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DESIGNING
A SUSTAINABLE
FINANCIAL SYSTEM
Development Goals and
Socio-Ecological Responsibility
EDITED BY
Thomas Walker, Stéfanie D. Kibsey,
and Rohan Crichton

PA L G R AV E S T U D I E S I N S U S TA I N A B L E B U S I N E S S

In Association with Future Earth

Palgrave Studies in Sustainable Business
In Association with Future Earth

Series Editors
Paul Shrivastava
Pennsylvania State University
University Park, Pennsylvania, USA

László Zsolnai
Corvinus University Budapest
Budapest, Hungary
Sustainability in Business is increasingly becoming the forefront issue for
researchers, practitioners and companies the world over. Engaging with this
immense challenge, Future Earth is a major international research platform
from a range of disciplines, with a common goal to support and achieve
global sustainability. This series will define a clear space for the work of
Future Earth Finance and Economics Knowledge-Action Network. Pub-
lishing key research with a holistic and trans-disciplinary approach, it intends
to help reinvent business and economic models for the Anthropocene,
geared towards engendering sustainability and creating ecologically con-
scious organizations.

More information about this series at

http://www.palgrave.com/gp/series/15667
Thomas Walker • Stéfanie D. Kibsey •
Rohan Crichton
Editors

Designing a
Sustainable Financial
System
Development Goals and Socio-Ecological
Responsibility
Editors
Thomas Walker Stéfanie D. Kibsey
David O’Brien Centre for Sustainable David O’Brien Centre for Sustainable
Enterprise Enterprise
Concordia University, John Molson Concordia University, John Molson
School of Business School of Business
Montreal, Québec Montreal, Québec
Canada Canada

Rohan Crichton
David O’Brien Centre for Sustainable
Enterprise
Concordia University, John Molson
School of Business
Montreal, Québec
Canada

Palgrave Studies in Sustainable Business In Association with Future Earth

ISBN 978-3-319-66386-9 ISBN 978-3-319-66387-6 (eBook)
https://doi.org/10.1007/978-3-319-66387-6

Library of Congress Control Number: 2017956572

© The Editor(s) (if applicable) and The Author(s) 2018

This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher,
whether the whole or part of the material is concerned, specifically the rights of translation,
reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any
other physical way, and transmission or information storage and retrieval, electronic adaptation,
computer software, or by similar or dissimilar methodology now known or hereafter developed.
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publication does not imply, even in the absence of a specific statement, that such names are
exempt from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in
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Cover image © adrian davies / Alamy Stock Photo

Cover design by Samantha Johnson

Printed on acid-free paper

This Palgrave Macmillan imprint is published by Springer Nature

The registered company is Springer International Publishing AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
 ACKNOWLEDGEMENTS

We would like to thank the support received by the David O’Brien Centre
for Sustainable Enterprise at Concordia University in the preparation of this
edited book, in particular our research assistants Annabelle Boucher,
Stephanie Lee, Minh-Thy Nguyen, Katrina Frances, and Andrea Kim. In
addition, we would like to express our gratitude to Cary Krosinsky for his
helpful advice throughout the process.

v
 CONTENTS

1 Introduction 1
Thomas Walker, Stéfanie D. Kibsey, and Rohan Crichton

Part I System and Sector-Level Transitions Towards

Sustainability 15

2 An Alternative Finance Approach for a More Sustainable

Financial System 17
Rosella Carè, Annarita Trotta, and Alessandro Rizzello

3 Social and Environmental Responsibility in the Banking

Industry: A Focus on Commercial Business 65
Beatriz Fernández-Olit, Marta de la Cuesta-González,
and Francisco Pablo Holgado

4 Seeking Greener Pastures: Exploring the Impact for

Investors of ESG Integration in the Infrastructure Asset
Class 89
Roy R. Sengupta, Tessa Hebb, and Hakan Mustafa

vii
viii CONTENTS

5 Pricing Carbon: Integrating Promise, Practice and Lessons

Learned from the Chicago Climate Exchange 115
Paula DiPerna

Part II Innovations in Best Practices, Tools, and Financial

Products 149

6 Designing Carbon-Neutral Investment Portfolios 151

Gianfranco Gianfrate

7 Sustainability Stress Testing the Financial System:

Challenges and Approaches 173
Dieter Gramlich

8 Responsible Investment Requires a Proxy Voting System

Responsive to Retail Investors 199
Ian Robertson

9 The Creation of Social Impact Credits: Funding for Social

Profit Organizations 239
Marcel C. Minutolo, Chloe Mills, John Stakeley,
and Kayla Marie Robertson

10 Crowdfunding Sustainable Enterprises as a Form of

Collective Action 263
Helen Toxopeus and Karen Maas

11 Palm Oil: Mitigating Material Financial Risks via

Sustainability 289
Gabriel Thoumi
 CONTENTS ix

Part III The Role of Regulation, Standards, and Policy 327

12 Toward a Theory of Sustainable Finance 329

Joakim Sandberg

13 Mobilizing Early-Stage Investments for an Innovation-Led

Sustainability Transition 347
Friedemann Polzin, Mark Sanders, and Ulrika Stavl€
ot

14 Financial Sector Sustainability Regulations and Voluntary

Codes of Conduct: Do They Help to Create a More
Sustainable Financial System? 383
Olaf Weber

15 Why Self-Commitment Is Not Enough: On a Regulated

Minimum Standard for Ecologically and Socially
Responsible Financial Products and Services 405
Andreas Oehler, Matthias Horn, and Stefan Wendt

Index 423
 LIST OF FIGURES

Fig. 2.1 Sample description by year 22

Fig. 3.1 Average CSR score of each bank cluster by year (2006–2009)
(Source: Own elaboration based on information from EIRIS) 76
Fig. 3.2 Bank profiles in external CSR index dimensions (Source: Own
elaboration based on information from EIRIS) 78
Fig. 3.3 External CSR index based on ASSET4*. Mean by cluster
(*Index converted to 0–100 scale. Note: 2014 shows a lower
index level due to database methodological changes.
Source: Own elaboration based on information from ASSET4) 80
Fig. 3.4 Scores by areas of ASSET4 CSR index. Mean by cluster
(Source: Own elaboration based on information from ASSET4) 80
Fig. 5.1 Founding Members in 2003 124
Fig. 5.2 Photos from Kerala 127
Fig. 5.3 Photos from Kerala 127
Fig. 5.4 CCX Installation Map and Members 130
Fig. 5.5 CCX 50 State Book sample 141
Fig. 5.6 Letter from CCX members 142
Fig. 6.1 The components of climate risk 155
Fig. 6.2 How to immunize a portfolio from carbon risk (a) Relationship
between carbon cost and portfolio value, (b) full
decarbonization, (c) hedging, (d) insurance 166
Fig. 7.1 Components of the sustainability stress test framework 181
Fig. 7.2 Impacts, feedbacks and amplifications in the sustainability
stress test framework 187
Fig. 8.1 Stages of capitalism (Adapted from Clark (1981) and
Clark and Hebb (2004)) 202

xi
xii LIST OF FIGURES

Fig. 8.2 Stages of capitalism—historical context (Adapted from

Clark (1981) and Clark and Hebb (2004)) 203
Fig. 8.3 Retail stock ownership: families with stock holdings
(Source: U.S. Federal Reserve Board (2016)) 211
Fig. 8.4 Proxies voted by retail investors (Extrapolated between
1976 and 2008 Sources: SEC (1976) and Broadridge (2015)) 217
Fig. 8.5 Retail positions voted by delivery method (Source: Broadridge
(2015)) 220
Fig. 8.6 Retail shares voted by delivery method (Source: Broadridge
(2015)) 221
Fig. 8.7 Responsible investment managed assets—level and trend
by region (Source: Global Sustainable Investment
Alliance (2015)) 225
Fig. 8.8 Stages of capitalism: the retail ownership gap (Adapted
from Clark (1981) and Clark and Hebb (2004)) 227
Fig. 9.1 Network of stakeholders 243
Fig. 9.2 Natural log of HAPLR 253
Fig. 9.3 Credit price 254
Fig. 10.1 Rules as exogenous variables affecting the elements of an
action situation (Ostrom 2010) 270
 LIST OF TABLES

Table 2.1 Sample distribution by theme 24

Table 3.1 Variables and information sources included in the analyses 73
Table 3.2 ANOVA of variables in the clustering process 74
Table 3.3 Spearman correlation of CSR index position from 2006 to
2009 75
Table 3.4 ANOVA for EIRIS dimensions 77
Table 3.5 Indicators composing the consumer responsibility index 79
Table 3.6 Scores by areas of ASSET4 CSR index 82
Table 7.1 Financial and sustainability stress testing—a synopsis 179
Table 7.2 Concepts of sustainability stress testing the financial system 189
Table 9.1 Variables and calculations using Institute of Museum and
Library Services fields available at https://www.imls.gov/.
Weights are from Hennen’s HAPLR calculation found at
http://haplr-index.com 251
Table 10.1 Overview institutional arrangements for collective action 269
Table 10.2 Overview arrangement for collective action matched
to rules in crowdfunding 274
Table 10.3 Three main mechanisms for collective action in
crowdfunding 275
Table 13.1 Policies to mobilize early-stage finance 350
Table 13.2 Investors’ and entrepreneurs’ perspective on policies to
mobilize early-stage finance 358

xiii
xiv LIST OF TABLES

Table 14.1 Financial sector voluntary codes of conduct

(Sources: UNEPFI, http://www.unepfi.org; Equator
Principles, http://www.equator-principles.com; UNPRI,
http://www.unpri.com; Global Alliance for Banking
on Values, http://www.gabv.org; The Global Impact
Investing Network, http://www.thegiin.org/iris, accessed
on January 14, 2017) 386
Table 14.2 Financial sector sustainability regulations 394
 CHAPTER 1

Introduction

Thomas Walker, Stéfanie D. Kibsey, and Rohan Crichton

Our current financial system is a legacy from a time when our understanding
of socio-ecological systems, natural resource management, and environ-
mental degradation was limited. Historically, utmost importance was placed
upon economic growth and development, with little consideration for the
integrity of the environment, sustainability, or the well-being of future
generations.
In recent years—especially following the Paris Climate Agreement
(COP21)—we have witnessed new ways of thinking and doing business
emerge and gain traction among academics, practitioners, and policymakers.
In the minds of many, the financial system is no longer a closed, isolated
system; it has evolved into a larger socio-ecological system where finance,
social well-being, and planetary health are highly interlinked. In fact, our
world cannot move toward sustainability, address climate change, reverse
environmental degradation, and improve human well-being without aligning
the financial system with sustainable development goals.

T. Walker (*) • S.D. Kibsey • R. Crichton

David O’Brien Centre for Sustainable Enterprise, Concordia University,
John Molson School of Business, Montreal, QC, Canada

© The Author(s) 2018 1

T. Walker et al. (eds.), Designing a Sustainable Financial System,
Palgrave Studies in Sustainable Business In Association with Future
Earth, https://doi.org/10.1007/978-3-319-66387-6_1
2 T. WALKER ET AL.

Academics, policymakers, and practitioners are currently developing a

variety of new tools and products to include environmental and social
factors in the way we make and evaluate business decisions; in some cases
the proposed ideas and approaches have been controversial. This book aims
to add to the discourse on the design of a sustainability-oriented financial
and economic structure by exploring how a system can be designed that
(a) is environmentally and socially responsible, (b) is aligned with planetary
boundaries, (c) manages natural resources sustainably, (d) avoids doing
more harm than good, (e) is resilient and adaptable to changing conditions,
and (f) addresses climate change. We define a “sustainability-oriented finan-
cial system” broadly as a financial system that is in line with larger sustain-
able development goals to promote social and environmental well-being for
current and future generations.
This transdisciplinary edited book presents chapters by some of the
leading academics and practitioners on designing a more sustainable finan-
cial system. The first objective is to explore the system and sector-level
designs of a sustainability-oriented financial system. We consider large-
scale changes to the role of finance, banking, business, and economic
theories and take a deeper look into the challenges and opportunities of
moving from theory to practice with an example centered on carbon
pricing. The second objective is to highlight some of the innovated best
practices, tools, and financial products that make up a sustainable financial
system. We look at new approaches to social and environmental responsi-
bility and risk management, as well as financial solutions to sustainable
development challenges. Finally, our third objective is to consider the role
of regulation, codes of conduct, and policymaking. We discuss the implica-
tions for more or less regulation and the role of common standards and
codes of conducts.
A transition toward a more sustainable financial system in order to
support sustainable development goals is inevitable and is already in pro-
gress. We hope that readers will gain a deeper understanding of this impor-
tant transition through the ideas, practices, policy recommendations, and
first-hand experiences presented in the following chapters. Moreover, we
hope this book will lead to further research, development, and implemen-
tation of new tools and methods—ultimately shaping a financial system
aligned with sustainable development goals.
We explore the following topics:
 INTRODUCTION 3

1.1 SYSTEM AND SECTOR-LEVEL TRANSITIONS TOWARD

SUSTAINABILITY
Chapter 2
An Alternative Finance Approach for a More Sustainable Financial System
By Rosella Carè, Annarita Trotta, and Alessandro Rizzello
The financial crisis of 2007–2009 has raised concerns about the role of the
neoclassical finance approach. Specifically, over the last several decades,
alternative voices have emerged in questioning the foundations of the
traditional view. Recent critical perspectives reject the assumptions and
paradigms of mainstream literature that focus on mathematical and statisti-
cal methods alongside rules and parameters in order to understand the
dynamics of the financial world, which are ultimately more complex. At
the same time, financial systems are experiencing new financial instruments,
channels, and models that emerge outside of the traditional financial system.
This phenomenon represents the first step toward a reaffirmation of the
“finance” mission as the servant of the economy. Concepts such as “alterna-
tive financing instruments”, “alternative financing channels”, and “alternative
forms of finance” can be found with increasing frequency, emphasizing
aspects such as ethics, solidarity, and social justice. Moving from these con-
siderations, this chapter explores—through a systematic literature review—
the “alternative finance” landscape, by identifying nine key themes, discussing
the linkages, interrelationships, and common threads that run through all
these aspects. The work contributes to the ongoing efforts to understand the
opportunities, challenges, and trends for a more sustainable financial system.

Chapter 3
Social and Environmental Responsibility in the Banking Industry: A Focus on
Commercial Business
By Beatriz Fernandez Olit, Marta de la Cuesta Gonz
alez, and Francisco
Pablo Holgado
This chapter carries out a review of the social and environmental responsibility
of banks and suggests a different approach to defining and measuring it based
on the diversity of banks’ models and their activities. Corporate Social
Responsibility (CSR) within the banking industry should include several
intra-sectoral approaches, adapted to better manage the higher risks of uni-
versal banks or to adequately disclose the positive impact of smaller banks on
their communities. The chapter argues that the trend of current homogeni-
zation of the banking industry is going to be unfavorable in terms of future
4 T. WALKER ET AL.

sustainability and responsibility. This chapter will also look at a horizon of

large, quoted banks with highly diversified activities. Alternative governance
models (cooperative, public, semi-public savings banks), small and medium-
sized banks, and entities focused on financial intermediation, and the retail
markets are being undervalued and induced to disappear in Europe, as well as
globally.
Moving forward in more sustainable financial systems requires a return to a
business model that is closer to customers. Technology can be helpful on the
democratization of financial services. However, it could involve new risks:
standardization of products, less personal advice, and financial exclusion of
population with insufficient access, knowledge, or confidence in technology.
Banks should guarantee credit to SMEs and, at the same time, question their
financial support to other less transparent agents. There is a need for CSR that
has an impact on the behavior of the retail-banking sector, as this sector
supports the (productive) economy. Policymakers should be able to evaluate
if the banking industry is fulfilling its role of facilitating responsible and
inclusive access to banking services.
A more relational and sustainable business model would help banking
institutions address the UN’s Sustainable Development Goals, specifically
the 12th goal (responsible consumption and production) and the 10th goal
(reduce inequality avoiding over indebtedness and financial exclusion).

Chapter 4
Seeking Greener Pastures: Exploring the Impact for Investors of ESG Integra-
tion in the Infrastructure Asset Class
By Roy R. Sengupta, Tessa Hebb, and Hakan Mustafa
This chapter looks at one of the most crucial aspects of sustainable devel-
opment across the world, which is infrastructure. Infrastructure factors into
the design and liveability of all communities in the world and will make a
major difference in both developmental and environmental goals in the long
term. Estimates have shown that it will require over $30 trillion of additional
infrastructure investment globally if we are to meet the Sustainable Devel-
opment Goals by 2030. Governments acting alone do not have sufficient
financial resources required to meet these needs. In order to get the finan-
cial system working in a sustainable way for communities, we must find a
way to leverage the resources of private capital for sustainable infrastructure.
This part of the book seeks to explore ways in which such private capital can
be leveraged for infrastructure, which has positive Environmental, Social,
and Governance (ESG) impacts.
 INTRODUCTION 5

This chapter considers the role in which economic theory plays in sus-
tainable infrastructure investment, including the relevance of concepts such
as information asymmetry, as well as the issues which sustainable infrastruc-
ture investment could help to solve, and some of the obstacles and trends in
the field of sustainable infrastructure investment. The key argument of this
chapter is that sustainable infrastructure (defined as infrastructure which
scores well on Environmental, Social, and Governance factors over its
lifecycle) is able to provide competitive returns for investors; returns that,
over the long term, match or even exceed the returns of non-sustainable
infrastructure. Overall, the chapter identifies both barriers to increased
uptake of sustainable infrastructure investment, but also a general feeling
of cautious optimism regarding the future of such investment, as evidenced
in both the literature and the interviews.

Chapter 5
Pricing Carbon: Integrating Promise, Practice and Lessons Learned from the
Chicago Climate Exchange (CCX)
By Paula DiPerna
Carbon pricing is an essential pillar in the architecture of any new sustain-
able financial system to help address climate change because it makes
otherwise invisible costs visible. But moving from theory to practice has
proven elusive. To help accelerate progress, this chapter presents lessons
learned from the Chicago Climate Change (CCX), which operated from
2003–2010 and pioneered carbon pricing worldwide using the cap-and-
trade mechanism, including spearheading a landmark joint that created the
first carbon market pilot program in China, the Tianjin Climate Exchange
(TCX). CCX, which began trading in 2003, was the world’s first and only
carbon market that covered all six greenhouse gases and had international
links.
Fueled by passion, imagination, and bold investors, including a leading
US philanthropy, CCX went from a hunch and an instinct to an expansive
practical working system that covered many major companies in the United
States. In fact, through CCX, the United States had more emissions capped
and subject to a rules-based reduction schedule than any other nation in the
world at the time even though the United States had no national regulatory
structure to require greenhouse gas reductions. The chapter describes how
CCX, voluntary but legally binding, coaxed and cajoled companies into
action, building up an extensive network of early adopters who believed that
6 T. WALKER ET AL.

getting started on climate change before being forced to had commercial

logic and made for visionary management.
The chapter takes the reader from the early days of CCX founding to the
halls of the US Congress, the streets of China and traces the up’s and
down’s CCX faced as it broke new ground. The chapter also makes recom-
mendations for how the world can make up for lost time on carbon pricing,
implement actual pricing systems, and credibly weave socio-ecological
responsibility into financial system design.

1.2 INNOVATIONS IN BEST PRACTICES, TOOLS, AND FINANCIAL

PRODUCTS
Chapter 6
Designing Carbon: Neutral Investment Portfolios
By Gianfranco Gianfrate
Designing a sustainable financial system will require profound innovation in
the ways investors measure and manage climate-related risks. Currently, the
main approaches to embedding environmental aspects in the investment
process are “exclusion lists”, ESG ratings, active engagement with the man-
agement of companies more exposed to environmental risks, and the adoption
of climate risks-adjusted valuation metrics. While those approaches have con-
tributed to making investment activities more sustainable, this chapter intro-
duces new evidence pertaining to the magnitude of climate change risks,
which demand more decisive actions to reduce and mitigate the risks borne
by institutional investors. In theory, the possible strategies to immunize
investments from climate risks would include decarbonization, hedging, and
insurance. Decarbonization consists of eliminating carbon polluters from
investment portfolios and switching to carbon-free assets. Hedging could be
carried out by using securities and financial instruments that linearly offset the
exposure to carbon risks. Insurance would be based on contracts that protect
the value of invested assets in case of extreme scenarios related to carbon prices
and climate. As of today, none of these three strategies could be implemented
satisfactorily by institutional investors because financial markets do not provide
the appropriate tools yet. Financial innovation will drive the financial system
toward the goal of sustainability by creating new markets and instruments.
The innovation will most likely result either in new specialized intermediaries
or in new markets serving the need for climate risk protection (or in a
combination of these two). Policymakers should create the conditions for
the financial markets to facilitate climate-related financial innovations.
 INTRODUCTION 7

Chapter 7
Sustainability Stress Testing the Financial System: Challenges and Approaches
By Dieter Gramlich
This chapter looks at how sustainability stress test (SST) models in finance
assess the resilience of financial institutions and markets against adverse
conditions in the surrounding ecological and social system. Depending on
the outcome from these models, individual institutions may work proac-
tively to avoid potential failures and include their clients in preventive
actions. Supervisors of the financial system may intervene to ex-ante miti-
gate the most critical factors and reduce the exposure of the overall system.
SST approaches thus indirectly contribute to the design of a sustainable
financial system.
In addition to the conventional risk factors from financial and real
markets, SST models include adverse conditions from the socio-ecological
environment and their interaction with the financial system. Up to now, the
effects from climate change on the financial system are mainly considered.
Further factors connected to the scarcity of resources and social imbalances
must be incorporated. It is argued that SST models particularly have to
account for the complex and mostly indirect connectivity between the
financial and the surrounding socio-ecological system. A further challenge
is to comply with the non-linear, dynamic, and simultaneous interaction
between the systems in a forward-looking way.
The inclusion of stress factors from the ecological and social system will
overlay conventional and purely economic structures of risk and risk con-
nectivity. New patterns of common exposures and turning points will
emerge. Due to the structural and behavioral complexity of the overall
economic, ecological, and social system, SST models are not simply exten-
sions of existing stress test models. Rather, they have to be conceived as a
new conceptual approach of stress modeling.

Chapter 8
Responsible Investment Requires a Proxy Voting System Responsive to Retail
Investors
By Ian Robertson
This chapter looks at how a sustainable financial system supports and pro-
motes responsible investment. Institutional investors have largely been able
to work within the labyrinthine proxy voting system to practice responsible
investment (RI) and express their views to companies on environmental,
8 T. WALKER ET AL.

social, and governance (ESG) issues. Though gaps and imperfections in the
system are evident, remedies are routinely considered by regulators and
institutional participants. For retail investors, however, the gaps continue
to widen; though they are increasingly interested in RI, their proxy voting
rates have declined considerably, regardless of whether they invest through
a discount brokerage, full-service brokerage, or use the services of a discre-
tionary portfolio manager.
Responsible investment has evolved from its values-based origins
(e.g. avoiding tobacco companies). It now includes more broadly represen-
tative portfolios that integrate ESG factors into the analysis of investments
and into the subsequent voting of proxies. Integrating ESG factors into
research can uncover hidden risks, while the ESG-themed voting of proxies
nudges companies to more responsible behavior (and according to recent
studies, lower risk and better returns). Before the mid-1970s, retail investors
who own shares directly overwhelmingly voted their proxies, but just as the
centrality of proxy voting to responsible investment was rising, retail voting
rates were declining precipitously.
The chapter traces the origin of property rights, the corporation, and
the ownership rights of shareholders. It situates historic ownership rights
within the social contract between government and citizen and traces the
centuries-long ebb and flow of regulated and liberal market capitalism. The
chapter concludes by noting that the decline in retail investor proxy voting
coincides with the current era of (neo)-liberal capitalism and that
re-engagement of this broad base of investors may both improve compa-
nies’ ESG performance and help usher in a new era of responsible capitalism.
A central recommendation is that stockbrokers, whose investment recom-
mendations are currently held to a duty of “suitability”, be considered
“fiduciaries” and that this higher standard be applied expansively to include
the responsible voting of proxies to reflect clients’ interests.

Chapter 9
The Creation of Social Impact Credits: Funding for Social Profit
Organizations
By Marcel Minutolo, John Stakeley, and Chloe Mills
Designing a sustainable financial system that facilitates development and
socio-ecological responsibility is no small task. Aligning competing stake-
holder requirements is challenging given the complexity of the global
financial system disparate interests. This chapter builds on the concept of
 INTRODUCTION 9

social impact bonds to introduce a financial instrument that facilitates social

development. The authors use the library system to illustrate the function-
ality of social profit credit. They find that there is an opportunity to align
stakeholder interests through the creation of a market for these credits. In
such a financial market, organizations traditionally known as non-profits are
incentivized to innovate, increase performance, and serve social needs while
potentially increasing the revenue needed to deliver on services. Key to the
social profit credit is the development of sector-specific metrics to evaluate
performance of any given organization within the space. Hence, museums,
rehabilitation centers, and libraries, for instance, will not be evaluated on the
same measures of performance but on measures that are agreed upon by the
segment for being important to them. Further, like any other issuance of the
type, participation is not mandatory, as the authors suggest, high
performing organizations will opt-in driving others in order to improve
their results raising the sector’s overall value creation. Likewise, investors
are expected to conduct more research into where they invest their
resources beyond what mere giving does. The authors propose that the
social profit credit will function as a financial instrument that will sustain the
development and social responsibility for years into the future.

Chapter 10
Crowdfunding Sustainable Enterprises as a Form of Collective Action
By Helen Toxopeus and Karen Maas
Crowdfunding is perceived as a particularly promising source of finance for
sustainable initiatives (Calic and Mosakowski 2016; Lehner 2013; Lehner
and Nicholls 2014). By undertaking an institutional, rule-based analysis of
crowdfunding, this chapter introduces three key mechanisms that may create
collective action among crowdfunders, thereby increasing availability of funds
for sustainable enterprises. Firstly, the use of social networks can increase
collective action, especially in the crucial early stages of a crowdfunding
campaign. Existing (strong and weak) ties can decrease fears of moral hazard
and increase trust about expected participation of other funders. Further-
more, smaller group sizes can enhance the feeling that an individual contri-
bution really matters and can also lead to reputational concerns for not
participating. Second, crowdfunding allows for heterogeneous contribution
and payoff rules, ranging from debt/equity to rewards to impact and com-
binations of these. This creates new niche funding markets where the payoff is
tailored to a specific crowd and also enables an enterprise to engage its value
10 T. WALKER ET AL.

chain as funders in particular users/clients. Third, crowdfund campaigns can

lead to conditional cooperation, since campaign websites display who has
already funded and provides a threshold (deadline) within a certain amount of
funding needs to be reached. Making the cooperative behavior of others
transparent has been shown to be a crucial factor for increasing cooperation
levels and can be applied to sustainable entrepreneurial finance. Both entre-
preneurs and crowdfunding platforms can use these three mechanisms to
increase the success rate of sustainable entrepreneurial finance, which can
open up additional sources of funds for a sustainable financial system.

Chapter 11
Palm Oil: Mitigating Material Financial Risks via Sustainability
By Gabriel Thoumi
This chapter looks at the environmental impact of the palm oil business.
Palm oil is an inexpensive and highly versatile oil derived from the fruit of
the oil palm tree. It is found in half of all consumer goods on the shelves
today in Western grocery stores. Due to its high yields and many uses, palm
oil is the most actively traded oil crop in the world. With annual sales of $50
billion, palm oil is big business. Indonesia and Malaysia have expanded their
plantations and tripled production over the past 15 years, and today account
for 85 percent of global production.
Palm oil has been identified as a driver of both tropical deforestation and
climate change. Material financial risks often accompany the environmental
impacts and human rights abuses associated with palm oil expansion. In
2015, fires associated with palm oil expansion in Indonesia destroyed over
2 million hectares of tropical forest and may be responsible for 100,000
deaths throughout SE Asia.
Capital markets in SE Asia and globally are raising capital to expand palm
oil expansion. Currently, there are over 7000 institutional investor equity
positions invested in publicly traded companies in the agriculture sector in
Indonesia, Malaysia, and Singapore. Many regional and global banks are
also providing loans to support palm oil expansion in the region while debt
markets likewise expand capital to support palm oil expansion.
These investors and banks are facing material financial risks associated
with their financing activities supporting SE Asian palm oil expansion.
Likewise, the numerous publicly traded companies and private companies
in the palm oil supply chain in Indonesia, Malaysia, and Singapore also are
facing material financial risks associated with their palm oil expansion.
 INTRODUCTION 11

Finally, millions of SE Asian retail investors who invested in these regional

companies are facing similar material risks.

1.3 THE ROLE OF REGULATION, STANDARDS, AND POLICY

Chapter 12
Towards a Theory of Sustainable Finance
By Joakim Sandberg
This chapter outlines a useful theoretical model for a more sustainable role
of finance in society. It is argued that recent developments have clearly
demonstrated the flaws of the dominant theory of finance rooted in neo-
classical economics and laissez-faire politics. However, a central question
that reformers now face is how social and environmental responsibilities
should be divided or distributed between the state and market actors. It may
seem self-evident that increased regulation is needed, but this suggestion
risks leading to ineffective bureaucracy and non-cooperation by industry.
A popular alternative is self-regulation by market actors in the form of social
responsibility policies, but also this suggestion has flaws as the policies risk
becoming too cumbersome for the actors and thereby both unrealistic and
inefficient. Sandberg presents a middle-way solution that preserves the best
aspects of both sides, which he calls the two-level model of sustainable
finance. The central idea of this chapter is that market actors should have
leeway to pursue private goals except in cases of considerable clashes with
the common goals of society. The role of public policy should primarily be
to support self-regulation by the market except in cases of severely
misaligned incentives.

Chapter 13
Mobilizing Early-Stage Investments for an Innovation-Led Sustainability
Transition
By Friedemann H. J. Polzin, Ulrika Stavl€
ot, and Mark W. J. L. Sanders
This chapter looks more at the financial system as consisting of a multitude of
actors that cover a variety of risk/return profiles and therefore finance different
companies’ projects and infrastructure, which makes it more stable and thus
more resilient to shocks. It so happens, such a diverse and resilient financial
system also allows for innovation in green tech sectors to be financed, con-
tributing directly to a sustainability transition in the real economy. Hence,
mobilizing private early-stage equity capital is important to achieve a more
12 T. WALKER ET AL.

sustainable financial system. When approaching the problem of lacking private

investment in green tech products and services, an effective policy strategy
should consider the most affected stakeholders, investors, and entrepreneurs.
Based on a series of interviews, a survey, and reflection upon the behavioral
biases and self-interest of green tech investors and entrepreneurs, this chapter
suggests a policy mix consisting of two central elements. First, policymakers
should address green tech disadvantages in current markets, for example,
through fiscal and financial incentives such as seed funding or systemic policies
such as green procurement and networking and information. Second, it is
pivotal to also ameliorate the framework conditions (i.e. intellectual property
legislation, labor-market rules, and tax policy) in order to attract investors into
the otherwise difficult market for green technologies. By shifting the burden of
financing, the transition to the private sector, budget constrained govern-
ments can, at the same time, stabilize financial markets, boost private eco-
nomic activity, and foster green innovation and growth.

Chapter 14
Financial Sector Sustainability Regulations and Voluntary Codes of Con-
duct: Do They Help to Create a More Sustainable Financial System?
By Olaf Weber
This chapter discusses the role of voluntary sustainability codes of conduct
and sustainability regulation in helping to create a more sustainable financial
system. Voluntary codes of conduct that are analyzed are UNEPFI,
UNPRI, the Equator Principles, GABV, and IRIS. Furthermore, financial
sector sustainability regulations, such as the Chinese Green Credit Policy,
the Nigerian Sustainable Banking Principles, and the Environmental Risk
Management Guidelines for Banks and Financial Institutions in Bangladesh
will be discussed. Additionally, newer developments, such as the FSB Task
Force on Climate Related Disclosures and climate risk related reporting
regulations for institutional investors will be presented. Most of the
described voluntary codes of conduct and regulations focus on financial
risks for the industry connected with environmental and social risks. Hence,
both voluntary codes of conduct and regulations can help to create a more
sustainable financial system, particularly if they work in tandem. However,
in order to address sustainability issues, these mechanisms should focus not
only on financial sector risks, but on decreasing negative impacts of the
financial sector on sustainable development and on increasing positive
contributions to sustainable development. Enforcement is also a common
issue. While voluntary codes of conduct usually do not have any
 INTRODUCTION 13

enforcement mechanisms, sustainability regulations are still relatively new.

Therefore, experiences about their enforcement are rare. But both might be
able to provide the governance framework that is needed to create a more
sustainable financial system.

Chapter 15
Why Self-Commitment Is Not Enough: On a Regulated Minimum Standard
for Ecologically and Socially Responsible Financial Products and Services
By Andreas Oehler, Matthias Horn, and Stefan Wendt
A crucial requirement to supporting the distribution of ecologically and
socially responsible financial products within a sustainable financial system is
high-quality information for consumers about the achievable financial prod-
ucts. This chapter points out that an ambiguous understanding of what
ecological and social responsibility actually means is one of the main obstacles
for consumers to engage in ecologically and socially responsible financial
products. Without a clear definition of specific ecological and social criteria
that must be fulfilled in order to categorize financial products and services as
being responsible, and without information about the performance impact,
individuals are unable to determine if ecologically and socially responsible
investments fit their personal needs. To tackle this problem, it is proposed
that a regulated minimum standard of ecological and social responsibility
should be implemented both on a global and on a local level. This minimum
standard must apply to the entire value chain to avoid greenwashing and must
go beyond existing legal requirements for firms, financial service providers,
and consumer information. The proposed minimum standard is based on
knock-out criteria measured as fulfilled/not fulfilled while avoiding scoring or
rating approaches and tolerance thresholds. The minimum standards’ under-
lying principles and functioning as well as other key features of the financial
products and services have to be presented in a transparent and comprehen-
sible way that also allows for comparison between different products or
services. Information about key characteristics must be clear and verifiable
and should address the products’ and services’ fit to personal consumer needs.
A sustainable financial system would benefit from the introduction of the
proposed minimum standard because it allows consumers to understand and
compare financial products and services, and it provides a level playing field
for intermediaries and strengthens competition.
 PART I

System and Sector-Level Transitions

Towards Sustainability
 CHAPTER 2

An Alternative Finance Approach for a More

Sustainable Financial System

Rosella Carè, Annarita Trotta, and Alessandro Rizzello

2.1 INTRODUCTION
The recent crisis has induced some critical reconsideration for the role of
“mainstream finance” (Kramer and Porter 2011; Rappaport and Bogle
2011; Shiller 2013; Zingales 2015). Many academics and practitioners
suggest that the crash was the result of bad or poorly applied theories
(Zingales 2015), even useless or harmful (Scherer and Marti 2011), and a
systemic failure of the economics profession (Colander et al. 2009). In the
most recent years, a growing number of scholars have been put the need to
diversify finance approaches under a magnifying glass by overcoming the
limitations related to the crucial (and mechanistic) assumptions of the
classical finance view and by recovering the newest view able to create

This chapter is the result of collaboration between the authors. In particular,

Dr. Rosella Carè contributed to the following Sects. 2.2, 2.2.1, 2.2.2, 2.3, 2.3.2,
2.3.3, 2.3.7, 2.3.9, 2.4 and 2.5; Prof. Dr. Annarita Trotta contributed to the Sects.
2.1, 2.3.1 and 2.3.8. Finally, Dr. Alessandro Rizzello contributed to the Sects. 2.3.4,
2.3.5, 2.3.6 and 2.6.
R. Carè (*) • A. Trotta • A. Rizzello
Department of Legal, Historical, Economic and Social Sciences, University
Magna Graecia of Catanzaro, Catanzaro, Italy

© The Author(s) 2018 17

T. Walker et al. (eds.), Designing a Sustainable Financial System,
Palgrave Studies in Sustainable Business In Association with Future
Earth, https://doi.org/10.1007/978-3-319-66387-6_2
18 R. CARÈ ET AL.

shared value (Kramer and Porter 2011). However, some authors have
highlighted that financial systems would have to reappropriate the funda-
mental and basic useful functions for a good society (Shiller 2013), sustain-
able development and social justice (Weber and Feltmate 2016).
The main criticism of the “traditional” financial theory is that the finan-
cial models and frameworks fail to explain the real financial world. About
this, several questions on how finance should be reconsidered in its onto-
logical, epistemological and methodological assumptions are posed
(Lagoarde-Segot 2015, 2016a; Schinckus 2015; Lagoarde-Segot and
Paranque 2017). The debate on these contentious issues highlights the
major key gaps in traditional finance, which uses a positivism approach
and quantitative models, resulting in theories and models in which ethical
considerations are irrelevant, with the consequence of having a remarkable
separation between facts and values.
For this reason, a number of scholars have argued that the assumptions of
theoretical constructs are largely unable to understand several real-world
phenomena (Lagoarde-Segot 2015). Currently, new approaches are emerg-
ing by questioning the foundations of the traditional view. However, it is
only after the recent crisis that we are witnessing a growing academic
movement that is formally opposed to the neoclassical financial approach
(Lagoarde-Segot 2016a) by underlining that the turmoil can be considered
a symbol for the failure of the mainstream (Blommestein 2009, p. 70) and
by forcing the reconsideration of academic finance (Lagoarde-Segot
2016b). The crisis undoubtedly leads to evidence that concepts such as
irresponsibility, morally dubious behavior and financial misconduct have
had a disruptive impact on the financial and economic systems. Therefore,
the crisis emphasizes a preexisting trend, and it becomes an opportunity to
promote the possibility of substantive change in the discipline of finance
(Gendron and Smith-Lacroix 2015).
Regardless of the theoretical debate, it is important to note that in recent
years, the financial systems provided experience in developing innovative
financial forms and models, which emphasizes concepts such as community
and values. In several countries, including the USA, the UK, Australia and
Europe, innovative forms of funding are being developed, in which people,
in addition to considering risk and return characteristics, take into account
concepts of sustainability, solidarity and social impact. The most prominent
examples are crowdfunding (in particular, civic, equity and lending),
microcredit and social impact investing models, which will be discussed
below.
Another random document with
no related content on Scribd:
 When the Kingsbridge manager turned toward the local bench, he
found Henry Cope standing near it.
“Well,” said the grocer, “what did old Riley have t’ say? Tried ter
browbeat ye, didn’t he?”
“Oh,” said Hutchinson, “he reasserted his claim to Hazelton, and
said we’d surely lose this game out of the count if we persisted in
pitching the man. You can see, Cope, that it’s no bluff; the meeting is
called for to-morrow night. I’ve got Ringling, a new pitcher, here, and
he’s clever. Don’t you think we’d better use him?”
“I notified you,” said the grocer irritably, “that Locke would pitch
this game, and he’ll pitch it. Put him in.”
“All right,” growled Hutchinson, in exasperation, “have your own
way.” As he sat down on the bench, he added to himself: “You pig-
headed old fool!”
So it was Locke who went on the slab when the umpire called
“play,” and Bancroft promptly sent Harney jogging forth to the pan
with his pet bat on his shoulder. Tom was given a rousing cheer by
his admirers.
“You know what to do to ’em, Lefty,” yelled a man on the
bleachers. “You’re the boy fer us. We’re backin’ you.”
Harney drove his spikes into the dry ground and squared himself,
his bat held high and ready. His posture was that of a man who
welcomed speed, and rather preferred that the ball should be up
around his shoulders; therefore, Locke opened with one across his
knees on the inside corner. True, Harney hit it promptly, but he only
batted a weak grounder into the diamond, and Labelle, grabbing it
quickly, whipped him out at first by a wide margin.
“Just as easy as ever!” whooped a delighted Kingsbridger. “Pick
off the next one, Tommy, old top.”
Trollop held his bat low, so Locke kept the ball high and close,
causing it to jump, and the Bancroft center fielder slashed at three
without making even a foul.
“Some pitchin’, Lefty, some pitchin’!” was the cry.
 Wop Grady, his face knotted and puckered, as usual, slammed at
the first one handed him, and hoisted a high foul, which Oulds
smothered close to the wire netting that protected the people in the
stand; and Kingsbridge gave Locke a cheer that resembled a
cowboy yell more than anything else.
Every eye seemed to be turned on Bancroft’s new pitcher as he
teetered awkwardly out upon the diamond. The ball was thrown to
him, and he whipped three or four scorchers to Harney, at first,
before Labelle was ready to bat; but not until he toed the slab to
pitch to the batter did he put his remarkable delivery on exhibition.
Suddenly he swung far backward, pivoting on his left foot and
shooting his right arm and right leg into the air, while his left hand
carried the ball far, far over until it seemed that he was trying to
touch the ground with it. Up he came and forward on to his right foot,
his pitching hand sweeping through the air to send the ball burning
across a corner of the pan.
“Nom de tonnerre! ” gasped Labelle, his eyes bulging, his bat
hanging poised.
“Strike!” cried the umpire.
 CHAPTER XL
PINWHEEL MURTEL

T he great Bancroft crowd laughed. They had come to Kingsbridge

to see their new southpaw show the Kinks something about
pitching. Incidentally they had made arrangements to take home with
them various sums of money which the foolish Kingsbridgers had
wagered on their team.
Bangs whipped the ball back, and Craddock again went through
with that remarkable delivery, looking, as one man expressed it, “as
though he was all arms ’n’ legs.” Again the ball bit a corner off the
plate, and Labelle, fascinated by the pitcher’s gyrations, swung too
late.
The only delay was that caused by the movements of Craddock
preliminary to pitching, and he did not waste a single “teaser” on the
Kinks’ first hitter. The third one was high, with a sharp slant on it, and
the little Canadian whiffed out.
“There’s pitchin’ fur ye!” yelled a Bancrofter. “What d’ye think o’
that?”
“Nom de tonnerre! ” said Labelle again, as he retired to the bench.
“Where he come from, de circus?”
Stark, following, fouled three times, but eventually the Bancrofter
twirler outguessed him, and sent him, fanned, to take his place
beside Labelle.
“Whut’s he got?” asked Reddy Crandall, pawing among the bats.
“Curves and speed,” answered Larry, in a low tone. “Don’t get to
watching his delivery and forget to watch the ball. Go to him! He can
be hit.”
 But Reddy could not hit him that time, and the Bancroft crowd
howled as their new projector fanned the third man in succession.
There were some who began to prophesy that the Kinks would be
shut out without a hit on their own field. There are always wise heads
who make foolish prophecies early in every game.
The second inning opened with Bancroft’s left-handed hitters
coming up, and Locke, knowing they had been practicing against a
left-handed pitcher, worked with the utmost care and judgment, his
change of speed being most effective, as it caused two of the four
men who faced him to bump weak grounders into the diamond, to
their complete undoing.
With two down, Bernsteine, standing well back from the plate, with
a long bat grasped near the end, stepped into a “roundhouse,” and
lined out a pretty single. It did no good, however, for Lisotte banged
a grasser into the clinging paws of Labelle, and Bernsteine was out
at second on a force.
“You all hit him, boys,” cried a Bancroft man. “You’ll straighten ’em
out by and by, and lose the balls over in the slashings at the foot of
Bald Mountain. He’s due to get his bumps.”
Craddock continued his remarkable work, and, one after the other,
Anastace, Hinkey, and Lace were mowed down, even as their
comrades had fallen in the first round.
The Bullies were urged to fall on Locke, and Bangs led off with a
long drive to center, which Sockamore retrieved on the fly. Craddock
did not seem to be strong with the club, and he made a laughable
exhibition by seeking to hit the low ones on the inside corner, where
Locke kept the ball for a strike-out. Harney got one to his fancy,
through a momentary lapse on the part of Locke, but, by tall hustling
out in the left garden, Reddy Crandall picked the globule out of the
air.
“You’re hittin’ him now,” declared the encouraging Bancroft fan.
“Keep it up; they can’t get ’em all. You’ll put the blanket on him yet.”
The delight of the visitors may be imagined as Craddock finished
Kingsbridge’s list by handing the last three men upon it the same
medicine he had given the first six. Three innings had passed, nine
men had faced him, and not one of them had even hit the ball into
the diamond. It began to seem that the man who had prophesied no
hits and no runs for the Kinks might not be such a fool, after all.
Locke’s manner was almost trancelike as he toed the slab at the
beginning of the fourth. His first ball was wide, but Trollop caught the
second one on the seam and pounded it for two sacks, bringing the
Bancroft rooters up, roaring. They continued to roar, as Grady
bunted and sacrificed Trollop to third, where, with only one out, he
was in position to score on the squeeze play if the Bullies saw fit to
try it.
They did try it, but, knowing what was coming, Locke pitched to
Mace high and close, and Mace bumped a little pop fly straight into
Lefty’s hands. Holding the ball a moment, Locke smiled at Trollop,
who made ludicrous efforts to stop and turn back toward third. The
roaring of the Bancrofters died away in a disappointed groan as they
saw the ball tossed to Fred Lace for the third put-out.
“Oh, this is something of a game!” crowed Stark, capering toward
the bench. “It’s about time we came to life and touched that gangling
port-sider up a few. Stop watching his contortions, Labelle. This is no
vaudeville performance; you’re here to play baseball. Try to hit him,
anyhow.”
“You bet!” growled the Canadian. “I hit de ball dis time; you watch.”
Nevertheless, although he slashed viciously, he did not graze the
first one.
Suddenly Reddy Crandall, who had spent his time on the bench
staring at the long-geared pitcher, struck his thigh a resounding slap.
“I’ve got him!” he declared excitedly. “I’ve spotted that guy! I know
him now! Craddock, hey? No wonder them Bancrofters come up to
this town to-day loaded with bettin’ money. Craddock! Why, that’s
‘Pinwheel’ Murtel, of the National League, as good a man as Matty
himself, only he’s got a rotten disposition, an’ no manager can
handle him. He’s been blacklisted and outlawed time after time, but
he’s such a wonder they always fix it up somehow, an’ take him back
when he wants to come. That’s Murtel, I’ll bet my life on it. Fellers,
we’ll never score to-day with him pitchin’.”
Stark, standing near, had ceased to swing the two bats he had
picked up, listening to the excited words of Crandall. He had never
seen the famous and eccentric Pinwheel Murtel, but he had heard a
great deal about the man, as, doubtless, had every other baseball
player in the country.
“By Jove!” he muttered, having turned to stare at the lengthy
twirler. “I believe you’re right, Reddy.”
“I know I’m right,” said Crandall. “I’ve been trying to figure out who
the man was, and I’ve got him at last. At his best, he can walk any
three of us without a man down and then keep us from scoring. This
game is as good as settled, and a lot of Kingsbridge sports have lost
some good money to-day.”
“Nonsense, Crandall!” said Locke swiftly. “Even if the man is
Pinwheel Murtel, he isn’t invincible.”
“There goes Pete ag’in,” said Reddy, as Labelle fanned out the
second time. “Nobody’s even touched him.”
“What of it? The best pitchers in the business can be hit.”
“But not by batters in our class.”
“Yes, sometimes they can be hit by batters in our class.
Mathewson has been batted and beaten by a scrub country team, at
least once, according to his own confession; and other top-notch
pitchers have met the same treatment, much to their surprise.
“We’re going to fight this game through to the last ditch, I hope,
whether that man is Murtel or not. There’s no knowing what may
happen. At any rate, if I can hold them down, and you fellows keep
on giving me the support you have, they may not get any runs. We’re
not going to quit, are we, just because we’ve found out that
Craddock is Murtel?”
“No,” rasped Jim Sockamore, the Indian, “we won’t quit! You’re
right, Lefty; mebbe well beat that bunch yet, if we support you.”
 It was plain, however, that Crandall’s discovery had taken the
courage out of him, and it seemed to fade away entirely as Stark,
also, fanned. Reddy stood up to the plate with his heart in his shoes
and swung apathetically, being sliced down without waste of energy
on the part of the pitcher.
 CHAPTER XLI
GONE WRONG

L ocke muttered a single word of disgust as he rose from the bench

and walked toward the pitcher’s slab. On the way he stopped
suddenly, staring for an instant toward some teams and automobiles
down beyond the far end of the third-base bleachers. Then he
walked onward, but some of the flush was gone from his face.
Hutchinson, sitting silent on the bench, had done little toward
directing his players. Should the game go against Kingsbridge, as he
believed it would, he was prepared to answer criticism by saying that
Henry Cope’s interference had made it impossible for him to rely on
his own judgment and generalship.
Long before Crandall named the Bancroft pitcher, Hutch was wise
to the man. He had likewise observed that Locke did not seem as
efficient as usual, although good support had prevented the Bullies
from hammering out runs.
“When the break comes,” thought the rascally manager, “it’s
dollars to doughnuts they’ll get his goat for fair.”
The Kingsbridge pitcher looked ill as he found the slab at the
beginning of the fifth; his face was pale and set, and there was
something like a glare in his eyes. He seemed to be in haste to hand
Pat McGovern a pass, pitching one ball after another without
pausing to steady down, though both Oulds and Stark begged him to
take more time; and not one of the four he threw for Pat even grazed
a corner.
Following this, he bored Bernsteine in the ribs, and two men were
on the sacks, with no one down. Remembering the first game Locke
had pitched on that field, the Kingsbridge crowd declined to be
frightened.
 “He’ll steady down in a moment,” they said. “Just watch him.”
But in a moment McGovern and Bernsteine each moved up a sack
on a weirdly wild pitch to Lisotte.
Hutchinson turned quickly to Ringling.
“Shake the kinks out of your arm, Ring,” he directed. “Hurry up
about it.”
Oulds had called Locke, meeting him a few steps in front of the
pan.
“What’s biting you now, son?” he growled, heedless of the howling
Bancrofters, who were demanding that the umpire should keep the
game going. “You’ve got the wabbles; I don’t believe you can see the
rubber.”
He wondered at the look in Tom’s eyes. Locke moistened his dry
lips.
“Yes, yes, Oulds,” he said huskily; “I’m all right now.”
“Well, you don’t look it,” retorted Hunchy. “Be you havin’ a fit, or
what? You’ve got to stop heavin’ the ball as fast as you can git holt of
it. Take your time, now. Don’t let Lisotte bunt; prob’ly he’ll try it. If
they start scorin’, they’re li’ble to win the game right here.”
“I tell you I’m all right now,” declared Locke savagely. “Give me the
ball.”
“He’s havin’ a reg’ler fit,” muttered the catcher, surrendering the
sphere and backing toward his position behind the pan.
Lisotte squared himself again; the coachers talked excitedly, the
Bancroft crowd rooted for runs; Kingsbridge was silent. Bernsteine
took a long lead off second, and McGovern danced back and forth at
third. Locke was taking time at last, apparently trying hard to throw
off the feverish wildness that had put him into “a hole.”
Swift, high, and close came the ball to Lisotte, difficult indeed to
bunt safely. But the little Canuck did not try to bunt; instead, as if he
knew just what was due, he met the sphere with a snappy swing,
driving it humming into the field between center and right.
 McGovern danced gayly to the scoring station, Bernsteine
following with a rush. There was a wild riot on the Bancroft
bleachers, men leaping up and down, flinging their hats into the air
and yelling themselves purple in the face; for, with two runs scored,
no one out, Locke apparently all to the bad, and Pinwheel Murtel in
Big League form, it seemed that the game had been clinched for the
Bullies.
Since coming on the field, Tom Locke had been looking for Janet
Harting; somehow he was confident she would attend this game. It is
likely that thoughts of her had disturbed him and prevented him from
concentrating upon the work of pitching, although he had not been
aware of it.
Walking out to take his position at the beginning of the fifth,
however, his searching eyes discovered her blue parasol, and,
beneath it, Janet, sitting at the side of Benton King in the same
carriage in which he had first beheld her. As Locke looked, King
seemed to be returning his gaze. The pitcher saw Bent lean toward
the girl and say something, whereupon both laughed. For the time
being Tom lost his head, greatly to the advantage of the rejoicing
Bancrofters.
He knew it; no one on that field knew it better. And nothing could
have served better to sober him and bring him to his senses than
that wicked, timely line drive by Lisotte. He saw Ringling warming up
and Hutchinson talking to Henry Cope, who plainly was not feeling
right. Of course, the manager was asking permission—or demanding
it—to remove him immediately from the game.
“I’m a fool!” thought Tom. “I have played right into that rascal’s
hand.”
 CHAPTER XLII
A SUDDEN SHIFT

H e hoped Cope would not yield. Perhaps the damage was done
already, but he would try to redeem himself if they did not bench
him.
Hutchinson was saying:
“What’s the use to keep him in, man alive? He’s lost the game
already.”
“If he’s lost the game,” returned the obstinate grocer, “what’s the
use to take him out? I don’t see no sense in that. Let him pitch some
more. He braced up t’other time; mebbe he will ag’in.”
Speechless with exasperation, Hutchinson turned back and
reseated himself on the bench. Seeing this, and understanding that
Locke would continue yet a while on the firing line, Stark ran to him,
grasped him with both hands, and spoke in swift, yet steady, tones:
“Pull yourself together, Lefty; you’ve got to do it, and you can.
Bangs is easy, and that man Murtel can’t hit a balloon. Put the ball
over, and take chances with them; we’re behind you. Don’t hurry,
and keep your head.”
Tom gave the disturbed captain a reassuring smile.
“I know I ought to be sent to the stable,” he said; “but I’ll do my
level best now. Watch me.”
Bingo Bangs was not much of a hitter, and the crowd saw Lefty
whip the ball through a single groove three times in succession, and
three times the Bullies’ catcher hammered the air. After the third
strike, the ball having been returned by Oulds, Locke caught a quick
signal from the backstop, and wheeled, to flash the sphere like a
shot into the hands of Labelle, who had dodged past the runner.
 Labelle nailed Lisotte, and the two Canadians exchanged
courtesies in choice patois. This second swift putout awoke some of
the saddened Kingsbridgers, their sudden yells of satisfaction
mingling with the groans of the Bancrofters.
“Now we’re all right!” cried Larry Stark. “Take a fall out of old
Pinwheel, Lefty. We’ll make a game of this yet.”
Locke’s nerves were growing steadier. He had forced himself to
dismiss every thought of the girl who had treated him so shabbily,
and the man, her companion, who had flung him an insult and
escaped a thrashing. Until the last inning was over he would
concentrate his energies upon the work in hand.
As before, the Bancroft pitcher’s efforts to connect with Locke’s
slants were laughable; he could not touch the ball, even to foul it.
“Hold them down now, Craddock,” begged Fancy Dyke from the
bleachers. “They shut us out last time we was here; let’s return the
compliment to-day.”
Murtel grinned; thus far he had seen nothing that would lead him
to doubt his ability to hold the Kinks runless. Nor was he ruffled when
Anastace got a scratch hit from him in the last of the fifth; for the
three following batters were like putty in his hands.
On the part of Kingsbridge there was uncertainty and anxiety as
Locke returned to the slab, for now the head of Bancroft’s list, the
best hitters of the team, were coming up to face him, and they were
full of confidence. There were times, it seemed, when Lefty was
sadly erratic, and were he to slump again in this game the faith of his
admirers would be much impaired.
Never had Tom Locke put more brains into his pitching. He had a
speed ball that smoked, and his curves broke as sharply keen as a
razor’s edge; furthermore, he “mixed them up” cleverly, his change of
pace proving most baffling, and his slow ball always seeming to
come loafing over just when the hitter was looking for a whistler.
Harney snarled his annoyance after fanning; Trollop almost broke
his back bumping one of the slow ones into the clutches of Labelle;
Grady lifted a miserable foul back of first for Hinkey to gobble.
 Hutchinson had temporarily deserted the bench, and the Kinks
came trotting in. Observing this, Locke grabbed Stark, and
whispered something in his ear, Larry listening and nodding.
“It won’t hurt to try it,” said the captain. “Here, Oulds.”
It was the catcher’s turn to lead off. He listened to Stark’s
repetition of Locke’s suggestion; then he stepped out to the plate,
slipped his hands up on the bat a bit as Murtel pitched, and bunted
the first ball.
The Bullies were taken by surprise. The ball rolled slowly down
just inside the third-base line, and Oulds, leaping away like a streak,
actually turned that bunt into a safe base hit, to the complaints of the
Bancroft spectators and the whooping merriment of the
Kingsbridgers.
Locke was promptly in position, and he followed with a bunt
toward first. Even as the bunt was made the bat seemed to fall from
his hands, and he was off like a shot toward the initial sack, leaping
over the rolling ball as he went. Only by the liveliest kind of hustling
did Murtel get the sphere up and snap it humming past the runner in
time to get an assist on Harney’s put-out.
Oulds was on second. Labelle, grinning, hopped into the batter’s
box, and astonished the spectators of the game, and the Bancroft
players, as well, by contributing the third bunt, which was so wholly
unexpected that he reached first by a narrow margin. And now the
Kingsbridge crowd was making all the noise, the Bancrofters
seeming stricken dumb with apprehension.
Murtel was angry, a fact he could not hide. For the first time he
seemed, with deliberate intent, to keep the first ball pitched beyond
the reach of the batter. Oulds, of course, had anchored temporarily
at third, and Labelle, taking a chance, tried to steal on that pitch.
Bangs made a line throw, but Lisotte, seeing Oulds dash off third,
cut it down, only to discover that the tricky Kingsbridge catcher had
bluffed. The Frenchman failed in an attempt to pin the runner before
he could dive back to the sack.
 Locke had taken Crandall’s place on the coaching line back of
third, giving Reddy a chance to get his bat, as he was the hitter who
followed Stark; and it was the play to keep the ball rolling as fast as
possible. Tom was laughing and full of ginger, his words of
instruction to the runners sometimes sounding clear above the
uproar of the excited crowd.
“Keep it up! Keep it up!” he called. “Get off those cushions! Take a
lead, and score! Look out!” Murtel had made an attempt to catch
Labelle by a quick throw, but the little Canadian slid under
McGovern’s arm.
 CHAPTER XLIII
A GAME WORTH WINNING

L ocke had forgotten the blue parasol and its owner; he had no
fleeting thought for Benton King; he was heart and soul in the
game.
With one out, it seemed an excellent time for Kingsbridge to keep
up the bunting, and attempt to score on it by the “squeeze,” so
Bancroft’s infield drew closer and the outfielders quickly came in.
At the plate, Stark gave a secret signal, changing the style of play,
and then he set the local crowd frantic by meeting Murtel’s high one
on the trade mark. With the outfielders playing in their usual places,
that line drive would have been good for a clean single, but while
they were chasing it down, Larry dug all the way round to third,
Oulds and Labelle romping over the rubber with the runs that tied the
score.
The whole Kingsbridge team was laughing, now, while Murtel,
enraged over being outguessed and deceived, was almost frenzied.
“It’s a great top piece you have, Lefty, old pal,” cried Larry Stark.
“That was the trick to get ’em going. Look at Pinwheel champ the
bit.”
But Hutchinson was back on the bench now, and he directed
Crandall to hit the ball out. Reddy, trying to respond manfully,
boosted an infield fly, and Stark was forced to remain on the sack
while it was caught. Had Anastace, coming next, taken a daring
chance and bunted, it is possible that the Bullies might have been
thrown into confusion again; but he had orders from Hutchinson to
hit, and in trying to do so he succumbed to Murtel’s strategy, expiring
in the box.
 “Oh, this is some game, believe me!” shouted a Kingsbridger.
“Hold ’em where they are, Lefty. You’ve got the stuff to do it. We
depend on you.”
The Bancrofters who had wagered money on the tussle were not
as cocksure as they had been, and doubtless more than one,
Manager Riley included, regretted that matters had not been
privately arranged in advance so that it would not be necessary to
rely almost wholly on the prowess their new left-handed pitcher.
Surely their regrets became still more acute when, in the seventh,
Locke showed no let-up in form, and was not even ruffled when
McGovern reached first on an infield error, the other three batters to
face him going the way of all flesh.
“Oh, you Lefty!” was once more the rejoicing cry of the palpitating
Kingsbridgers.
Murtel came back with a shut-out, although Hinkey led off with a
scratch hit.
“Hold ’em, Lefty—hold ’em!” was the beseeching cry.
Bangs and Murtel faded like morning dew before a burning sun,
but Harney got into a speedy one and banged it for two hassocks,
setting the shaking Bancrofters off again in a tremendous uproar.
Nevertheless, the lucky batter remained at second, where Stark and
Labelle kept him dancing back and forth while Locke took Trollop’s
measure and put him away until the next game should be played.
With no one batting ahead of him, Locke advanced to the pan in
the last of the eighth without instructions. The first ball was too close,
but the second came slanting over, and he bunted. Again it was the
unexpected, and never had a prettier bunt been pulled off.
Nevertheless, it was only Tom’s wonderful knack of starting at high
speed with the first jump and covering the ground like a streak that
enabled him to reach the sack a gasping breath ahead of the ball.
“Safe!” cried the umpire.
The Bullies started to kick, nearly every man on the team taking
part in it. The crowd hooted and hissed, but it was only the nerve of
the umpire in pulling his watch which finally sent the Bancroft
players, growling, back to their positions. There was so much money
wagered on the game that they could not afford to lose it through
forfeiture; but henceforth they badgered the umpire on almost every
decision, even scoffing when he declared in their favor.
Labelle sacrificed Locke to second. Stark, thirsting for a hit,
hoisted a fly to center. Then, just as the visitors were breathing
easier, Crandall smashed a drive into right field.
Locke was on the way to third even before bat and ball met.
Sockamore, coaching, seeing Tom coming like the wind, took a
desperate chance, and, with a furious flourish of his arms, signaled
for him to keep on. Out in right field Mace got the sphere and poised
himself for a throw to the pan.
There was a choking hush. Staring, breathless, suffering with
suspense, the watchers waited.
“Slide!” yelled Sockamore, with a shriek like the blast of a
locomotive whistle.
Spikes first, Locke slid. The whistling ball spanked into Bangs’
clutches and he lunged to make the tag. But Tom’s feet had slipped
across the rubber, and the downward motion of the umpire’s open,
outspread hand declared him safe.
Again the Bullies protested, and again the umpire was compelled
to produce his watch. With difficulty the excited crowd was kept off
the field.
Laughing, Stark had helped Locke to rise, and made a show of
brushing some of the dust from him.
“It’s your game that wins to-day, if you can hold them down now,”
declared Larry. “It was bunting when they weren’t expecting it that
did the trick. Oh, say, there’ll be some sore heads in Bancroft to-
night!”
Henry Cope came bursting out of the crowd back of the bench to
shake hands with Locke.
 “Sufferin’ Moses, whut a game!” he exclaimed. “If I ain’t under the
doctor’s care ter-morrer it’ll be queer. Keep ’em right where they be,
an’ we’ve won.”
“Lots of good that will do us when the game is counted out of the
series,” sneered Hutchinson.
“Even if they count it out,” returned the grocer, “folks round this
town’re goin’ to have a heap o’ Bancroft’s money t’ spend.”
Reddy Crandall did not score. He had done his part well, and he
uttered no complaint when Anastace failed to hit.
The Bullies had not given up. Savage, sarcastic, insolent, they
fought it out in the first of the ninth, bearing themselves, until the last
man was down, as if they still believed they would win. Locke,
however, had them at his mercy, refusing to prolong the agony by
letting a hitter reach first.
With some difficulty he fought off the delighted Kingsbridgers who
swarmed, cheering, around him, and would have lifted him to their
shoulders. When he finally managed to break clear of the throng he
thought suddenly of Janet, and looked round for her.
Benton King was driving toward the gate by which teams and
autos were admitted to the field. She had lowered her parasol, and,
before disappearing through the gate, she turned to gaze backward,
as if looking for some one in the midst of the still-cheering crowd that
covered the diamond.
 CHAPTER XLIV
FACING HIS ACCUSERS

S easonable July weather caused discomfort for the seven

persons assembled in the dingy office of Rufus Kilgore for the
purpose of attending the meeting called to consider Manager Mike
Riley’s claims. Riley himself, in his shirt sleeves, sat with his back
toward one of the wide-open windows, a handkerchief tucked round
his neck inside his collar, grumbling and smoking. Anson Graham,
president of the league, a serious, middle-aged man, with block-
trimmed whiskers, who had the look of one who might be just, but
would rarely temper his justice with mercy, was talking to Kilgore, the
secretary of the organization, who occupied the chair at the desk.
David Farman and William Jones, representing Fryeburg and
Lakeport, respectively, were aimlessly discussing various topics,
such as the weather, crop prospects, and the ardent desire that the
usual number of boarders from the city might be netted by the
blandishments of advertisements which pictured the part of the
country in which they were interested as a summer Eden. Benton
King, appearing restless, talked in low tones to the ever-icy Bob
Hutchinson.
“Confound it!” growled Riley, looking at his watch. “Where’s Hen
Cope ’n’ that man Hazelton? It’s one minute of time fur the meetin’ to
begin, ’n’ they oughter be here.”
“Perhaps they won’t come,” said the lawyer. “Cope is a mule, and
he may try to block proceedings by staying away.”
“But he can’t do that,” rasped Mike. “We can go ahead without
him. It’s time. Hadn’t you better call the meetin’ to order, Mr.
Graham?”
At this moment, footsteps were heard on the stairs, and the door
opened, to admit the puffing Kingsbridge grocer, who paused to
remove his hat, mop his shining, moist dome, and look the
assemblage over.
“Good evenin’, ever’body,” he said pleasantly. “On time, ain’t I?”
“Just about, an’ that’s all,” answered Riley. “Where’s th’ slip’ry guy
that’s caused all this trouble?”
“You mean Locke? Ain’t he here?”
“I mean Hazelton, ’n’ he ain’t here.”
“That’s strange,” said Cope, plainly a trifle disturbed. “He lef’
Kingsbridge on the early train this mornin’, sayin’ that he’d meet me
here to-night. I thought sure I’d find him waitin’.”
“Left town, hey?” cried Riley. “Left town this mornin’! Well, I swear!
So help me, he’s skipped!”
He was not the only one through whose head had passed the
same thought, but Henry Cope immediately raised an agitated
protest against such an idea, asserting his belief that the absent man
would put in an appearance. They were induced to wait a while,
although it was likely that Cope was the only one who was not
satisfied that time was being wasted. In his heart, even the grocer
began to doubt.
As the minutes ticked away, Cope looked anxious, Riley smoked
and growled, Hutchinson remained cool, and Benton King fidgeted.
Finally Anson Graham said:
“Gentlemen, it is now ten minutes past the time set for this
meeting to be called, and I think we had better proceed without
further delay; for it seems that the party accused does not intend to
appear in his own defense. If you will please come to order, the
secretary will read the protest of Manager Riley which led to—”
Breathless and anxious, Henry Cope had been listening to the
sound of hurried footsteps on the stairs, and now, as the door was
thrust open and the tardy one stepped in, he gave an exclamation of
great relief and satisfaction.