ACRN Journal of Finance and Risk Perspectives
Vol. 4, Issue 4, OCTOBER 2015, ISSN 2305-7394
Special Issue - Social and Sustainable Finance and Impact Investing II
TABLE OF CONTENTS
EDITORIAL BOARD
LIQUIDATION OF COOPERATIVE BANKS IN INDIA: IMPLICATIONS OF PERFORMANCE INDICATORS FOR LIQUIDATION
Rituparna Das 1
1 Centre of Risk Management and Derivatives, National Law University Jodhpur
Abstract: The crisis of 2007-08 posed new challenges for the cooperative banks. On one hand, it has highlighted the importance of liquidity and funding risk for banking activity. The stakeholder-based cooperative banks are faced with the problem of how to improve their access to wholesale funding. On the other hand, the deficiencies in their corporate governance are exposed. In arguing that the indicators of performance of the management give the signal of movement of a cooperative bank towards or away from the position that may attract delicensing or liquidation, this paper analyses and compares a number of urban cooperative banks, based on which a decision may be taken regarding which bank is how distant from failure.
ISLAMIC FINANCE AND THE ROLE OF Qard-al-Hassan (BENEVOLENT LOANS) IN ENHANCING INCLUSION: A CASE STUDY OF AKHUWAT
Zamir Iqbal 1, Bushra Shafiq 2
1 World Bank 2 State Bank of Pakistan
Abstract: In contrast to conventional approach to social finance Islamic economic system is an integrated approach towards improving overall well-being of the society though this does not disallow individual’s self-interest within the ambit of morals. In this background our paper reviews perspective of Islamic finance on financial inclusion and discusses the significance of one of its key redistributive instruments, i.e., Qard-al-Hasan (QH: benevolent loans) in reinforcing the social unity and cooperation. Our paper presents the Case Study of an Islamic microfinance organization, Akhuwat, (literary meaning solidarity) to illustrate how significant QH can be on the landscape of social and sustainable finance in developing countries. The paper in its final section suggests policy recommendations for capitalizing on the immense potential of QH towards the objective of social justice especially in Muslim dominated countries.
UNDERSTANDING THE BUSINESS MODELS OF SOCIAL HYBRIDS – 10P’S FRAMEWORK FOR CHALLENGES AND ACTIONS
Sandeep Goyal 1, Bruno S. Sergi 2
1 Institute for Competitiveness, GD Goenka University, India
2 University of Messina, Italy and Harvard University, USA
Abstract: There are increasing numbers of social hybrids focusing on the design and implementation of innovative, market-based business models for serving the global base of the pyramid (BoP) segment. The hybrid business models of these enterprises focus on delivering the integrated mix of positive social outcome and commercial revenue streams. However, considering the complexity of the BoP context, the success and sustainability of the social hybrids depend upon the ability and capability in identifying the challenges and determining the strategic alternatives and actions to blend the business model appropriately. The research objective involves identifying the challenges faced by the social hybrids and corresponding strategic choices specifically in terms of 10 P’s (purpose, product, price, place, promotion, people, partnerships, policy, purse strings and presence) framework identified by the authors. The qualitative multi-case based research methodology is applied for data collection and analysis. The sampling involves the field interaction with the three social hybrids targeting the energy and healthcare needs of the BoP segment in India. The experience of the social hybrids cited in this article helps to resolve the theoretical tension as to why should social hybrid means self-sustainable and social mission focused enterprise leveraging the market-based logic for positive cash flow irrespective of the legal setup.
Keywords: social hybrids, business model, social enterprise, base of the pyramid, BoP. socio-economic outcome
FROM THE CANVAS OF INDIAN INCLUSIVE FINANCE MODELS: PROBLEMS OF HYBRIDISATION WITHOUT REGULATION
Nadiya D Parekh 1
1 Tata Institute of Social Sciences, Mumbai
Abstract: In this research, the different inclusive finance models that has evolved in India, with diverse institutional logics is portrayed. With this backdrop, the context in which hybrid models emerge in a sector and the relevance of regulatory support for its welfare sustenance is discussed. It shows why theoretical models needs legal vigilance for effective practical implementations.
ON THE SOCIAL REPRESENTATIONS OF INTERGENERATIONAL EQUITY
Julia M. Puaschunder 1
1 The New School for Social Reasearch New York, Harvard University Cambridge
Abstract: Social Representations describe the genesis of collective ideas and allow predictions about future behavior of social masses during economic upheaval. The social representations of intergenerational equity were retrieved from 110 speeches, interviews and conversations with leaders at a European future conference during the late summer of 2011. Social representations on intergenerational equity comprised of unsustainable pension systems in the light of aging, shrinking Western populations, overindebtedness in the wake of governmental deficit spending and ecologic decline related to climate change and unsustainable consumption. Stakeholder views of intergenerational equity included environmentalism on public officials’ and international organizations’ agendas. Politicians connected intergenerational justice to human rights. The 2008/09 World Financial Crisis stressed focus on overindebtedness and uncertainty. Nationalism and protectionism were growing in the European finance and corporate worlds. Promoting solidarity, ethicality and social responsibility but also innovations and future investment implement intergenerational equity. Long-term solutions may stem from institutional regulation and foresighted taxation but also open debates informing global leaders about complex intertemporal frictions.
Keywords: 2008/09 World Financial Crisis, Climate Change, Globalization, Intergenerational Equity, Intertemporal Decisions, Social Representations, Societal Collective Decision Making
MAKING FRIENDS WITH WINDMILLS: BUILDING TERRITORIAL CAPITAL
Geeta Lakshmi 1, Gerard de Zeeuw 2, Martha Vahl 3, Eliseo Vilalta-Perdomo 4
1 Lincoln Business School, 2 University of Amsterdam
3 Research Consultant Kennisland, 4 Lincoln Business School
Abstract: The role of community engagement in the development of sustainable territorial capital and territory-based governance is explored. The aim is firstly, to describe the development of a community that started in 2006 in a Nottinghamshire village and secondly, to identify what might be learned. The latter is argued to take the form of research principles. The challenges to the development of the community included the coordination of the variety of purposes of the participants. The central tenet of the research principles is the initiation of sustainable interactions that support the improvement of individual life. The principles differ from those of traditional research, but they are shown to belong to the same class as the latter. In the example a sustainable support system was described that enhanced individual activities without the need for a collective preference or some individual’s dominance.
Keywords: Social finance, Territorial capital, Territorial governance, Community, Sustainability, Triple Bottom Line, Research Principles
MULTIDIMENSIONAL METRICS FOR MEASURING SOCIAL AND SUSTAINABLE FINANCE PERFORMANCE
Houssem Eddine Bedoui 1
1 Ecole Normale Superieure, The Islamic Development Bank
Abstract: Performance is significant not only in the business world, but also to society as a whole. However, performance is traditionally assessed from the one-dimensional aspect of monetary gains. This chapter will first discuss multidimensional performance measurements and expand on the need for ethics in reporting and measuring social and sustainable performances, and will then develop a new approach that links performance to ethics as applied to social and sustainable finance. First, this chapter will develop three-dimensional metrics to measure ethical performance based on the definition of sustainability. Next, these metrics will be generalized using the objectives of Islamic law explained in Bedoui (2012) and Bedoui and Mansour (2015)’s model, with multidimensional metrics. Such a system ensures that any firm or organization can ethically promote human welfare, prevent corruption, and enhance social and economic stability, instead of simply maximizing its own performance in terms of financial returns. A measurement of ethical performance will be developed, demonstrating that a firm or organization that evaluates financial performance alone at the expense of ethical aspects will perform poorly.
NONPROFIT ORGANIZATIONS AS IDEAL TYPE OF SOCIALLY RESPONSIBLE AND IMPACT INVESTORS
Tizian M. Fritz 1, Georg von Schnurbein 2
1 University of Basel, 2 University of Basel
Abstract: Nonprofit organizations (NPOs) as mission-driven organizations could profit from investing in stocks diametrically opposed to their mission, as they serve as a perfect hedge. Earning more income from oil or tobacco companies when there is a greater need for ecological interventions or cancer research might help effectively fighting the cause. We show the flaw in this logic as in its optimal state, this strategy is at most a financial zero-sum game. However, as NPOs strive at creating net value by aiming at a most effective mission-accomplishment, socially responsible and impact investments may offer a better way of doing so. We present NPOs as an ideal type of a socially responsible and impact investor and give the corresponding formal economic reasoning. For mission-driven organizations only the combination of financial and mission-based goals allows for an effective, goal-oriented financial decision-making. The full application of this logic is what is broadly understood under the term of mission investing (MI). Based on a theoretic introduction, we present a formalized way of analyzing multidimensional trade-offs in the case of NPOs being mission-driven investors. This formalization will supply NPOs with a tool that enables them to capture their investments’ financial and mission-based impact and therefore the full benefit of responsible and impact-driven investments.
Keywords: Impact investing, Mission investing, Nonprofit organizations, Socially responsible investments, Trade-off analysis
THE SOCIAL ENTREPRENEUR AS TRAILBLAZER - A ROLE FOR THE SOCIAL ENTERPRISE IN A MERKET ECONOMY
Jeremy Thornton 1, Franz Lohrke 2, John Gonas 3
1,2 Brock School of Business, Samford University
3 Massey School of Business, Belmont University
Abstract: This paper advances the field of social entrepreneurship by developing a basic economic model of the social entrepreneur as a profit-deviating firm. We then demonstrate how profit deviation lowers the effective operating costs of the firm, allowing social entrepreneurs to recognize, evaluate, and exploit previously unconsidered opportunities. In doing so, social entrepreneurs may generate knowledge spillovers by providing valuable ex-post entry information regarding the expected costs of a venture, thereby providing a public good to latent entrepreneurs in the commercial sector. Based on this new information, the latter may then enter markets previously considered unprofitable, leading to market development and growth. We illustrate the range of market conditions that are relevant for the social entrepreneur and provide one industry- and one company-focused case study to illustrate the model. The model and evidence provide a complementary role for the social entrepreneur beyond the production of collective goods.
Keywords: social entrepreneurship, entry, profit deviation, market discovery
JEL: L21, L26, L31
SOCIAL IMPACT BONDS: NEW FINANCE OR NEW PROCUREMENT?
Marika Arena 1, Irene Bengo 2, Mario Calderini 3, Veronica Chiodo 4
1,2,3,4 Politecnico di Milano
Abstract: Over the last years, the Social Impact Bond (SIB) model has emerged as a new and innovative way for financing social programs. This work aims to assess the extent to which SIB model actually realizes its potential to overcome some of the shortcomings characterizing the public purchasing of social services. Therefore, the analysis has considered two aspects, which may affect the design and implementation of a Social Impact Bond: the specific needs of a policy maker in organizing the provision of social services and the social problem the services intend to tackle. After having (a) identified the motivations, which coexist in triggering the creation of a SIB and (b) several dimensions, which characterize the SIB design, the study, provides a review of the experiences in which the SIB model has been already applied, exploring the specific configuration used. Then, the study investigates the relationship between (c) how a SIB has been designed and the motivations that have triggered its development; (d) how a SIB has been designed and the social issue the SIB tries to solve. Lastly, considering the prevalent outline in a social sector, it will be discussed the ability of the SIB scheme to reform the social procurement practice.
THE VALUE CONTRIBUTION OF SUSTAINABILITY REPORTING - AN EMPIRICAL EVIDENCE FOR REAL ESTATE COMPANIES
Nelufer Ansari 1, Marcelo Cajias 2, Sven Bienert 1
1 University of Regensburg, IRE|BS Department of Real Estate, Competence Center of Sustainable Real Estate
2 PATRIZIA Immobilien AG and Germany and University of Regensburg
Abstract: Sustainability has evolved into one of the major challenges for society as a whole and for the business world. This changing perception over the past two decades has resulted in increased requirements for corporate sustainability. In order to meet stakeholders’ desire for information, documenting the corporate contribution to sustainability becomes an important aspect of companies’ stakeholder communication. Especially the real estate industry bears a high level of responsibility, since this sector is regarded as one of the major triggers of anthropogenic climate change and resource exploitation, making sustainable corporate management and the communication thereof quite essential. As the leading authority in sustainability reporting, the Global Reporting Initiative (GRI), published an internationally recognized common framework, in order to ensure the comparability and standardization of corporate sustainability reporting. This paper analyses, for the first time, whether sustainability reporting has an influence on the stock prices of real estate companies. Using the methodology of event study, research with a global sample (Europe, USA and Australia) shows a clear positive impact. Thus, sustainability and its communication do indeed have an impact on corporate valuation, so that efforts to promote corporate sustainability cannot be branded simply as altruism. In fact, sustainability is of decision-making relevance for shareholders and investors and therefore constitutes a success factor for companies. The results of this study provide empirical evidence based on data from listed real estate companies.
Keywords: Global Reporting Initiative, Sustainability Reporting, Corporate Social Responsibility, corporate performance, event study, Listed Real Estate Companies