Financing For Social Impact

FINANCING FOR SOCIAL IMPACT
(SUSTAINABLE FINANCE)
Session 1 – Introduction to financing for social

impact
Prof. Wioletta Nawrot

wnawrot@escp.eu
Financing for Social Impact Course
Assessment Strategy
The overall evaluation of each student will be determined in the following manner:
1. Individual engagement 50%

 At-home preparation to the class
 In-class engagement (debates, guest speakers, quizzes /other activities)
 Name cards - compulsory
 Computer / phone – use ONLY for class activities (when asked)
3. Final group assignment 50%

 Application assignment
2
Financing for Social Impact
Session 1 – Introduction to financing for social impact
Overview of the Session
• ‘Sustainable (Social) Finance’ – what it is and how it differs from traditional finance
• Introduction to the Financing for Social Impact course – how you will learn and be assessed
• Linking traditional finance with sustainable finance
• Global initiatives supporting sustainable (social) finance
3
Objectives for this Session
1. Know how you will learn and what is expected from you
2. Know how to access all the resources prepared for this course
3. Understand what Sustainable (Social) Finance is and how important it is
4. Explore recommended external webpages and resources
4
Sustainable (Social) Finance
What it is and how it differs from traditional finance

Introduction to Sustainable Finance
Traditional Finance vs. Sustainable (Social) Finance
?
6
Sustainable (Social) Finance – What is it?
E
Sustainable finance considers ( )nvironmental, ( )ocial and ( S G)overnance (ESG) objectives
in the process of financial / investment decision-making.
• E-nvironmental considerations: climate change and environment (biodiversity, pollution

prevention, circular economy)
• S-ocial considerations: inequality, inclusiveness, human rights, healthcare, education,

housing, communities
• G-overnance considerations: management structures, employee relations, executive

remuneration
Please compare with the definition of Sustainable Finance (for financial services) by the European Commission:
https://finance.ec.europa.eu/sustainable-finance/overview-sustainable-finance_en 7
Sustainable (Social) Finance – What is it?
8
Source: https://www.youtube.com/watch?v=JCIX3DjAJMQ&t=13s
Introduction to Sustainable (Social) Finance
Providing Finance to Social Impact Initiatives and Businesses
ENTITIES REQUIRING FINANCING:

• Non-for-profit organisations
• Public sector initiatives
• Private businesses
WHO PROVIDES FINANCE?

• Individual/Institutional private investors (through capital markets)
• Financial institutions (through banking, insurance or broader financial system)
• Governments / governmental agencies (through tax breaks, subsidies, etc.)
• International organisations (grants / funding programmes)
• Public (Crowd-funding)
HOW? COST OF CAPITAL:

• Non-repayable financial support • Free of charge / some conditions might apply
• Loans and debt instruments • Interest rate / coupon of debt instruments
• Equity or hybrid instruments • Cost of equity financing
12
« Sustainable, Responsible, and Impact Investing » (SRI)
Sustainable, Responsible, and Impact Investing (SRI) is an investment discipline that considers:
Environmental,
Social, and
Corporate Governance (ESG) criteria
to generate long-term competitive financial returns and positive social impact.
(The Forum for Sustainable and Responsible Investment, USSIF definition).
13
« Impact Investing »
ESG investing that is designed to produce a positive impact on a specific issue as part of the
investment strategy.
• Impact investing is: cause-based and mission-oriented
• Most important reasons for Impact investing:
1. To meet the social or environmental objective of the asset owner(s), or the investor’s belief
system
2. To yield the best risk-adjusted return compared to other investment choices
Sherwood M., Pollard J. (2019), p. 99-109. 14

Size of the impact investing market
Recap:
• $300bln - 2018 McKinsey Report
• $715bln – 2020 GIIN Report
• $1.164 – 2022 GIIN Report
15
https://thegiin.org/research/publication/impact-investing-market-size-2022/
Impact Investing & Social Finance
There are many similarities between traditional finance & conventional investing AND
sustainable (social) finance & impact investing.
The difference between both areas, is a ‘new’ layer added through innovative finance schemes
built based on (social) impact-oriented principles.
TODAY – a clear distinction between traditional finance and sustainable (social) finance
FUTURE – expected gradual convergence.
16
Introduction to the Financing for Social
Impact Course
How you will learn and be assessed

Course Schedule
Session 2 – PRIVATE MARKETS: Financing for social impact through Private Equity and other
schemes
Session 3 – BANKING: Financing for social impact through lending
Session 4 – PUBLIC MARKETS: Financing for social impact through stocks and bonds
Session 5 – Summary and Future of the financing for social impact
18
Objectives for this course
1. Understand the link between finance and sustainability
2. Broad review of key areas of Sustainable (Social) Finance
3. Engage in research and discussions on selected relevant topics
4. Understand what challenges Social Finance faces how it will evolve
5. Consider career in Sustainable (Social) Finance
19
Assessment Strategy (Syllabus)
20
Financing for Social Impact Course – BLENDED LEARNING
Assessment Strategy
1. ‘Individual continuous assessment’ 50%

 At-home preparation to the class (Blackboard and external sources)
 Pre-recorded lectures – compulsory!
 Preparation of the questions for Guest Speakers
 Preparation for in-class discussions
 Review of additional resources
 Exchanges on the BB Discussion Forum
 In-class engagement
 In-class quizzes (Kahoot & BB tests)
 NAME CARDS –
 Active participation in in-class discussions
compulsory!
 Effective engagement with Guest Speakers  Computer / Phone –
ONLY for class activities!
 Engagement in in-class research
2. ‘Group assessment’ 50% 21

Financing for Social Impact Course – GROUP PROJECT
Assessment Strategy
1. ‘Individual continuous assessment’ 50%

2. ‘Group assessment’ 50%
 Group project in partnerhip with Astorg Philanthropy Investments, the Astorg
Foundation)
 Task - assess an assigned social impact company (social impact & financing
options)
 Aim: equip you with relevant practical knowledge of sustainable (social) finance
and highly sought on the job market application skills
22
Financing for Social Impact Course – GROUP PROJECT
Course Schedule
Session 2 – PRIVATE MARKETS: Financing through Private Equity & other schemes
Detailed guidance for group project & access to documents, START of research!
Session 3 – BANKING: Financing for social impact through lending ADVANCING research!
Session 4 – PUBLIC MARKETS: Financing for social impact through stocks and bonds
Detailed guidance for the presentation, FINALISING research!
Session 5 – Summary and Future of the financing for social impact Group PRESENTATIONS 
23
Organisation of the course
1. Lecture component
 Pre-recorded lectures
 Review quizzes
2. Application component
 Practical insight from Guest Speakers
 Application group project
 Case studies
3. Class discussions & debate
 Individual and group work
 Oral or written (Mural)
4. Research task
 Individual or group work
5. Group presentations
 Final presentations of your group project
24
Assessment Strategy (Syllabus)
Format of the RESIT – on campus written exam

• Closed-book
• Invigilated
• You must demonstrate the detailed knowledge of all the course content
25
Blackboard Resources
26
27
28
29
There is a number of books on ‘Sustainable Finance’
Authors: Schoenmaker, D., Schramade, W., (2021)

Published by: Oxford University Press, New York.
30
But there is a wide range of SRI books
And even more …. 31

Useful Internet sources
• ESMA – Sustainable Finance by the European Securities and Markets Authority - https://www.esma.europa.eu/policy-
activities/sustainable-finance
• EU – Sustainable Finance by the European Commission - https://ec.europa.eu/info/business-economy-euro/banking-and-

finance/sustainable-finance_en
• Euro SIF – Sustainability Through European Financial Markets - http://www.eurosif.org/
• GIIN – Global Impact Investment Network - https://thegiin.org/
• GSIA – The Global Sustainable Investment Alliance - http://www.gsi-alliance.org/
• The Global Sustainable Investment Centre, London Stock Exchange Group, https://www.lseg.com/sustainable
• The Sustainability Institute - https://www.sustainability.com/
• SSE – Sustainable Stock Exchanges Initiative, https://sseinitiative.org/
• US SIF – The Forum for Sustainable and Responsible Investment - https://www.ussif.org/
32
Global Impact Investing Network
https://thegiin.org/ 33
Global Impact Investing Network
https://thegiin.org/impact-investing/ 34
Careers in Sustainable Finance
• Corporate sustainability officers (firms, banks, insurers)
• Sustainability data officers (rating agencies, data providers)
• Standard setters
• Investment bankers in ESG area
• Stock exchange officers responsible for segments of sustainable instruments
• ESG analysts
• Sustainable, Responsible and Impact investors / asset managers
• ESG consultants …
35
Careers in Sustainable Finance – Interesting Read
36
Source: https://www.forbes.com/sites/forbesfinancecouncil/2021/09/08/five-paths-to-a-sustainable-finance-career/?sh=294f2d103b6e
Sustainable Finance
Linking traditional finance with sustainable finance

Recap on the cost of capital and optimal capital structure
https://kahoot.it
38
Markets / Segments
• Private (not regulated) vs. Public (regulated) market
• Primary vs. Secondary market
• Markets of Governmental vs. Corporate instruments
• ‘Sustainable’ Debt vs. ‘Sustainable’ Equity market
39
Institutions
• Central banks – should be independent from the government
• International Organisation of Securities Commissions (IOSCO)
• Capital market supervisory authorities (ESMA, FCA, SEC)
• Stock exchanges and other trading venues
• Governmental vs. non-governmental institutions / public vs. private institutions

 Banks
 Stock Exchange
 Private equity firms
 Pension and investment funds / asset managers & insurance companies
 Etc. 40
Instruments /Asset Classes
1. Non-repayable funds
2. Private Equity / Venture Capital funds schemes
3. Loans
4. Debt instruments (bonds)
5. Equities
6. Etc.
41
Staub-Bisang M. (2012), Chapters 8-14, p. 125-217.
Sustainable Finance
Asset Allocation Across Classes
Source: Global Sustainable Investment Review, GSIR 2018, http://www.gsi-alliance.org/wp- 42

content/uploads/2019/06/GSIR_Review2018F.pdf
Sustainable (Social) Finance Instruments in the Financial Markets
• In recent years a number of financial products that were promoted as: ‘green’, ‘social’,
‘sustainability-linked’, ‘ESG-linked’, ‘climate change’, ‘inclusion’, … were launched
• Distinction / similarity between such products / terminology used – are now always clear
• Accusations by investors and regulators of “greenwashing” financial products
• Creation/characterisation of these products is not precisely described by any binding

legislation, but ‘guidelines on best practice’ through a voluntary action of financial market
participants allowed a progress!
Busch D., Ferrarini G., Grunewald S. (2019) Sustainable Finance in Europe. Corporate Governance, Financial Stability and Financial
Markets, Palgrave Macmillan p. 331-332. 43
Risk and Return / Cost of Capital
• Positive relationship between the investment risk and required rate of return
• Required rate of return from an investment = Risk free rate (RFR) + Risk premium
• Investment risk for Debt vs. Equity instruments
• Required rate of return = Cost of capital for the Issuers of financial instruments
• Investment risk for different markets / classes of financial assets:

 Governmental vs. Corporate
 Governmental in different countries
 Corporate Debt vs. Equity
 Corporates of different sizes (small vs. large cap firms)
 Corporates of different industries/ of different countries
44
Optimal capital structure
• Capital structure: equity + debt
• Optimal capital structure: weighted cost of capital is at MINIMUM
• Typically, it is beneficial to have debt in the capital structure:

 Interest tax shield
 Improved ROE
• Risk considerations: we can NOT increase the proportion of debt excessively as with each such
increase increases the investment risk / cost of debt (finance providers require higher interest
rate).
45
Global initiatives supporting Sustainable (Social) Finance

Introduction to (Social) Sustainable Finance 2000 – UN Global Compact
Sustainability global initiatives supporting Sustainable Finance Initiative – corporate sustainability

initiative
Viewed as in competition with each other

Sustainable Finance: A Global Overview of ESG Regulatory Developments. Cleary Gottlieb, 22 October 2020;
https://www.clearygottlieb.com/-/media/files/alert-memos-2020/sustainable-finance-a-global-overview-of-esg-regulatory-developments.pdf 47
Reference to the UN Global Compact Initiative (2000)
The UN Global Compact Initiative is a

founding member of the UN SSE
https://www.unglobalcompact.org/what-is-gc
https://sseinitiative.org/ 48
Reference to the UN Global Compact Initiative
Human Rights Signatories’ commitment
Principle 1 - Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2 - make sure that they are not complicit in human rights abuses.
Labour
Principle 3 - Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
Principle 4 - the elimination of all forms of forced and compulsory labour;
Principle 5 - the effective abolition of child labour; and
Principle 6 - the elimination of discrimination in respect of employment and occupation.
Environment
Principle 7 - Businesses should support a precautionary approach to environmental challenges;
Principle 8 - undertake initiatives to promote greater environmental responsibility; and
Principle 9 - encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Principle 10 - Businesses should work against corruption in all its forms, including extortion and bribery.
https://www.unglobalcompact.org/what-is-gc/mission/principles 49
Reference to the UN Sustainable Development Goals (2015)
https://sdgs.un.org/goals 50
Legal framework for Sustainable Finance – global trends
1. Legal complexities regarding the Sustainable Finance themes, involvement of institutions in

investment process, disclosure process, geographical/countries jurisdictions
2. Europe – next to the US worldwide leader in SRI

• Broad early acceptance of ESG-driven strategies in EU finance - EU regulators as front runners
of regulatory reforms in Sustainable Finance
• 2018 the European Commission launched the “Sustainable Finance Action Plan” as a conceptual
framework for sustainable finance regulation – regulatory reform trend
• 2020 – the EU’s “Green Deal” and calls from investors and institutions to place sustainability
considerations at the heart of the EU’s post-pandemic recovery plan
3. United States – next to the EU worldwide leader in SRI

• Unlike EU and despite pressure from institutional investor, the US SEC has been reluctant to
introduce ESG-specific guidelines and instead only requires that disclosure of ESG risks be made
if they are “material” – formally declined to publish any rule-making in the areas of ESG by 2021
Sustainable Finance: A Global Overview of ESG Regulatory Developments. Cleary Gottlieb, 22 October 2020; 51
https://www.clearygottlieb.com/-/media/files/alert-memos-2020/sustainable-finance-a-global-overview-of-esg-regulatory-developments.pdf
Relevance and major challenges for businesses, finance

providers / investors, and society
Relevance and major challenges
https://app.mural.co/invitation/mural/wiolettanawrotescp9116/1675023315796?sender=u73c821aaf89f73b6ae4f0365&key=d5e0a49d-db6c-45a0-8af6-
cc8d68a2b013
53
Additional activities and materials

55
Financing for Social Impact – Session 1
Thank you for your attention 

Session 2 – PRIVATE MARKETS:

Financing for social impact through
Private Equity and other schemes
wnawrot@escp.eu
Session 2 – PRIVATE MARKETS: Financing for social impact through
Private Equity and other schemes
• Non-repayable funds
• Financing through (ESG) Private Equity / Venture Capital / Business Angels schemes
2
A Summary
A Summary
1. What is ‘Social Finance’ & examples of projects with social focus
2. Social economy entities in need of financing
3. Social finance providers
4. Ways for social economy organisations to receive social investments
5
1. What is ‘Social Finance’ & examples of social projects
Social Finance – subset of Sustainable Finance in a S- part of the ESG financing objectives:
• E-nvironmental
• S-ocial
• G-overnance
Examples of projects with social focus:

• human rights,
• education,
• healthcare,
• housing,
• strengthening communities,
• addressing inequality,
• reducing poverty,
• humanitarian actions,
• etc.
6
Examples of social economy projects
https://sdgs.un.org/goals 7
2. Social economy entities in need of financing
1. Not-for-profit organisations – want to achieve social return only
2. Cooperatives / mutual organisations – social objective comes first but a small financial return is also sought
and is distributed between their members
3. Private businesses – want to achieve both social and financial returns
 Different social objectives
 Different size of firms
 Firms in different phase of a business life cycle (start-up, growth, maturity, …)
8
3. Social finance providers
1. Governments & international institutions
2. Private corporations
3. Banks and other financial institutions
 traditional banks
 social banks (cooperative banks / credit unions)
4. Individual and institutional (social) investors
9
4. Ways for social economy organisations to receive social investments
1. Memberships schemes
2. Grants
3. Debt financing schemes

 Loans
 Bonds
4. Equity financing schemes

 On the private market – Private Equity
 On the public market – stocks listed on a stock exchange
10
Financing for social impact – market approach
1. Private markets
• Non-repayable funds
 Membership funds
 Institutional grants
 Funds from the public – crowdfunding
• Private Equity schemes
 Equity schemes
 Debt financing schemes
 Other financing schemes – Outcome Based Contracting (OBC)
2. Banking
• Loans
3. Public markets
• Publicly traded bonds
• Publicly traded stocks
11
Classification of financing and tax considerations
1. Forms of financing classified as ‘Liabilities and Owner’s Equity’
 ‘Owner’s equity’ (equity capital)

 ‘Liabilities’ (debt capital: loans and bonds)
2. Forms of financing not classified as ‘Liabilities and Owner’s Equity’
 Membership schemes
 Grants
 Possible tax implications (where accounting jurisdictions treat them as a form of ‘revenue’)
12
Optimal capital structure
• Capital structure: equity + debt
• Optimal capital structure: weighted cost of capital is at its minimum
• Typically, it is beneficial to have debt in the capital structure:

 Interest tax shield
 Improved ROE
• Risk considerations: we can NOT increase the proportion of debt excessively as with each such
increase raises the investment risk / cost of debt (finance providers require higher interest rate).
13
PRIVATE MARKETS
Non-repayable funds
Sustainable (Social) Finance – Private Markets
Non-repayable funds
1. Membership schemes
2. Institutional grants
3. Funds from the public - crowdfunding
16
Sustainable (Social) Finance – Non-repayable funds
Membership funds
1. Provided by: individual or institutional members of an institution.
2. Used by: mostly by not-for-profit organisations.
3. Include: membership fees, subscriptions, donations.
4. Advantages: non-repayable.
5. Disadvantages:
 Practical difficulties of managing / collecting membership fees, etc.
 Not always reliable – fluctuation of proceeds.
 May not be enough to create the targeted social impact.
17
Institutional grants
1. Provided by: government departments, corporations, foundations.
2. Used by: not-for-profit organisations and private businesses.
3. How to access it: rigorous application process.
5. Disadvantages:
 Possibly long application process and many candidates.
 May be subject to potentially cost-involving conditions.
18
Funds from the public - crowdfunding
1. Provided by: ‘the public’
2. Used by: not-for-profit organisations but also possible for other entities.
3. Include: collection of financial support for a particular cause.
5. Disadvantages:
 Practical difficulties of crowdfunding.
19
Application exercice
1. How to find non-repayable funds providers?
2. What are the entities that CAN access some of the non-repayable funds? Is YOUR business one of them?
3. What is the (application) process you need to follow to access these funds?
4. How demanding is this process?
5. What’s the ‘rate of success’ (probability that you will get these funds)?
6. Is it worth to invest your time / money in this process?
20
PRIVATE MARKETS
Financing through (ESG) Private Equity / Venture Capital /
Business Angels schemes
Financing through (ESG) Private Equity schemes
Private Equity / Venture Capital / Business Angels - what is the difference?
• Private Equity (PE) is (institutional/pooled) capital invested in a company a on a private

market.
• Venture Capital (VC) is (institutional/pooled) capital invested on a private market in start-up

firms or other young businesses that show potential for long-term dynamic growth.
• Business Angels (BA) - individuals providing finance to start-up firm or other young
businesses that show potential for long-term dynamic growth.
23
ESG Private Equity / Venture Capital / Business Angels
• ESG Private Equity is (institutional/pooled) capital invested in a company a on a private

market; addressing ESG objectives is key!
• ESG Venture Capital is (institutional/pooled) capital invested on a private market in start-up

firms or other young businesses that show potential for long-term dynamic growth;
addressing ESG objectives is key!
• ESG Business Angels - individuals providing finance to start-up firm or other young
businesses that show potential for long-term dynamic growth; addressing ESG objectives
is key!
• PE/VC/BA
24
Different forms, different ESG objectives
 Investment in exchange for a stake in these firms or based on debt contract
 Different ESG objectives: E-nvironmental, S-ocial, G-overnance
 Provide with their know-how, helping businesses to grow towards pre-set ESG objectives
or just provide their capital
 Different investment horizons
25
(ESG) Private Equity schemes
1. (ESG) Equity schemes
2. (ESG) Debt financing schemes
3. (ESG) Other financing schemes – Outcome Based Contracting (OBC)
26
Summary of Private Equity investment scheme
ESG Private
Equity/Venture
Capital Fund 2
Shareholders – Shareholder Shareholder Shareholder
Founders of the / Founder 1 Limited / Founder 2 / Founder …
Private Equity /
Venture Capital Fund Partners (LPs)
General (ESG) Private

Equity/Venture Capital
Partners (GPs)
Fund 1
ESG Investment
target / PE’s
Investment Portfolio Firm …
Firm 1 Firm 2
(following ESG
investment policy)
The author’s illustration. 27

How to become a shareholder in Private Equity Scheme
Private Equity (PE) – 2 ways of investing in PE:
1. Through primary market - LPs investment in a ESG private equity fund (capital is pooled in
private equity fund)
2. Through secondary market for private equity shares – LPs trade their shares in private equity
fund with other LPs (investors)
• Growing number of platforms facilitating secondary trading of PEs
• Improving liquidity of PEs
Staub-Bisang M. (2012), p. 125-217. 28

Growing number of Private Equity trading platforms
29
https://www.institutionalinvestor.com/article/b1sswxdwp0d8lv/Move-Over-Private-Equity-Trading-Platforms-Are-Helping-Investors-Tap-Pre-IPO-Companies
Private Equity / Venture Capital
Source: Moonfare,
https://www.moonfare.com/?utm_term=private%20equity%20investment&utm_campaign=&utm_source=adwords&utm_medium=ppc&hsa_
acc=2925157205&hsa_cam=11729083646&hsa_grp=114236436216&hsa_ad=482903015950&hsa_src=g&hsa_tgt=kwd-
17439950&hsa_kw=private%20equity%20investment&hsa_mt=b&hsa_net=adwords&hsa_ver=3&gclid=Cj0KCQiA4L2BBhCvARIsAO0SBd 30
YJl1DLugQZ8jKb2gFLPHRl0KyA_OJuVf2Fq5CnXuVfIFpEAN7LtXAaAt4SEALw_wcB, accessed on 1/03/2021
Summary of Private Equity investment scheme
(ESG) Private
Equity/Venture Capital
Fund 1
ESG Investment
target / PE’s
Investment Portfolio
(following ESG
Firm / Firm / Firm /
investment policy)
start-up 1 start-up 2 start-up 3
Different ways for (ESG) Private Equity / Venture Capital to engage with their capital:
31
1. Equity engagement (through taking a stake in business’ capital)

2. Debt engagement (lending)
3. Engagement through other schemes (other kinds of engagement with businesses)
The author’s illustration.

Incorporating ESG into investment process in Private Equity
Different ways for Private Equity / Venture Capital to engage with ESG investing
1. Whole activity of Private Equity Fund is based on the principles of the ESG investing
2. Only one/few of their portfolios target SRI
BUT in both cases the ESG investment process is the same:
Recommended read:
33
https://www.unpri.org/download?ac=10226
Examples of inclusion of ESG into Private Equity investment policy
LPA – Limited Partnership Agreement

34
Source: UN PRI, https://www.unpri.org/private-equity/private-equity-snapshot-2018/3999.article, accessed 10/03/2021
Private Equity investors committing to ESG principles
Global Private Equity Report 2020. Bain&Company, p. 44; Global Private Equity Report 2021. Bain&Company, p. 30,
https://www.bain.com/globalassets/noindex/2021/bain_report_2021-global-private-equity-report.pdf
Global Private Equity Report 2022. Bains&Company, p. 32. 35
Private Equity / Venture Capital - CONCLUSIONS
• To date, regulators/markets have put less pressure on private equity (PE) funds than on public funds to
integrate ESG into investment process.
• Also LPs are less inclined to consider ESG criteria in the PE portfolio than they are for their public,
equities, fixed income, real estate, or infrastructure asset classes, but this tendency started to change.
• But as ESG investing moved to the mainstream, there is an assumption in PE industry that ESG pressure
will only grow.
• Still challenges for ESG private equity investing (source: UN PRI):

• misconceptions around fiduciary duties and responsible investment,
• establishing a clear guidance to investment teams,
• Measurement of ESG/ reliable information, …
37
(ESG) Private Equity schemes
1. (ESG) Equity schemes
2. (ESG) Debt financing schemes
3. (ESG) Other financing schemes – Outcome Based Contracting (OBC) / Social Bonds Scheme
38
PRIVATE MARKETS
Financing social impact through the (ESG) Private Equity
schemes
Other financing schemes - Outcome-Based Contracting
(OBC)
Outcome Based Contracting (OBC)
1. What is it? - Financing scheme focusing on achieving a targeted social impact outcome
2. Involved parties: contracting organisations, intermediary, providers, investors
3. How does it work? - Payment from the contracting organisation is wholly or partly dependent on
outcomes being achieved
4. What is the financing available for the providers? – Social Bonds Scheme is one of the financing
methods.
5. Customised OBC schemes depending on the contracting organisation and targeted impact objective.
6. Private Equity funds increasingly get engaged in OBC schemes in different roles.
Source：https://golab.bsg.ox.ac.uk/the-basics/outcomes-based-contracting/ 41
Social Bonds Scheme as part of Outcome Based Contracting (OBC)
42
Source：https://www.youtube.com/watch?v=E6GrQtCh83w
Outcome Based Contracting (OBC)
Advantages:
• Incentivising desired behaviour: Lead the interested parties to change behaviours for the better outcome
• Managing risks: Transfers potential risks from the public to the private
• Reducing costs: Reduce costs and increase efficiency of public services
Disadvantages:
• Misaligned incentives: Lead providers only focus on outcomes rather than actions
• Failure of risk management: Lead to requirements of more resources and failure of cost savings
Source：https://golab.bsg.ox.ac.uk/the-basics/outcomes-based-contracting/ 43
The importance of OBC schemes: Impact Bonds
Source：https://golab.bsg.ox.ac.uk/community/news/october-2022-impact-bond-landscape/ , https://golab.bsg.ox.ac.uk/knowledge-
bank/indigo/impact-bond-dataset-v2/
World Bank’s Program for Results
Source: https://ieg.worldbankgroup.org/sites/default/files/Data/Evaluation/files/program-for-results-full.pdf
UK Government’s Payment by Results (PbR)
Schemes
This report reviews the government’s

recent experience of using payment
by results (PbR) to deliver public
services.
Source: https://www.nao.org.uk/wp-content/uploads/2015/06/Outcome-based-payment-schemes-governments-
use-of-payment-by-results.pdf

cc8d68a2b013
49
PRIVATE MARKETS

51
https://www.institutionalinvestor.com/article/b1qcg33v33y7zl/The-Pressure-Is-on-Private-Equity-To-Take-ESG-Seriously 52
Private equity & ESG in the UK – interesting read!
https://www.financierworldwide.com/from-nice-to-have-to-mainstream-esg-in-private-equity#.YEk_rWj7RPY 53

Session 3 – BANKING: Financing for

social impact through lending

wnawrot@escp.eu
Session 3 – BANKING: Financing for social impact through lending
• Introduction to Sustainable Banking
• Financing impact through bank loans
• Other lending schemes available for impact projects
2
BANKING
Introduction to Sustainable Banking
Institutions – Recap.
• Central banks – should be independent from the government
• International Organisation of Securities Commissions (IOSCO)
• Capital market supervisory authorities (ESMA, FCA, SEC)
• Stock exchanges and other trading venues
• Governmental vs. non-governmental institutions / public vs. private institutions

 Private equity firms Session 2 – PRIVATE MARKETS
 Banks Session 3 – SUSTAINABLE BANKING
 Stock Exchange Session 4 – PUBLIC MARKETS
 Pension and investment funds / asset managers & insurance companies
 Etc. 5
Instruments /Asset Classes - Recap
Type of lending (by type of borrower):

1. Loans
• Corporates: SME loans, corporate loans,
2. Fixed Income / debt instruments financial sector loans (interbank), syndicated
loans, mortgages, credit lines;
3. Equities
• Governments (and governmental agencies):
4. Shares in investments funds loans, mortgages, credit lines;
5. Shares in private equity / venture • Social Enterprises: loans, mortgages, credit

capital funds lines;
6. Etc. • Households: mortgages, consumer credit,

microfinance, overdraft facilities.

Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, p. 286-287. 6
Sustainable Banking
Principles for Responsible Banking - UNEP
7
Source: https://www.unepfi.org/banking/bankingprinciples/
Sustainable Banking
Principles for Responsible Banking - UNEP
8
Source: https://www.unepfi.org/banking/bankingprinciples/
Sustainable Banking
‘Responsible banking practices: benchmark study 2020’
Source: https://www.mazars.co.uk/Home/Industries/Financial-Services/Thought-Leadership/Responsible-banking-practices-study-2020 9
Sustainable Banking
Sustainable Banking
Sustainable Banking
12
Source: https://www.mazars.co.uk/Home/Industries/Financial-Services/Thought-Leadership/Responsible-banking-practices-study-2020
Sustainable Banking
Responsible banking practices – where are we?
Most of the banks assessed:
Sustainable Banking
The corporate governance of banks themselves matters!
• Social capital improves the viability of stakeholder-oriented banks (Ostergaard, Schindele,

and Vale, 2016).
• Banks with the strongest shareholder-oriented governance performed worse during the crisis.
(Kotz and Schmidt, 2017)
• Values-based banks (VBBs) are more involved with real economy, perform better and are
safer than global, systemically important banks (Global Alliance for Banking on Values – GABV)
Source:Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, Chapter 10. 14
Sustainable Banking
Value-Based Banking (VBBs)
• VBBs - banks lending to companies that

transition to the sustainable economy.
• VBBs are mission driven: ‘let our money

work for projects with a positive societal
impact’.
• VBBs – link to the United Nations

Sustainable Development Goals (SDGs).
Sustainable Banking
Data by GABV (2016)
Relevance of sustainability for banking
Value-Based Banks Global Banks

Real economy
Loans / assets 76.8% 41.6%
Deposits / assets 81.7% 52.2%
Capital strength
Equity / assets 8.1% 7.3%
Tier 1 12.8% 14%
Risk-weighted assets/total assets 61.6% 44.2%
Financial return and volatility
ROA & Standard deviation ROA 0.65% & 0.26% 0.53% & 0.35%
ROE & Standard deviation ROE 8.3% & 4.9% 8.7% & 7.7%
Source:Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, Chapter 10, p.288. 16
Sustainable Banking
Incorporating sustainability into lending – 2 broad approaches!
1. RISK BASED incorporation of sustainability into lending

(focus on how to incorporate ESG factors into risk management)
 Exclusion (bank loans) – to avoid ‘reputation risk’

 ESG incorporation (bank loans) – includes ESG factors & risks in the
calculation of the risk premium
2. VALUE BASED incorporation of sustainability into lending

(focus on lending to companies and projects that are transforming to sustainable
business models)
 Impact lending
 Microfinance
Sustainable Banking Example of Deutsche Bank’s ‘materiality matrix’:
Material ESG risks in banking
Source: https://cr-report.db.com/2016/en/about-deutsche-bank/materiality.html 18
Sustainable Banking
Sustainability criteria integrated into credit risk management
Economic Sustainability Criteria
Environmental Sustainability Criteria
Social Sustainability Criteria
Source:Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, Chapter 10, p293. 19
Sustainable Banking
Sustainability criteria integrated into credit risk management
Social Sustainability Criteria

• Wage policy
• Health policy
• Social security of the employees
• Worker’s participation
• Conservation of workplaces
• Flexible working conditions and working hours
Source: Weber, Scholz, and Michalik (2010), after Schoenmaker and All (2021)
Source:Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, Chapter 10, p293. 20
Sustainable Banking
Why does sustainability matter to lending?
• In their monitoring role, banks have an opportunity to collect more information on firms,
including ESG factors and risks.
• Banks can thus analyse sector-wide sustainability trends and discover best practices.
• Banks can in turn transfer these best practices in sustainability back to firms in their advisory
role.
• Banks will also use the information to calibrate the risk premium.
In summary, banks can help firms with their transition to sustainable

business models.
Sustainable Banking
Why does sustainability matter to lending?
• It is important for banks, when granting loans, to consider the full impact of sustainability on a
company’s business model, because that affects the company’s credit risk.
 What are the transition challenges for the company’s sector?
 How far is the company, in the transition of its business model, also in comparison with its
sector peers?
 The energy efficiency of real estate is, for example, a key determinant of its future value.
 Traditional cars with combustion engines operating on fossil fuel may lose their value, while
hybrid or electric cars may maintain theirs.
 Environmental question about electric cars – mining and disposal of rare raw materials such
as lithium, for the batteries is of major concern (dilemma: good for the reduction of carbon,
bad for the land system.
• Sustainability has also an impact on collateral values!
• A stronger ESG factor means a lower cost of debt!
BANKING
Financing impact through loans

Instruments /Asset Classes - Recap
Type of lending (by type of borrower)
• Corporates: SME loans, corporate loans, financial sector loans (interbank),

syndicated loans, mortgages, credit lines;
• Governments (and governmental agencies): loans, mortgages, credit lines;
• Social Enterprises: loans, mortgages, credit lines;
• Households: mortgages, consumer credit, microfinance, overdraft facilities.

Schoenmaker, D. & Schramade, W. (2021), Principles of Sustainable Finance, Oxford University Press, p. 286-287. 25
Sustainable Banking
• VALUE BASED incorporation of sustainability into lending

business models)
 Impact lending
 Microfinance
• RISK BASED incorporation of sustainability into lending

(focus on how to incorporate ESG factors into risk management)
 Exclusion (bank loans) – to avoid ‘reputation risk’

 ESG incorporation (bank loans) – includes ESG factors & risks in the
calculation of the risk premium
Sustainable Banking
• VBBs provide lending services to individuals or companies that deliver value to , or have
positive impact on, society in the areas of:
 Economic resilience: through microfinance for individuals and microenterprises

and economic inclusion.
 Social empowerment: through education, health care, social inclusion, and special
needs housing.
 Environmental regeneration: through renewable energy, energy efficiency or

retrofits, green-oriented housing and buildings, sustainable agriculture, and water
efficiency and access.
Sustainable Banking
• The GABV (2017 and 2018) developed a scorecard to measure the societal impact, which is
central to VBBs.
• Risk-Based approach is 2 dimensional only, Value-Based approach is 3 dimensional:
1) RETURN
2) RISK
3) IMPACT
Sustainable Banking
1. VALUE BASED incorporation of sustainability into lending

business models)
 Impact lending
 Microfinance
Sustainable Banking
Value-based banking: Impact Lending
Value-based banking, also called Impact Lending, works on the principle of inclusion.
 Projects that meet the (minimum) criteria on societal impact form the universe of
environmental and social projects that are eligible for Impact Lending.
 Example: Bio-based farming in agriculture,
 Example: Human care and use of animals in health care research,
 Example: High-energy-efficiency label for real estate.
Impact Lending is about lending to companies that are changing, or have changed, their business
model from the linear to the sustainable economy.
Sustainable Banking
Value-based banking: Microfinance
• Microfinance is a banking service that is provide to unemployed or low-income individuals

or groups who otherwise have no other access to financial services.
• The pioneering business model grew out of experiments in low-income countries such as
Bolivia and Bangladesh.
Sustainable Banking
Value-based banking: Microfinance
Example
Source: https://mammothmemory.net/geography/geography-vocabulary/changing-economic-world/microfinance-loan.html 32
lending
Other lending schemes available for impact projects

Other lending schemes available for impact projects
Other lending schemes
NOT only banking institutions get involved in Impact Lending!
Source: Sahin Mustafa, Impact Investing – A Personal Observation, presented in March 2020. 34

cc8d68a2b013
38
SUSTAINABLE BANKING

Sustainable Banking – Additional Activities and Materials
40
Sustainable Banking
Recommended Read
https://www.ft.com/content/82ed86c0-4141-415c-b88c-a22672c2424b 41
Sustainable Banking
Recommended Read
https://www.ft.com/content/10c3e16b-d1c7-4f76-a2f8-b92d54b1e2a7 42
Sustainable Banking
Recommended Read
https://www.ft.com/content/68bf29db-2d32-403d-bad2-d38b7a7e6ea3 43
Sustainable Banking
Recommended Read
44
https://www.ft.com/content/197dbd75-e0a6-4c1a-aef8-3b6dc60b4baf
Sustainable Banking
Recommended Read
45
https://www.ft.com/content/0affebaa-c62a-49d1-9b44-b9d27f0b5600

Session 4 - PUBLIC MARKETS:

financing for social impact through
bonds and stocks Prof. Wioletta Nawrot
wnawrot@escp.eu
Session 4 – PUBLIC MARKETS: financing for social impact through bonds
and stocks
• Introduction to the Sustainable, Responsible, and Impact Investing (SRI)
• Stock exchanges for sustainable finance instruments
• Financing through publicly traded bonds
• Financing through publicly traded stocks
2
PUBLIC MARKETS
Introduction to the Sustainable, Responsible, and Impact

Investing (SRI)
Sustainable Finance
« Sustainable, Responsible, and Impact Investing » (SRI)
Sustainable, Responsible, and Impact Investing (SRI) is an investment discipline that considers:
Environmental,
Social, and
Corporate Governance (ESG) criteria
to generate long-term competitive financial returns and positive social impact.
(The Forum for Sustainable and Responsible Investment, USSIF definition).
5
Sustainable, Responsible, and Impact Investing (SRI)
History of SRI
• Beginnings of SRI (1800s – 1950s) – religious influences (Incorporated “Negative Screening”)

• Christian investing
• Islamic investing
• First signs of corporate social responsibility
• Period of development of SRI (1950s – 1990s) – Incorporated “Positive Screening”
• SRI of today era (1990s – present)
6
General Goals for SRI – historical perspective
• Support firms that have positive impact on society (Positive Screening)
• Avoid firms that have negative impact on society (Negative Screening)
• Encourage firms to behave more “ethically” or “responsibly”
7
Sustainable, Responsible, and Impact Investing (SRI) Today
Common methods for incorporating ESG into investment
1. Exclusion-based ESG investing (“Negative Screening”)
2. Integration-based ESG investing (“ESG Integration”)
3. Impact-based ESG investing (“Impact Investing”)
4. Engagement based ESG investing

1. Exclusion-based ESG investing
Investment that excludes investment in business sectors or firms that do not meet ESG standards.
Ethical or moral orientation – consideration of ethical (e.g., human rights) or subjective

moral criteria (eg. exclusion of tobacco or alcohol)
Norm based approach – consideration of normative criteria (e.g., UN Global Compact, UN

PRI, ILO, OECD):
• Divestment – exclusion of certain investments from portfolio that were previously there
Sherwood M., Pollard J. (2019), p. 58-91; Staub-Bisang M. (2012), p. 15-17. 9

1. Exclusion-based ESG investing
Frequently used Screens in Exclusion-based ESG investing
• Alcohol screens – exclusion of companies involved with alcohol

• Fossil fuels
• Fur
• Gambling
• Nuclear
• Pornography
• Tobacco
• Weapons
• “Sin screens” – capture companies exposed to alcohol, gambling, pornography, and tobacco.
• …
10
1. Exclusion-based ESG investing – Screened Indices
MSCI Screened Indices
• Aim to exclude companies:
– Associated with controversial, civilian, nuclear and tobacco
– Having revenues from thermal coal and oil sands extraction
– Not being in compliance with UN Global Impact principles
• Incorporate exclusions but seek to maintain a profile similar to market cap indexes
1. MSCI EMU ESG Screened 4. MSCI World ESG Screened

Index Index
2. MSCI USA ESG Screened 5. MSCI Japan ESG Screened
Index Index
3. MSCI Europe ESG 6. MSCI Emerging Markets IMI
Screened Index ESG Screened Index
MSCI ESG Screened Indexes. An off-the shelf approach to ESG Screens (https://www.msci.com/esg-screened-indexes) 11
1. Exclusion-based ESG investing - Screened Indices
S&P Exclusion Indices
• The S&P 500 ESG Exclusions II Index measures the performance of companies in the S&P 500
(the “underlying index”) that are not involved in the controversial business activities as specified in
Index Exclusions (weapons, tobacco, coal)
• S&P Global 100 ex Controversial Weapons
S&P Dow Jones Indices: S&P ESG Exclusion Indices Methodology, 12

https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-esg-exclusion-indices.pdf
2. Integration-based ESG investing («ESG Integration »)
ESG factors cover (but are not
limited to):
• Board or management diversity
• Cyber security
• Accounting standards
• Financial reporting
“ESG Integration” includes the investment in instruments / • Waste management
• Carbon emissions management
firms eligible based on certain ESG objectives in order to
• Energy efficiency
optimize risk-return profile of the investment portfolio. • Carbon footprint management
• Raw material use
• Water use
• Water pollution
• Climate change risk management
• Labour management
• Workplace safety
• Human capital development
• Supply chain labour management
• Chemical safety
• Privacy and financial product
Sherwood M., Pollard J. (2019), p. 91 – 99; A practical guide to ESG
integration for equity investing, PRI:
security
https://www.unpri.org/download?ac=10 • Corporate governance 13
2. Integration-based ESG investing («ESG Integration »)
https://www.unpri.org/download?ac=10 14
3. Impact-based ESG investing (« Impact Investing »)
ESG investing that is designed to produce a positive impact on a specific issue as part of the
investment strategy.
• Impact investing is: cause-based and mission-oriented
• Most important reasons for Impact investing:

1. To meet the social or environmental objective of the asset owner(s), or the investor’s belief
system
2. To yield the best risk-adjusted return compared to other investment choices

4. Engagement-based ESG investing
• Engagement – communicating and collaborating with a company (current or target investment).
• The objective for the engagement-based ESG investing is to communicate their beliefs or views
on a particular issue or topic in order to serve as a catalyst for change.
• Institutional investors may engage with companies as part of their investment policy statements, in
reaction to negative headlines, or as a part of client demand.
Sherwood M., Pollard J. (2019), p. 109 - 126. 16

4. Engagement-based ESG investing – cont.
Methods of Engagement
1. Collaborative engagement – investors attempt to work alongside the company in a supportive

manner (eg. send a letter to the board of directors explaining governance issues, the need for
gender and minority diversity at the senior management and executive level).
2. Hostile engagement – engaging with a company in an aggressive manner to use the

investor’s position to forcefully be a catalyst for change (eg. publically discuss the governance
issues in attempt to gain greater control of the company’s management team).

Approach / strategy for Engagement
1. Private engagement – may include confidential communications on constructive ESG issues.

Objective is to contribute to change (relevant ESG issue).
2. Public engagement– may entail open letters, use of media platforms and social media
channels to communicate desired engagement and goals for changes. Investors buy large
amounts of a public company’s stock and then attempt to obtain seats on the company’s board
with the goal of creating a major change in the company.
3. Proxy voting – a mainstream example of a basic engagement strategy. Investors have the
option to vote on shareholder resolutions proposed, particularly those that are relevant to
environmental, social and governance factors.

19
https://corpgov.law.harvard.edu/2021/11/29/recent-shareholder-activism-trends/
Sustainable, Responsible, and Impact Investing (SRI) - Equities
Summary of SRI Investment Approaches for Equities
SRI in equities
Active approaches Passive approaches
Engagement Negative criteria Positive criteria

Voting rights, Exclusion of certain
dialogue companies/equities
Best-in-class Thematic
approach approach
e.g. renewable
energy, etc.
Staub-Bisang M. (2012), p. 144. 22

PUBLIC MARKETS
Stock exchanges for sustainable finance instruments

Financing for Social Impact – Public Markets
The first dedicated Platform for Sustainable Securities
26
https://www.bourse.lu/green
Stock exchanges / markets for SRI instruments
https://www.lseg.com/sustainable
https://www.nyse.com/esg/resource-center
https://www.nasdaq.com/sustainability/offerings 27
https://www.deutsche-boerse.com/dbg-en/sustainability
Sustainable Stock Exchanges Initiative
28
https://sseinitiative.org/
Sustainable Finance and the Role of Securities Regulators and IOSCO
https://www.iosco.org/ 29
PUBLIC MARKETS
Financing through publicly traded bonds

Source: Global Sustainable Investment Review, GSIR 2018, http://www.gsi-alliance.org/wp- 32

content/uploads/2019/06/GSIR_Review2018F.pdf
Green, Social and Sustainability Bonds
• Green bonds – instrument to fund projects bringing a positive environmental impact.
• Social bonds – instrument to fund project bringing a positive social effect.
• Sustainability bonds - instrument to fund sustainability projects.
• Sustainability-linked bonds – focus to borrower’s overall CSR strategy, proceeds may be used
for general corporate purposes
Green Bond market was pioneered in 2007 by the European Investment Bank (EIB) with an issue
the world’s first Climate Awareness Bond (CAB). This market was growing dynamically from a niche
to hundreds of billion dollars investment industry
Staub-Bisang M. (2012), p. 125-141. 35

Green, Social and Sustainability Bonds
Sustainable Bond issuance to hit $1.35 trillion globally in 2022 for another record year!
36
https://www.environmental-finance.com/content/the-green-bond-hub/sustainable-bonds-to-exceed-the-trillion-dollar-barrier-in-2022-for-second-consecutive-year.html
Sustainable Bond Market at the London Stock Exchange
https://docs.londonstockexchange.com/sites/default/files/documents/sustainable_bond_market_transition_flyer.pdf 37
Sustainable Bond Market at the London Stock Exchange
https://www.lseg.com/green 38
Sustainable Bond Market Structure - LSE
39
https://www.londonstockexchange.com/raise-finance/debt/our-products/sustainable-bond-market?lang=en
Best Practice by International Capital Markets Association (ICMA)
To ensure that products labelled as such feature common characteristics, ICMA issued:
• Green Bond Principles (GBP)
• Social Bond Principles (SBP)
• Sustainability Bond Guidelines (SBG)
• Sustainability-linked Bond Principles (SLBP)
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/green-bond-principles-gbp/
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/social-bond-principles-sbp/
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-bond-guidelines-sbg/
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-linked-bond-principles-slbp/ 40
Best Practice by International Capital Markets Association (ICMA)
GREEN, SOCIAL, SUSTAINABILITY BONDS SUSTAINABILITY-LINKED BONDS
• Use of proceeds determines classification Use of proceeds NOT determining classification, instead
focus to Borrower’s overall CSR strategy:
• Proceeds to be used to finance or re-finance green, social, • Proceeds may be used for general corporate purposes
sustainability projects • Pricing linked to ESG/sustainability performance of the
borrower’s business (as a whole, e.g. ESG score, or
against certain criteria
Process applies for project evaluation and selection (process, Substantive target setting and measuring the sustainability of
eligibility / exclusion criteria, green standards/certifications) the Borrower
Management of proceeds applies (tracking funds, Management of proceeds NOT applicable

auditor/third party)
• Reporting (annual report) applies • Reporting applies

• Third-party verification (external review of green bond • Review/Third party oversight generally required
framework, reporting, opinion, certification, scoring rating)
is recommended, NOT required
41
Busch D., Ferrarini G., Grunewald S. (2019), p. 335-336.
Social Bond Principles (SBP) by ICMA
https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/social-bond-principles-sbp/ 42
Recap on Social Finance & Financing through public markets
Social Bond Principles (SBP) by ICMA - Appendix I (June 2022)
Types of Social Bonds:
1. Standard Social Use of Proceeds Bond
2. Social Revenue Bond
3. Social Project Bond
4. Secured Social Bond
https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Social-Bond-Principles_June-2022v3-020822.pdf 43
(1) Standard Social Use of Proceeds Bond
an unsecured debt obligation with full recourse-to-the-issuer only and aligned with the SBP
(2) Social Revenue Bond
‘a non-recourse-to-the-issuer debt obligation aligned with the SBP in which the credit
exposure in the bond is to the pledged cash flows of the revenue streams, fees, taxes etc., and
whose use of proceeds go to related or unrelated Social Project(s).’
(3) Social Project Bond
‘a project bond for a single or multiple Social Project(s) for which the investor has direct
exposure to the risk of the project(s) with or without potential recourse to the issuer, and that is
aligned with the SBP.’
(4) Secured Social Bond
‘a secured bond where the net proceeds will be exclusively applied to finance or refinance either:
• The Social Project(s) securing the specific bond only (a “Secured Social Collateral Bond”);
• (or) The Social Project(s) of the issuer, originator or sponsor, where such Social Projects may or
may not be securing the specific bond in whole or in part (a “Secured Social Standard Bond”). A
Secured Social Standard Bond may be a specific class or tranche of a larger transaction.
This Secured Social Bond category may include, but is not limited to, covered bonds,
securitisations, asset-backed commercial paper, secured notes and other secured structures,
where generally, the cash flows of assets are available as a source of repayment or assets serve
as security for the bonds in priority to other claims.’
PUBLIC MARKETS
Financing through publicly traded stocks

Source: Global Sustainable Investment Review, GSIR 2018, http://www.gsi-alliance.org/wp-

content/uploads/2019/06/GSIR_Review2018F.pdf 52
Equities - Green Economy Mark Issuers
https://www.londonstockexchange.com/raise-finance/equity/green-economy-mark/green-economy-mark-report-2022?tab=issuer-list 53
Equities - Green Economy Mark
https://www.londonstockexchange.com/raise-finance/equity/green-economy-mark/green-economy-mark-report-2022 54
Equities - Green Economy Mark Issuers
55
https://docs.londonstockexchange.com/sites/default/files/documents/lse_green_economy_mark_factsheet_issuer.pdf
SRI Market for Equities
https://www.reuters.com/business/sustainable-business/sustainable-firms-raise-record-amount-equity-2021-2022-01-18/ 56
Performance of SRI Investment in Comparison with Conventional Portfolio
We need to be always reflective and critical of what we read/analyse BUT there are MANY interesting
reads… Here another one ...
https://academ.escpeurope.eu/pub/IP%202021-23-EN.pdf 63

cc8d68a2b013
70
stocks and bonds

Additional Activities and Materials
72
Recommended Read
https://www.ft.com/content/d3b2da29-6299-40d3-a748-afa08b2fd446 73
Recommended Read on Sustainable Finance
https://www2.lseg.com/sustainablefinance/Guide-to-green-finance/download74

Financing For Social Impact

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Financing For Social Impact

Uploaded by

Copyright:

Available Formats

FINANCING FOR SOCIAL IMPACT

Session 1 – Introduction to financing for social

Prof. Wioletta Nawrot

1. Individual engagement 50%

3. Final group assignment 50%

Overview of the Session

• Linking traditional finance with sustainable finance

• Global initiatives supporting sustainable (social) finance

Objectives for this Session

3. Understand what Sustainable (Social) Finance is and how important it is

4. Explore recommended external webpages and resources

What it is and how it differs from traditional finance

Traditional Finance vs. Sustainable (Social) Finance

• E-nvironmental considerations: climate change and environment (biodiversity, pollution

• S-ocial considerations: inequality, inclusiveness, human rights, healthcare, education,

• G-overnance considerations: management structures, employee relations, executive

ENTITIES REQUIRING FINANCING:

WHO PROVIDES FINANCE?

HOW? COST OF CAPITAL:

Corporate Governance (ESG) criteria

to generate long-term competitive financial returns and positive social impact.

(The Forum for Sustainable and Responsible Investment, USSIF definition).

• Impact investing is: cause-based and mission-oriented

• Most important reasons for Impact investing:

2. To yield the best risk-adjusted return compared to other investment choices

Sherwood M., Pollard J. (2019), p. 99-109. 14

• $300bln - 2018 McKinsey Report

• $715bln – 2020 GIIN Report

• $1.164 – 2022 GIIN Report

FUTURE – expected gradual convergence.

How you will learn and be assessed

Session 1 – Introduction to financing for social impact

Session 3 – BANKING: Financing for social impact through lending

Session 5 – Summary and Future of the financing for social impact

1. Understand the link between finance and sustainability

2. Broad review of key areas of Sustainable (Social) Finance

3. Engage in research and discussions on selected relevant topics

4. Understand what challenges Social Finance faces how it will evolve

5. Consider career in Sustainable (Social) Finance

1. ‘Individual continuous assessment’ 50%

2. ‘Group assessment’ 50% 21

1. ‘Individual continuous assessment’ 50%

Session 1 – Introduction to financing for social impact

Format of the RESIT – on campus written exam

Authors: Schoenmaker, D., Schramade, W., (2021)

And even more …. 31

• EU – Sustainable Finance by the European Commission - https://ec.europa.eu/info/business-economy-euro/banking-and-

• Euro SIF – Sustainability Through European Financial Markets - http://www.eurosif.org/

• GIIN – Global Impact Investment Network - https://thegiin.org/

• GSIA – The Global Sustainable Investment Alliance - http://www.gsi-alliance.org/

• The Sustainability Institute - https://www.sustainability.com/

• SSE – Sustainable Stock Exchanges Initiative, https://sseinitiative.org/

• US SIF – The Forum for Sustainable and Responsible Investment - https://www.ussif.org/

• Corporate sustainability officers (firms, banks, insurers)

• Sustainability data officers (rating agencies, data providers)

• Investment bankers in ESG area

• Stock exchange officers responsible for segments of sustainable instruments

• Sustainable, Responsible and Impact investors / asset managers

Linking traditional finance with sustainable finance

• Private (not regulated) vs. Public (regulated) market

• Primary vs. Secondary market

• Markets of Governmental vs. Corporate instruments