Socially Responsible Finance and Investing: Financial Institutions, Corporations, Investors, and Activists

CHAPTER 9

Social Finance and Banking

OLAF WEBER

Associate Professor, Export Development Canada Chair in Environmental Finance, University ofWaterloo

YAYUN DUAN

Co-op Student, University ofWaterloo

INTRODUCTION

What are social finance and social banking? Generally, social finance and banking try to achieve a positive social impact through finance and banking. A positive social impact includes an impact on society, the environment, or sustainable development. Social finance and banking attempt to achieve this impact by offering products and services such as loans, investments, venture capital, and microfinance.

In contrast to social finance, socially responsible investment (SRI) integrates social or environmental criteria into the set of investment indicators (Koellner, Suh, Weber, Moser, and Scholz 2007). SRI attempts to create a financial return outperformance compared to conventional investments that do not integrate social, environmental, or sustainability performance criteria into the investment process (Weber 2006; Buttle 2007; Sandberg, Juravle, Hedesström, and Hamilton 2009; Weber, Mansfeld, and Schirrmann 2011). SRI includes “social” screening, community investment, and shareholder advocacy (O’Rourke 2003).

How are social finance and its subgroups such as impact investing or social banking defined? The Monitor Institute (2009, p. 3) defines impact investment as “making investments that generate social and environmental value as well as financial return.” Jones (2010, p. ...