CONSCIOUS CAPITAL IN THE

21ST CENTURY

Port Talk

Goodenough College

5.6.2017

Mikael Homanen

Note: These slides are a work in progress and are subject to error. Please notify me

at homanen.mikael@gmail.com in case of inconsistencies. All errors are my own.

PREDICTIONS REMAIN GRIM

• Global warming

• Inequality

• Pollution

• Species extinction

• Tax Evasion

• Poverty

• Ocean acidification

• Deforestation

THIS DOES NOT MAKE ECONOMIC SENSE (EITHER)

• Frequent hot days (temperatures

above 32C) can reduce

production output in U.S.

automobile factories by several

percentages

• Aggregate local output by 1-2%

• Reduces daily labor supply up

to 14%

• There are similar economic &

social costs arising from;

1. Climate change ($520bn)

2. Pollution

3. Inequality

4. Tax evasion ($20-30tr)

5. Ocean acidification

6. and more

“MONEY MAKES THE WORLD GO AROUND”

WHO COMES FIRST?

1) CHICKEN OR THE EGG

2) FINANCE OR GROWTH

CORPORATE SOCIAL RESPONSIBILITY

• Thousands of studies

• Studies suggest that there is a positive relationship

between social responsibility and financial performance

• “Doing Well by Doing Good”

TRADITIONALLY: CORPORATIONS HAVE BEEN ON THE SPOTLIGHT

RECENTLY: THE FOCUS HAS SHIFTED TO THE FINANCIERS

BIG BAD BANKS

FT: June, 2016 FT: January, 2017

Greenpeace: February, 2015

BIG BAD BANKS

Go Fossil Free UK: December, 2016 Friends of the Earth: October, 2016

COMMUNITY ACTION

February, 2017

(SOME) OBSTACLES

• Can we change everything in one go? – Decarbonization

• Can we change faster? – Norway

• Norm Based Behavior – Achim Steiner

• Tragedy of the Horizon – Mark Carney

THERE IS HOPE

FINANCE IS CHANGING

Socially Responsible

Projects

Banks

Investors

Governments

TRADITIONAL BANKS

• 89 banks in 37 countries have adopted the

Equator Principles.

• The Equator Principles is a risk management

framework for determining, assessing and

managing environmental and social risk in

projects

• It is to support responsible decision-making and

signatories cover over 70 percent of

international project finance debt in

emerging markets 0

10

20

30

40

50

60

70

80

90

100

2003 2010 2017

Signatories of Equator Principles

Source: Equator Prinicples

SOCIALLY RESPONSIBLE INVESTORS

• Investors are increasingly incorporating social criteria in their investment decisions

• Asset managers, pension funds, mutual funds, insurance companies, etc.

• Excluding “sin” industries & supporting pro-social initiatives

• Similar developments across Europe and the rest of the world. Globally, there are now $22.89 trillion of assets being professionally managed under responsible investment strategies

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1996 2006 2016

$ B

illio

ns

United States

SRI Assets Under Management

Source: USIF

GOVERNMENTS

• Strong investments

• Subsidies and R&D

• India, Brazil & China are

catching up fast - committed a

total of $156 billion

• Green bonds are issued in

France & Poland for record

amounts

0

50

100

150

200

250

2004 2007 2011 2015

$ B

illio

ns

Axis Title

Global Investment in Renewable Energy

China, India & Brazil Other Developing Developed

Source: Bloomberg & UNEP

GREEN BONDS

• Green Bond issuances reached 80$

billion in 2016

• Proceeds of loans go towards

environmental initiatives

• They are projected to increase to $150

billion in 2017

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2007 2012 2016

$ M

illio

ns

Green Bond Issuances

Issuances

Source: World Bank

SOCIALLY RESPONSIBLE BANKS

• Social Banks are growing in size and numbers.

Currently comprise of 40 financial institutions

hold up to $110 billion USD of combined

assets under management

• They concentrate on loans that make the world

a better place

• Loans go towards social, cultural &

environmental Initiatives

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1996 2006 2015

$ M

illio

ns

Triodos Bank

Total Assets

Source: Triodos Balance Sheets

ARE THEY REALLY DOING GOOD THINGS?

TRADITIONAL BANKS

WHAT CAN WE DO?

BUT WHO DRIVES THE FINANCIERS -WHAT ARE WE MISSING?

Depositor BankSocial

Project

DEPOSITOR ACTION

February, 2017

Greenpeace: February, 2015

REACTIONS - TAX EVASION

August, 2016

REAL OPERATIONAL CHANGES

ETHICAL RETAIL BANKING PRODUCTS

• ING offers Eco Loans for “green” Cars

• The interest rate is more favourable

compared to alternative loans

• Similar products offered by other banks

include “green” mortgages

• Ålandsbanken offers a new Green Credit

Card

• The card is made out of renewable and

biodegradable materials

• The card allows users to track their carbon

footprint based on their transactions

OUR ROLE

• We are the savers & depositors

• We are the investors

• We make the investment choices & demands

• We are the direct & indirect activists

• We choose where we put our money

• The financiers are a reflection of our demands

• We need to keep up the momentum

REAL

CHANGES

SOME THINGS YOU CAN DO

• Subscribe & Support

1) Friends of the Earth

2) Tax Justice Network

3) Banktrack

4) Greenpeace

5) Fossil Free UK

6) Union of Concerned Scientists

7) UKSIF, Eurosif

8) NRDC

• Do a little homework on your bank

• Explore the options of Ethical Banks

• Keep all of this in mind as you take

your next steps, Pensions, Insurance,

Mortgages, etc.

www.gabv.org/

WHAT NEXT? WILL THIS WORK? WHAT TOOK US SO LONG?

WHAT SHOULD COME FIRST? THE CHICKEN OR EGG?

“IF IT WERE NOT FOR US, MANY OF THE SOCIAL INVESTMENTS WE SEE TODAY,

WOULD NOT HAVE EXISTED OTHERWISE”

Quote: Social Lender

EVERY PENNY COUNTS

THANK YOU!

REFERENCES• Slides 2-3

1. British Red Cross – Refugee Crisis Appeal

2. World Bank – Natural Disasters

3. World Bank – Air Pollution

4. The Guardian – Air Pollution

5. The Guardian – Species Extinction

6. Independent – Climate Change

7. World Wildlife – Living Planet Report

8. Daily Mail – Climate Change

9. The Guardian – Air Pollution

10. The Economist – The Arctic

11. Time – Species Extinction

12. Heal, G., & Park, J. (2016). Reflections—Temperature Stress and the Direct Impact of Climate Change: A Review of an Emerging Literature. Review of Environmental Economics and Policy, 10(2), 347-362.

13. Henry, J. S. (2012). The price of offshore revisited. Tax Justice Network, http://www. taxjustice. net/cms/upload/pdf/Price_of_Offshore_Revisited_120722. pdf.

• Slide 6

1. Wang, Q., Dou, J., & Jia, S. (2016). A meta-analytic review of corporate social responsibility and corporate financial performance: The moderating effect of contextual factors. Business & Society, 55(8), 1083-1121.

2. Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233.

• Slide 8

1. Financial Times – Fossil Fuel

2. Financial Times – Palm Oil

• Slide 9

1. Greenpeace – Santander

• Slide 10

1. Fossil Free UK – Barclays

2. Friends of the Earth – Barclays

• Slide 11

1. WHSV - DKL

2. CNBC - DKL

• Slide 12

1. BoE – Tragedy of the Horizon

• Slide 15

1. Equator Principles – Members

• Slide 16

1. USSIF – Socially Responsible Investments

2. GSIA – Socially Responsible Investments

• Slide 17

1. Global Trends in Renewable Investment

2. RI – Green Bonds

• Slide 18

1. World Bank – Green Bonds

• Slide 19 - 21

1. Ethical Banks – GABV

2. Ethical Banks – Triodos Bank

3. Ethical Banks – Triodos Loans

4. Green Loans – Barclays

• Slide 24-27

1. Common Dreams – DKL Petition

2. Greenpeace – Santander

3. YLE – Panama Leaks

4. Friends of the Earth – Barclays Fracking

5. Eco Car Loan – ING

6. Green Credit Card – Ålandsbanken

• Related TED Talks

1. Audrey Choi

2. Steve Waygood

3. Al Gore

4. John Doerr

5. Ray Anderson

6. Geoff Mulgan

7. Toby Ecles

8. Chris Mcknett