy Trad. SRI - 100% l Philantrop py Traditiona 50% 30% No impact measurement - effiency of donations remains cloudy or unknown < 3% < 10% < 20% Money Market Investm. Bonds, Stocks Impact Investments = next generation of SRI, SRI 3.0, Core Impact Investments: t Direct impact by investments SII Broad Impact Investments: Investing with purpose theme investments Socially Responsible Investments (SRI): Conventional SRI (public listed assets), alternative SRI (private equity) + Private Equity, Hedge Funds, Legend: Investments without SRI Traditional Philanthropy Financial Performance New Philanthropy Venture Philantr Impact Investment

10 SRI and impact investments in comparison on a worldwide scale (in US$ Billion) in 2014 SII US$ Billion 275 US$ Bln SRI 5,534 7,045 12,854 40,815 US$ Bln 14,390 Source: Global Sustainable Investment Alliance Review

11 Agenda b I. Zweite From Ebene SRI to SII II. What is the social impact of an investment?

12 The Impact Value Chain of SII pay for social success Source: adapted from Clark et al. (2004) and Hehenberger et al. (2013)

13 Measurement along the Impact Value Chain is crucial Source: adapted from Hornsby (2012)

14 Agenda b I. Zweite From Ebene SRI to SII II. What is the social impact of an investment? III. Investment targets of Social Impact Investing

15 Impact Investment - the investees landscape Primary driver: Primary driver: Blended societal and financial value financial i societal b value value Zweite Ebene Social Purpose Organizations [SPO s] Traditional Business Socially Driven Busin. Revenue Generating Social Enterprise Philanthropy/ Charities Firm allocating percentage to charity CSR driven firm Profitable surplus reinvested Potentially sustainable >75% trading revenue Breakeven all income from trading Mainstream Market Firm Profit distri- buting socially driven Trading revenue and grants Grants only; no trading Finance First Impact First Impact Only

16 SRI and SII have different investment targets with differing operating environments SRI: matured, steady-state networks SII: social entrepreneurs & projects Open, interconnected, horizontally/ vertically integrated, boundless, global Technical innovations (e.g. digital firm) Heterarchy complements, substitutes hierarchy Social/human capital as main sources Universal owners: CSR by SRI SRI with unspecific outcome on CSR Social & ecological innovators, driving social change Firms with single outcome, PPPs Start ups, often from Non-/Not for Profit Provide new services/improve quality Empowerment of citizens SII with focused outcome on real issues

17 Agenda b I. Zweite From Ebene SRI to SII II. What is the social impact of an investment? III. Investment targets of Social Impact Investing IV. Banks roles the case for Germany

18 German banks offer investment vehicles with impact and purpose 2015 market research for the 1 2 Prototypes and Financial return (risk adjusted) Textmasterformate examples from t t durch Klicken bearbeiten + market research Performance-based bonds Mutual investment funds 3 Participation of civil sector SRI mutual investment funds 4a Saving account (Example: GLS Bank - project related saving) 4 b 4b 4c Saving account (Example: Krefeld local train) Saving account (Example: gambling for social purposes) 4c 5 Covered mortgage bonds Challenge of 6 7 State issued bonds Citizens bonds Philantropy a + Greenwashing Benchmark: market return Impact environm./ social 8 Structured financing (Example: Microfinance) 9 Peer-to-Peer (Crowd related) Source: Schäfer/Bauer (2015)

19 Insights into the German SII market from market research SII in Germany still in a nascient stage Textmasterformate HNWI; tretail & mass t durch affluent Klicken investors bearbeiten and b foundations show a high Zweite willingness Ebene to invest in SII Dritte but Ebene family offices are more reluctant and the market suffers from missing Vierte investable Ebene projects, organizations or firms SII related investments traditionally found in the sector of renewable energies social service sector offers high potential of innocations but is still underdeveloped prevention, innovation and scaling is the focus of SII and should complete the existing state dependant social service system in Germany German banks still lag in adopting SII products SII in principle could serve as an ideal completition of CSR and CS related strategies and policies of German banks SII requires a radical shift in the business models of most German banks from corporate to project finance, from isolated product innovation and marketing to network based models

20 Agenda b I. Zweite From Ebene SRI to SII II. What is the social impact of an investment? III. Investment targets of Social Impact Investing IV. Banks roles the case for Germany IV. Conclusions and Perspectives

21 SII only a nice to have? The shift of economies and societies tosustainability should count on banks

22 SII can strongly enable the realization of SDGs /PublicationsLi ibrary/osg2015 5d3_en.pdf unctad.org/en/ Quelle:

23 Performance framework Basle VI looks at SDGs, SII, CSR ( ) encourage more investment in 'green assets and other forms of environmentally sustainable economic activity ( ) Quelle: Alexander, K., 2015, Stability and Sustainability in Banking Reform Are environmental risks missing in Basel III

24 SII as important drivers for a responsible banking in Germany Citizens bank : SII can contribute Textmasterformate tot the t durch Klicken bearbeiten b reputation Zweite Ebene of banks and Values enrich Dritte their Ebene sustainability reporting. Sustainability: SII offer a modernization of business models in banking in order to enable stakeholders to cope with severe challenges of future life. Ba Com Community Banking anking & mmunity Open Eco System: SII require new interfaces and partnerships, that can be extended to many other areas of the banking business

25 Many thanks for your attention! Univ.-Prof. Dr. Henry Schäfer University it of Stuttgart tt t * EccoWorks GmbH BWI/Dept. III (Finance) Keplerstr. 17 * Fuchstanzstr. 40 D Stuttgart * D Oberursel (Taunus) Fon: +49-(0) * +49-(0) Fax: +49-(0) h.schaefer@bwi.uni-stuttgart.de *