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Traditional vs. Sustainable Finance

We believe that our global financial system needs to improve. Sustainable Finance tries to achieve this by evolving Traditional Finance.

Traditional Finance focuses on Return and Risk, while Sustainable Finance includes environmental and social issues to measure Impact. We can think of this graphically.

[Insert Graph of Return v Risk (x&y) and Return, Risk, Impact (x,y,&z)]

Why does Traditional Finance fail?

Our current economic models were developed based on a set of false assumptions, such as, natural resources are infinite, and carbon emissions are not harmful. These models did not factor in environmental and social concerns. To this day, labor and capital are the only scarce production factors to optimize in economic production. The problem is that the mindset derived from the Industrial Revolution in the 19th century is no longer tenable.

Where does Sustainable Finance step in?

The world of finance now realizes that we must consider more than just financial performance. We must also consider the impact we have in the form of Environmental, Social, and Governance (ESG) factors when we analyze companies and investments. The reasons for this change in mindset are many:

• Sustainability is a new business imperative thanks to its proven value-add

• Customers are becoming increasingly worried about global issues like climate change

• Investors realize they can address societal challenges with their decisions

• Regulation is forcing changes to business models and reporting standards

Sustainable Investing is along a Spectrum

Want to learn more?

How did we build it?

So far, we’ve designed the key components of our website to be a resource for students and young professionals to understand the growing topics of Sustainable Finance, ESG (Environmental, Social, and Governance), and Impact Investing. The toolkit:

• Defines what Sustainable Finance is and why it can solve global issues

• Explains how you can use the resources for career development

• Outlines the most important terms and resources you can use

• Presents interviews and writings from students, professors, and practitioners

What was Curriculum Camp?

Key information

Impact investing is defined as the deployment of investment capital seeking to make a positive social and/or environmental difference alongside financial returns.

“All investing has an impact that is largely opaque to the investor, and I think that the work of our field, in part, is to make that impact, positive and negative … transparent to the investor so that the investor can choose.”

How money is allocated influences which companies are able to grow and what products and services are delivered to people, it is one of the most powerful scarce resources.

Historically, investment decisions were almost exclusively made based on the traditional risk vs return model. Today, ESG ratings have led to asset selection screening based on these factors. Impact investing goes one-step further, specifically directing capital towards companies whose product/service has a positive impact.

Broadly speaking, as much as 1/3 of USA Assets Under Management can be considered as Impact Investments.

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Key information

ESG Criteria allow investors and companies to measure the impact they have on people and the planet.

The factors are broken down as so:

E - Environmental - includes a company's use of renewable energy, waste output, and GHG emissions.

S - Social - refers to how a company interacts with society from wages, to gender balance, and human rights.

G - Governance - describe the management and policies a company has in place. Corporate scandals may be a result of poor governance.

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Key information

How to Get to Sustainable Banking

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Think of Asset Managers as chefs because they create portfolios for their clients to balance: Risk, Return, and Impact (Sustainability). The "chef" must cater to the needs of their clients and allign their needs and motives to security possibilities.

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Key information

Risk is a measurement of uncertainty, and so it is a crucial factor when considering the unknown future before us. Through analysing the probability of an event occurring, and the resultant financial impact, we can analyse risk and put measures in place to minimise loss.

There are three main categories of risks related to sustainability:

1. Physical Risk

   • Encapsulates risks related to the physical impact of climate change

   • Examples include extreme heat events, which studies have attributed to human action causing warming of the climate in many studies

2. Transition Risk

   • Includes risks related to the transition to a low-carbon economy

   • A big aspect of this is stranded assets, which are assets that have suffered from unanticipated write-downs or devaluations due to climate factors

   • For example, nearly 60% of oil and fossil methane gas and 90% of all coal reserves would have to remain unused to keep temperature increase at 1.5°C - the target level set in the 2015 Paris Agreement.

3. Litigation Risk

   • The chance of legal action being taken in response to company's behaviours relating to climate change

   • Since 2017, the total number of climate litigation cases nearly doubled to 1550

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Key information

There are many frameworks created to assist companies and major stakeholders in the financial industry to form their sustainability goals and implement the necessary changes to achieve them.

We have identified 4 key frameworks which are having a big positive impact:

1. United Nation's Sustainable Development Goals (UN SDGs)

• The 17 SDGs are at the heart of the 2030 Agenda for Sustainable Development which was adopted by United Nations' members in 2015.

2. Doughnut Economics

• The Doughnut is the creation of economist and Oxford professor Kate Raworth.

• The social foundation is the minimum social standards we want for humanity, based on the UN SDGs.

• The ecological ceiling highlights the nine planetary boundaries set out by John Rockström and his colleagues. Beyond which lie catastrophic environmental changes.

• Between these two limits, is 'the safe and just space for humanity' to operate in sustainably.

3. Principles for Responsible Investment

• Created by the PRI, these six principles intend to guide investors on how to act in order to create a more sustainable global financial system for the future.

• The PRI has almost 4000 signatories now made up of institutional investors.

4. Sustainability Accounting Standards Board (SASB)

• Reporting and accounting standards are crucial to the business world, allowing companies to understand themselves better and facilitating transparency between firms, shareholders and investors.

• The SASB has developed standards specific to 77 industries, identifying the ESG issues most relevant to financial performance.

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Key information

In November 2008, the World Bank became the first institution to issue a green bond.

• Green bonds typically have the same structure, credit risk, yield, and rewards as traditional bonds.

• Their differentiation comes from “greenness” or being environmentally friendly.

• Although that is not particularly well regulated, the investment in itself is structured just like any other fixed-income security.

• There are also social, blue bonds, etc.

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Characteristics of Bonds:

It is useful to learn more about traditional and sustainable bond factors to better understand how we finance projects using bonds. Source: Schoenmaker and Schramade, 2019.

Traditional Bond Factors

Sustainable Bond Factors

Sustainability Assessment Methods:

There are many valuation methods useful in analyzing and financing sustainability. Below are just a few of the methods possible and some useful research papers to help you learn more.

Please use the search function (in the top right) if you are looking for something specific. The industry is growing very quickly so if we are missing something you can let us know about it and we'll add it to the toolkit.

Contact Stephen Snider (stephen.snider@oikos-international.org) if you have any questions.

How can the Toolkit help you?

• Learn how to find job opportunities

• Participate in workshops and trainings

• Develop your professional, technical, and leadership skills

• Interview stakeholders and network

• Write on finance "hot topics"

• Organize events and conferences

Check out this promotional flyer for more info:

Why should you help us?

If you help us then you can:

• Join our squad of international professionals

• Feature your work

• Have your profile online

• Network with the industry

• Have a positive impact

What do we hope to achieve?

What resources are available?

The Toolkit provides valuable pages of information. Generally, information is organized in the following three sections. Please use the Search bar in the top right to look for anything specific.

• Toolkit Resources

  • Interviews, Career Advice, Websites, and Online Resources

• Activities & Events

  • Conferences, Events, or Workshops you can participate in

• Partners & Resources

  • Supporting People and Organizations to network with

Below are some specific resources the toolkit has to offer by the type of user.

Key information

The purpose of the insurance sector is to understand, manage and carry risk on behalf of people, companies and governments. With the increasing focus on ESG issues, the industry has to adapt.

Leading this is the United Nations Environment Programme Finance Initiative, which has identified four principles to integrate ESG into insurance:

1. We will embed in our decision-making environmental, social and governance issues relevant to our insurance business.

2. We will work together with our clients and business partners to raise awareness of environmental, social and governance issues, manage risk and develop solutions.

3. We will work together with governments, regulators and other key stakeholders to promote widespread action across society on environmental, social and governance issues.

4. We will demonstrate accountability and transparency in regularly disclosing publicly our progress in implementing the Principles.

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Key information

There is a general consensus that carbon pricing is a key strategy that will help lead us to a fully decarbonised economy.

It works by putting a price on carbon emissions, companies have a large financial incentive to reduce their emissions.

How it works

The two most common carbon pricing policies are:

Emission Trading System (ETS) - Companies have emissions units which are tradable, if a company emits less than their units, they can sell the remaining and benefit financially.

Carbon Tax - Directly sets a price on carbon by setting a specific tax rate on greenhouse gas emissions.

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Key information

Did you know that nearly 50% of the world's greenhouse gases come from the built world?

27% from building operations and 20% from building materials and construction, both of these areas need to have an operational overhaul.

Green buildings are those that are environmentally responsible and resource-efficient, through the full lifecycle - from design, to construction, to operation and finally with demolition.

PropTech companies, those that are using technology to the real estate industry, are finding many creative solutions to this problem.

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Key information

Technology is unlikely to be the silver bullet that many people hope it will be, however innovation will be a key contributing factor to achieving necessary climate goals. A McKinsey report found that 40% of required emissions abatement could come from technologies that are still being developed, so watch this space!

ClimateTech

ClimateTech is a sub-sector of technology companies which are focusing on developing and/or utilising technologies to combat climate change. Companies in this space are attracting significant investments from venture capitalists (VCs) who are early-stage investors, giving capital to risky start-ups in return for equity in the company, in the hope that it will grow.

Some of the most successful and impactful ClimateTech companies include:

• Nature's Fynd - Using their fermentation technology they turn fungi into dairy and meat food substitutes, using a fraction of the water, land and energy resources of animal protein sources.

• Prometheus Fuels - Has developed a tools to filter atmospheric CO2 and turn it into a viable net-zero fuel that can compete with fossil fuels.

• Volocopter - An electric powered air vehicle designed to operate as an air taxi, reducing cars on the road.

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Key information

SRI refers to investment approaches that apply social and environmental criteria when evaluating companies.

How it works:

• Investors will create a scoring system based on criteria relating to social impact

• Excluded companies are dictated by the goals of the investor, some may want to avoid weapons companies where as others could want to support companies that do not pollute excessively.

Sustainable Finance, SRI, ESG, etc. is not just a Trend

• $12 trillion market in 2019, or about $1 of every $4 investing in SRI

• UN’s Principles for Responsible Investment (PRI) has >3,000 signatories & $90 trillion

• Green bond & loan issuance $360 billion globally in 2019

• BlackRock predicts ESG funds to rise >$400 billion over the next ten years

• Unique tools are being created $25 million water bond for Washington, D.C. in 2016

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Ones to know

Key information

Climate Justice is liked to human rights and international development, as it acknowledges there is a disparity between those having the largest causal influence on climate change and those feeling the largest burden from its impacts.

As the more developed nations have achieved their wealth in-part due to climate damaging practices, such as burning fossil fuels, many argue it would be 'just' for them to redistribute their wealth more equitably to those dealing with the consequences.

Some facts motivating climate justice activists

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oikos Syllabus

There are so many areas of Sustainable Finance because it touches so many aspects of our society. At oikos International we are developing focus areas with the key points of information you need to build a better financial system. Below are the areas we think form the Principles of Sustainable Finance.

If you'd like to help us explore these areas further, please let us know by emailing Stephen Snider at stephen.snider@oikos-international.org.

Principles of Sustainable Finance

Key dates timeline

1700s - John Wesley's novel idea

The founder of the Methodist movement, is credited with the first conscious investment practice. Urging followers to refrain from making investments in 'sin stocks' such as weapons and tobacco.

1971 - Pax World Fund launched

To avoid supporting companies contributing to the Vietnam War, the first sustainable mutual fund is launched.

1988 - Institutions Created

After NASA's James Hansen told a congressional hearing that there was a 'real warming trend', climate change attracted global attention. The Intergovernmental Panel on Climate Change (IPCC) and the United Nations Environment Programme (UNEP) are established.

1997 - Agreements in Japan

The Kyoto Protocol, an international treaty committing to reduce greenhouse gas emissions, is signed by 192 states.

2006 - Principles in Place

The United Nations' Principles for Responsible Investment (PRI) is launched to encourage further development of sustainable investing.

2007 - Impact Investing

The term 'impact investing' is coined by the Rockefeller Foundation. Putting a name to investments that intend to generate both a financial return and social impact.

2009 - A Network is Born

The Global Impact Investing Network (GIIN) is created to promote investing with the aim of creating a social benefit.

2015 - Frameworks in France

At COP 21 the Paris Agreement is signed by 196 parties agreeing to meet certain future climate goals.

2020 - The Largest Asset Manager Acts

Larry Fink, founder and CEO of BlackRock, wrote in his annual letter that companies generating more than 25% of revenues from coal production will be removed from their active portfolios.

2021 - Study Shows Sustainable Finance is Significant

The Global Sustainable Investment Alliance (GSIA), found that 35.9% of total assets under management were sustainable as of 2020.

2022 and beyond - You Can Make an Impact

The industry is still growing and getting more attention everyday. Could you be a key part of this exciting future?

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Key information

Equity

Public companies, meaning they are listed on the stock exchange, have a market value which is known as market capitalisation.

Share price is impacted by supply and demand, and sustainability factors are increasingly influencing demand of stocks.

Tesla is a great case study for this, it took them 17 years to turn their first annual profit in 2020. Yet it became the most valuable automative company in the world in July of that year, before the news of its annual profit was announced. Investors became confident in the future of cars being electric, and hence demand for a piece of the company skyrocketed.

Valuation

The most common intrinsic valuation method is the discounted cash flow (DCF) approach.

Analysts are now aware that many factors relating to sustainability will impact the future cash flows of companies. For example, necessary investments to make processes less polluting or potential regulations that could force a firm to change some of its products/services.

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In terms of Sustainable Finance, this refers to how shareholders are using their collective power to force companies to make organizational and operational changes through the use of engagement, shareholder resolutions, public advocacy, and more.

Organizations to Check Out

Some organizations working in this space are below. These groups are helping the average shareholder take collective action to change the way public companies are behaving.

What is it?

Many people like to save some of their income for the future, and investing is one possible approach.

If you decide to do this, how can you be sure that your money isn't supporting companies that don't align with your values? Check out the resources below to find out!

Useful resources

Some great organisations to help you with your decision making are below:

Find out what your bank is doing with your money and find a bank that invests aligned with your values. They only review U.S banks and credit unions currently. They pull together information from publicly reported data, financial institution websites, and surveys. You can check if your institution is certified as sustainable, if they invest in low-income communities, if they do small business lending, if it is women or minority-owned, and much more.

Interviews

1. Who are you and what is your work?

2. What can you teach us about Sustainable Finance?

3. How can students find jobs in your area?

Origins and Milestones of Divestment

Data

Organizations and Coalitions

Other Related Initiatives

There is a boom in interest in Sustainable Finance! Having experience on your resume and speaking the "language" is essential to differentiate yourself.

Major banks, asset managers, consulting companies, and others are adding roles and looking for talent with traditional financial skills, sustainability experience, and ESG knowledge.

Many Paths

There is no one way for you to enter the industry. There are many roles and opportunities and they seem to be constantly evolving. One way to think of it is as either:

• Bring your traditional finance skills and learn about sustainable finance on the job

• Know a lot about sustainability issues or ESG and learn the finance part as you go

What could your job be?

• Lead business efforts to become more sustainable

• Coordinate teams to adopt sustainability principles

• Communicate with clients and investors

• Organize, present, and use data

• Position reporting in line with new standards

• Allocate capital following ESG goals

• Sell products to the market and clients

• Market business efforts

In the News

Some useful articles on job prospects are:

Pension Funds

• CalPERS

• CalSTRS

• Business experience - past roles that will help you quickly ramp-up

• Adaptive and critical thinking - the industry is evolving and you have to be able to keep up

• A multidisciplinary and systems perspective - diverse experiences and knowledge to complement what you'll learn on the job

• Passion - your heart and mind is behind making a better world to live in

One way to narrow down your job hunting is by thinking of different sectors of jobs. Some include:

• Community Developer Financial Institutions (CDFIs)

• Consulting Companies

• Institutional Investors

• Family Offices

• Foundations

• Investment Managers (public and private equity, or even debt)

• International Organizations (like the UN or World Bank)

• Microfinance

• Philanthropy

Useful Sites

The oikos St. Gallen team has written two reports on the topic of Sustainable Finance in Switzerland based on various events that they have hosted. Check the reports here.

For information on oikos St. Gallen check out some more information on this student group here:

This section of the Toolkit provides resources that are most relevant to specific geographical regions.

Would you like to feature your region? Add your resource and a short description using our sign-up form. We will get in touch with you and add your contribution.

Many Types of Roles

Here we share with you some examples of jobs we're seeing in the space but this is in no way a comprehensive subset. There are many different roles that are integrating sustainable finance and there is an opportunity for you to create your own way in your roles.

Some typical job positsions include:

• ESG Risk Analyst

• Performance

• Consulting

• Sales, Product Development,

• Backoffice and Finance Roles

• Marketing and Product Support

Share Your Job - If you would like to share with us an example of a job description please reach out. We can also share with our network interesting roles for the community. Contact - stephen.snider@oikos-international.org

Examples of Roles

1. Definition – What is Green Finance

Broadly speaking, climate finance is the domain of financial entities seeking to fund adaptation or mitigation responses to climate change. Green banks are one such entity, differentiating themselves from typical banks with their dedication to facilitating private investment in environmental or “green” solutions to climate change. They are particularly in demand in regions that are especially vulnerable to climate change and require direct financial assistance.

2. Why do we need green banking?

3. Why does the Caribbean need green banking?

4. The state of green banking in the Caribbean

5. Examples of climate financing efforts in the LAC

• Green Bond Transparency Platform - This is a digital tool designed to facilitate greater transparency in the Latin American and Caribbean (LAC) green bond market.

• Listing of a Caribbean-based green bond on the Jamaica Stock Exchange

• Green Finance LAC Platform - This platform promotes knowledge exchange on green financing throughout the region. It also offers technical assistance to regional governments.

6. Barriers to entry: What’s preventing green financing in the LAC?

The following are some identified barriers to entry:

• A lack of regional financial integration

• Overcoming cultural and linguistic barriers between countries

• The relatively poor state of Caribbean financial development

• Overreliance on tourism, agriculture, and extractive industries discourages change

Universities

Even though not enough universities offer resources on Sustainable Finance, we managed to gather the ones and how you can find them underneath this title.

Books

In order to widen your knowledge on the topic, we recommend you check these books!

Companies

Looking into these companies’ work is going to be a really good start for your journey in Sustainable Finance.

ESG Data and Reporting

You can find many projects and initiatives working on ESG Data and Reporting in this section.

Research

Additional to the research material on Carbon Washing and Impact Investing, we have some websites that can help you under this title.

Tools

Check out this page for software and programs geared toward helping you practice Sustainable Finance.

Partnerships

We are looking for organizations working and educating around sustainable finance. If you would like to be a part of the creation of this toolkit, please reach out.

Glossary of Important Terms

In order to fully understand the resources and the analyses we have provided so far, you need to know what these terms mean.

News Sources

Keeping up with the current developments is a crucial part of participating in Sustainable Finance. We have many news resources that will keep you updated!

Trainings

Being trained by these programs will take you to the next step of your Sustainable Finance journey.

Organizations

Some organizations to be aware of that are acting in the space are here. Some additional pages are included that go deeper into a few of these organizations.

Sustainable development is becoming the guiding principle for the 21st century. This textbook - based on the author's course and rigorously class-tested by his students - provides an introduction into patterns of past and present (un)sustainable development and into the emergence of the notion of sustainable development

Search out jobs and network broadly on LinkedIn. Many currently in roles are willing to chat and mentor because they see the need for more people to join the field.

Use this link to search ESG jobs. There are thousands!

Many organizations are adding jobs so quickly they don't have the time to train or hire the right talent. Some firms are internally promoting individuals and giving them titles they do not have a background in because there is such a major demand for these services. A basic understanding of sustainability does not make them an "ESG and Sustainability Expert." Likewise, a career in finance does not mean you will have the understanding to address environmental and social issues.

Greenwashing means that individuals with passion, empathy, different backgrounds, and understanding can stand out and have a deeper impact.

Hult International Business School - Joanne Lawrence

Harvard Library Resources:

Contributors to the Toolkit have provided some information on the state of sustainable finance in Kenya.

An evidence-based way to estimate social and environmental returns.

Impact investing—directing capital to ventures that are expected to yield social and environmental benefits as well as profits—provides investors with a way to “do well by doing good.” But whereas the business world has tools for estimating a potential investment’s financial yield, it lacks them for estimating social rewards in dollar terms. Now the Rise Fund and the Bridgespan Group have developed what they call the impact multiple of money (IMM) to demonstrate the value of putting impact underwriting on the same footing as financial underwriting. In this article they explain their six-step process for calculating it: (1) Assess the relevance and scale of a potential product, service, or project. (2) Identify target social or environmental outcomes. (3) Estimate the economic value of those outcomes to society. (4) Adjust for risks. (5) Estimate terminal value. (6) Calculate the social return on every dollar spent. The IMM, they write, “offers a rigorous methodology to advance the art of allocating capital to achieve social benefit.”

Despite the increased attention and capital incentives around corporate sustainability, the development of sustainability reporting standards and monitoring systems has been progressing at a slow pace. As a result, companies have misaligned incentives to deliberately or selectively communicate information not matched with actual environmental impacts or make largely unsubstantiated promises around future ambitions. These incidents are broadly called “greenwashing,” but there is no clear consensus on its definition and taxonomy. We pay particular attention to the threat of greenwashing concerning carbon emission reductions by coining a new term, “carbonwashing.” Since carbon mitigation is the universal goal, the corporate carbon performance data supply chain is relatively more advanced than that of the entire sustainability data landscape. Nonetheless, the threat of carbonwashing persists, even far more severe than general greenwashing due to the financial values attached to corporate carbon performance. This paper contextualizes sustainable finance-related carbonwashing via an outline of the communication as well as the measurement, reporting, and verification (MRV) of carbon emission mitigation performance. Moreover, it proposes several actionable policy recommendations on how industry stakeholders and government regulators can reduce carbonwashing risks.

Key information

Corporate Social Responsibility (CSR) is a management concept whereby companies are socially accountable to themselves and their stakeholders. Through integrating social and environmental concerns into their operations and stakeholder interactions firms a company can achieve balance socially, environmentally, and economically.

There is an accounting framework that considers these three key factors which is called 'the triple bottom line'. The three areas are often referred to as The Three P's; People, Profit and Planet.

Some examples of CSR in practice

• TOMS shoes - Founded upon the social mission that for every pair of shoes sold, one pair would be given to a child in need of shoes.

• Starbucks - In its hiring procedures Starbucks strives for equality and diversity, hiring veterans and refugees, and maintaining 100% pay equity across men and women and people of all races for performing similar work.

• Salesforce - Champions a 1-1-1 philanthropic model, this means giving 1% of product, 1% of equity, and 1% of employee time to communities and the non-profit sector. Interlinking success of the company with positive impact.

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The Integrated Capital Game has a great subset of terms essential to the field

Stakeholders

• Social Entrepreneurs seeking funding for their enterprises can find alternative financial models and long-term partners in the impact investing community.

• Business leaders can gather insights on bringing a stakeholder mindset into their organization and discover how to include environmental, social and governance factors throughout their operations.

• Retail investors, which includes anyone with a bank account and 401(k) or other retirement plan, can now find options that keep their money out of sectors they don’t agree with, such as fossil fuels, and put the money into impact, like renewable energy infrastructure.

• Foundations can align the investment of their endowment with the mission of their philanthropic giving to leverage organizational impact.

• Financial advisers and intermediaries can learn how to speak to clients about impact, identify relevant securities, and expand opportunities to build their book and retain assets with the impending wealth transfer.

• Asset Owners can align investments with their values, and seek out best practices and strategies.

The CFA UK has prepared some resources to help you to study for their ESG Investing certificate. These are below. These are provided only as reference materials and if you decide to take the CFA UK's course you should consider purchasing the most up-to-date materials.

Some organizations to be aware of that are acting in the space are here. Some additional pages are included that go deeper into a few of these organizations.

Here are links to some of the most popular events out there hosted by major organizations around the globe. These are great opportunities for learning and networking. Often they will have free passes for students, so do reach out to the organizers. They usually need volunteers, and that is a great way to make connections.

The Corporate Finance Institute has two sessions that are useful to the sector. They also offer many other trainings and useful content.

The following are some resources specific to those organizing classes or lectures on the topic. Our hope with this page is that resources can be shared globally to improve the quality of education on the topic of sustainable finance.

Please contact Stephen Snider if you would like to share any resources with us - stephen.snider@oikos-international.org

Syllabi for Your Class

This Google folder has a bunch of great syllabus from top universities from around the globe that offer exciting and really interesting courses. Please reach out to the professor of the class to discuss the syllabus. If copying any materials you need to ask for permission to share them. Thank you for your interest.

The following is a list of key words and definitions you should learn.

Please reach out to BII to get permission to use the cards in a group setting. BII can facilitate a training session. Email them at - info@bostonimpact.org

#SriTweeters, #SriDOCS) are free to access and at your disposal, I'm fine if you can just quote the blog as the source. Is this what you had in mind? If not, pls explain to me. Moreover: since you're a #SRINatives contributor, you think there's a way to bring @SRI_natives on board in this project? You tell me

#ESGCareerMap as we said in the call

ANCHOR INSTITUTION Nonprofit institution such as a university or hospital that once established tends not to move location. It can have significant impact in its local community via its investment, procurement, hiring and philanthropic practices.

ACCREDITED INVESTOR Investor with annual income above $200k ($300k for couples) or minimum net worth of $1M. An organization may be accredited if it has a minimum of $5M in assets or if its owners are accredited investors.

ANGEL INVESTOR Individual who provides financial support and strategic advice to entrepreneurs launching early stage enterprises, usually in exchange for convertible debt or equity. Angels often form organized collectives to identify investment opportunities.

BANK Regulated financial institution with access to the Federal Reserve. It is able to offer low interest rates, but primarily to organizations with profitable financial histories.

CDC Community Development Corporation focused on revitalizing its local geography, typically low-income, underserved neighborhoods that have experienced significant disinvestment.

CDFI Community Development Financial Institution provides affordable capital (primarily lending) to disinvested people and communities. Capital comes primarily from grants and low-interest loans from foundations, the government and banks.

CHARITABLE LOAN FUND Lightly regulated nonprofit that raises debt and grants from accredited and non-accredited investors to finance organizations that advance a charitable mission. Exempt from federal securities offering registration and in most states.

CORPORATE PHILANTHROPY Financial donations or in-kind support from corporations. Corporations may be inclined to support issues aligned with their corporate interests.

COMMUNITY FOUNDATION Tax-exempt charitable organization that distributes grants with a mission focus within a specific geographic area. Unlike private foundations, they have a broad, public donor base.

CREDIT UNION Financial cooperative owned and controlled by its depositors and providing its members with traditional banking services, including credit.

DIVERSIFIED BUSINESS FUND Fund whose investing activities are ancillary to some other purpose, such as being an incubator, accelerator or co-work facility.

DONOR-ADVISED FUND Charitable giving vehicle administered by a public charity created to manage donations on behalf of organizations, families or individuals. Donor retains advisory privileges over how money is distributed.

FAITH-BASED INSTITUTION Religious organization that may incorporate its values into decision-making criteria for its investing, grantmaking and procurement practices.

FAMILY OFFICE Entity established by wealthy families to manage their wealth and provide other services, such as tax and estate planning.

GOVERNMENT Direct, small business support from government may take the form of grants, low-interest loans, guarantees, technical assistance and policy programs effecting procurement and diversity practices.

IMPACT INVESTING FUND Institutional investors that evaluate investments based on financial and non-financial return objectives.

NON-ACCREDITED INVESTOR Investor with annual income below $200k ($300k for couples) and net worth less than $1M. They are frequently prohibited from making direct investments, with the exception of DPOS, crowdsourcing platforms and community funds.

PRIVATE FOUNDATION Tax-exempt charitable foundation that receives funding from one or a few high net worth individuals, families or corporations.It must grant 5% of its assets each year while a public charity may not.

REGISTERED INVESTMENT ADVISOR Person or firm that is registered with the State or Federal Securities Exchange Commission to provide investment advisory services to the public.

VENTURE CAPITAL Investors using pooled private capital to invest in early stage businesses. They typically take on higher risk, seek high returns and a 3-7 year exit. They may seek a controlling interest and assume an active role in governance.

B-CORP For-profit entity that is legally organized to be accountable for both profit and impact objectives.

COMMUNITY LAND TRUST Nonprofit corporation that develops and stewards affordable housing, community gardens, civic buildings, commercial spaces and other community assets.

EARLY STAGE ENTERPRISE Enterprise that has not yet achieved financial sustainability and may not have ready access to traditional financing given its limited operating history.

FOR-PROFIT ENTITY C-Corp, S-Corp, LLC that seeks to increase the value of ownership for its shareholders. For-profit entities may state impact goals, but are not held accountable to them by their incorporation.

GROWTH ENTERPRISE Enterprise with a fully devel oped business model seeking to grow its customer-validated value proposition. Revenue growth may come at the expense of profitability, requiring additional external funding.

NON-PROFIT ENTITY Tax-exempt organization that works for the public interest. All assets and income from the nonprofit are reinvested into the organization or donated.

OTHER COOPERATIVES Values-driven enterprise owned and governed collectively. Consumer coops buy goods and services together. Producer coops process and market products. Retail coops pool purchasing power. Housing cOop members own building shares rather than individual units.

SMALL/ MEDIUM ENTERPRISE (SME) Enterprise with typically fewer than 500 employees.

START-UP New enterprise that intends to grow beyond the founder and may not yet have earned any revenue.

WORKER-OWNED COOPERATIVE Values-driven enterprise that is owned and governed by its workers. Worker-owners participate in profits, oversight and management of enterprise using democratic practices.

CONVERTIBLE DEBT Loan that can be converted into an equity investment at a future date or under certain circumstances. Upon conversion, the value of the debt is used to buy shares at a pre-negotiated, typically discounted price.

EQUITY Ownership of stock in an enterprise, purchased either directly from the company or from another investor. Equity investors may receive voting rights and/or board seats.

GRANT Financial award given to an organization to address a stated goal with no repayment obligation.

GUARANTEE Binding promise made by one individual or organization to cover the debts of another individual or organization in the event they cannot repay a debt.

LINE OF CREDIT Credit facility that can be drawn upon and replenished, typically to fund working capital. The line can include commitment fees as well as interest rate charges.

PREFERRED EQUITY Preferred equity investments give the investor a higher claim to dividends or asset distribution than other equity positions.

PURCHASE ORDER FINANCE Loan made with an incoming receivable, such as a customer order or grant, used as collateral. Repayment occurs when the receivable is collected.

RECOVERABLE GRANT Grant made by nonprofit organizations or donors that, under predetermined circumstances, becomes repayable, potentially with interest.

ROYALTY FINANCE Loan with repayment obligations based on a percent of revenue.

SAFE Simple Agreement for Future - Equity that provides rights to an investor for future equity without determining a specific price per share until a later priced round or liquidity event occurs. Often used with start-ups.

TERM LOAN Loan that is repaid in regular payments over a set period of time, usually greater than one year. Term loans can have a range of interest rates and amortization schedules.

ANCHOR INSTITUTION Nonprofit institution such as a university or hospital that once established tends not to move location. It can have significant impact in its local community via its investment, procurement, hiring and philanthropic practices.

ANGEL INVESTOR Individuals who provide financial support and strategic advice to entrepreneurs launching early stage enterprises, usually in exchange for convertible debt or equity. They often form organized collectives to identify investment opportunities.

BANK Regulated financial institutions with access to the Federal Reserve It is able to offer low-interest rates, but primarily to organizations with profitable financial histories.

BUSINESS ASSOCIATION Network of professionals from various industries who exchange expertise and relationships to advance their field.

CDC Community Development Corporation focused on revitalizing its local geography, typically low-income, underserved neighborhoods that have experienced significant disinvestment.

CDFI Community Development Financial Institution provides affordable capital (primarily lending) to disinvested people and communities. Capital comes primarily from grants and low-interest loans from foundations, the government and banks.

CHAMBER OF COMMERCE Voluntary association of businesses in different trades and industries whose purpose is to advance shared business interests in their community.

CHARITABLE LOAN FUND Lightly regulated nonprofit that raises debt and grants from accredited and non-accredited investors to finance organizations that advance a charitable mission. Exempt from federal securities offering registration and in most states.

COMMUNITY ORGANIZATIONS Civic, grassroots and community-based organizations are formal and informal networks of community members that can be mobilized to advance educational, charitable, cultural, political or economic development goals.

CORPORATIONS Large companies that may be inclined to direct philanthropic or in-kind support to social issues aligned with their corporate interests.

CREDIT UNION Financial cooperative owned and controlled by its depositors and providing its members with traditional banking services, including credit.

DIVERSIFIED BUSINESS FUND Individuals who provide financial support and strategic advice to entrepreneurs launching early stage enterprises, usually in exchange for convertible debt or equity. They often form organized collectives to identify investment opportunities.

FAITH-BASED INSTITUTION Religious organization that may incorporate its values into decision-making criteria for its investing, grantmaking and procurement practices.

FOUNDATION Public, private and community foundations are tax-exempt charitable organization that distribute grants with a mission focus.

GOVERNMENT Direct, small business support from government may take the form of grants, low-interest loans, guarantees, technical assistance and policy programs effecting procurement and diversity practices.

INCUBATORS & ACCELERATORS Organizations that support early-stage businesses by offering strategic advice, technical assistance, co-work space and/or financial support.

MENTOR NETWORK Network designed to match experienced business and nonprofit leaders with emerging leaders. Mentoring may include leadership coaching, strategic guidance and technical advisory support.

MUTUAL AID NETWORK Network or platform designed to enable voluntary reciprocal exchange of resources and services for mutual benefit in a community.

NGO Non-governmental organizations are mission-based and tax-exempt nonprofits that rely on grants, and sometimes earned income, to advance a social good.

PRIVATE EQUITY Funds and individual investors that directly invest in private companies. They may seek to take managerial control and grow the business to sell for profit.

TA PROVIDER Technical Assistance Providers are individuals and organizations offering practical, strategic business advice to enterprises. These services may be paid for by a third-party.

VENTURE CAPITAL Investors using pooled private capital to invest in early stage businesses. They typically take on higher risk, seek high returns and a 3-7 year exit. They may seek a controlling interest and assume an active role in governance.

WORKER SERVICES AND LABOR Organizations representing the interests of a workforce, whose endorsement and bargaining power depend on the labor climate in the community.

ANTI-DISPLACEMENT PRACTICES Require that real estate investments do not displace local residents and businesses, thereby contributing to accelerated speculation and gentrification.

COMMUNITY EMPLOYMENT Require a percentage of jobs to be created and sustained from target populations (e.g. returning citizens, immigrants and refugees, neighborhood workers, etc.).

COMPENSATION RATIO Cap the difference in total compensation between the highest paid and lowest paid workers in an enterprise.

DISTRIBUTED OWNERSHIP Require a percentage of enterprise ownership to be distributed to workers.

GENDER EQUITY Designate a percentage of board seats, management and/or staff to be filled by women based on recruiting and retention efforts.

LIVING WAGE Require wages to approach, meet or exceed a calculated wage target that covers the cost of living in the enterprise's Community.

PROCUREMENT: EQUITABLE Require a percentage of supplier relationships or dollars to come from enterprises owned by people of color and/or women.

PROCUREMENT: LOCAL Require a percentage of supplier relationships or dollars to come from local providers.

RACIAL EQUITY Designate a percentage of board seats, management and/or staff to be filled by people of color based n recruiting and retention efforts.

WORKPLACE DEMOCRACY Require the creation or maintenance of internal systems that distribute information and decision-making power among staff (e.g. cooperatives governance, participatory decision-making, open book accounting, etc.).

CO-LENDING AGREEMENT Agreement made between two or more lenders concerning how they will jointly interact with the same borrower.

CROWDFUNDING Process of soliciting capital from the general public, including non-accredited investors, without the use of a registered underwriter, often leveraging internet platforms.

DPO Direct Public Offering is a structure in which a company offers stock directly to the general public, including non-accredited investors, without the use of a registered underwriter.

EQUIPMENT FINANCING Loan made to an enterprise with the purpose of purchasing equipment.

ESCROW ACCOUNT Contractual arrangement in which a third party (escrow agent) receives and disburses money or property for the primary transacting parties, based upon agreed conditions.

ISA Income Sharing Agreement is a debt repayment structure based on a percentage of future or current income for a discrete time period. Most commonly applied to student loans.

IPO Initial Public Offering is a structure in which a company uses an underwriter to establish an initial value for stock ownership of the company, then sells the stock on public exchanges to investors.

MORTGAGE Debt obligation secured by real estate owned by the borrower.

PARTICIPATION AGREEMENT A lending institution agrees to fund a portion of a larger loan commitment and allow a lead funder to administer the loan.

PAY-FOR-SUCCESS Deal structure in which repayment terms are based on the achievement of pre-established, observable metrics, usually defined by social impact. Social Impact Bonds are an example.

RECOVERABLE GRANT Grant made under predetermined circumstances that can become repayable, potentially with interest. Recoverable grants are different from loans in that they are forgivable.

ROYALTY FINANCE Form of debt in which lenders agree to be repaid based on an agreed upon formula, usually a percentage of revenue (a royalty).

SELF-LIQUIDATING EQUITY Form of structured exit in which an equity position is repaid using a pre-determined formula (such as available free cash flow) up to a cap.

SPV Special Purpose Vehicle is a standalone legal entity formed for the purpose of financing a specific project or business operation, often on a temporary basis.

STRUCTURED EXIT Pre-negotiated arrangement for an investor to sell a debt or equity position at a later date to realize an investment gain. This replaces traditional exits in which the investor is paid out when the company is acquired.

TAX CREDIT STRUCTURE Transaction in which the investor pays in advance for expected future tax credits related to project finance.

VARIABLE DIVIDEND VEHICLE Form of equity in which shareholders receive distributions (dividends) of available excess cash based on an agreed upon formula.

AUM Assets Under Management is the total value of all deployed and undeployed fund assets, excluding operating cash.

BUDGET Projection of the expected inflows and disbursements of a fund, project or enterprise, used and modified in an ongoing way as an operating management tool.

CASH BALANCE Current amount of cash on hand.

COLLECTION POLICY Policy describing the fund's approach to collecting past due debts and recovering losses from collateral liquidations.

COVENANT TRACKING Report tracking financial and impact covenants, which are legally binding agreements made between the fund and an enterprise regarding expected financial and impact performance.

CREDIT RATING REPORT Report assessing the probability of repayment for each investment in a portfolio, based on historical and projected data and judgment.

DEPLOYED ASSET REPORT Report describing each investment the fund has made, including investment type, outstanding balance, credit score and repayment timeline.

DURATION ANALYSIS Dollar-weighted average time of asset return and liability obligations.

EQUITY VALUATION Projection, typically created on an annual basis, that assigns value to the ownership of a for-profit enterprise. Used to determine whether equity investments have appreciated or been impaired.

FINANCIAL COVENANT GUIDELINES Policy providing guidance about which financial covenants should be included in final investment documents.

FINANCIAL REPORTING Series of financial statements in line with accounting principles as required by law (GAAP) and management decision-making needs.

FUND POSITION REPORT Report used to monitor the continued financial viability of a fund with respect to its past and future obligations and investments.

IMPACT COVENANT GUIDELINES Policy providing guidance about which impact covenants should be included in final investment documents.

IPS: DEPLOYED ASSETS Investment Policy Statement for the fund's stated goals and requirements for making investments, including expected risk, return, asset mix and special constraints.

IPS: UNDEPLOYED ASSETS Investment Policy Statement for the fund's stated goals and requirements for how to invest undeployed assets in alignment with return, risk, liquidity and other non-financial expectations.

PRO FORMA Forecast of financial prospects of a fund, project or enterprise, typically used for soliciting capital.

RESERVE MANAGEMENT POLICY Policy for the fund's stated goals and requirements for how to determine required and discretionary reserves relative to current and future expected bad debt.

UNDEPLOYED ASSET REPORT Report describing the interim investment program for the fund's undeployed assets, and comparison to the borrowing costs to raise those funds.

YIELD ANALYSIS Analysis that compares a fund's average yield of assets against the average costs of its liabilities.

Title: How do we finance a better future?

Date and Time: Thu, 21.10; 2-4.30 pm CEST.

Session Description: Join oikos International for a workshop on using the financial system to solve climate change's global challenges. We'll work together and discuss the available financial tools. The workshop will use the newly created oikos Sustainable Finance Toolkit and Career Map. This platform has been built to help students and researchers explore the exciting world of Sustainable Finance, ESG (Environmental, Social, and Governance), and Impact Investing. Come learn how our financial system can be used for good

Agenda:

1. Welcome and Introductions (5min)

2. Presentation of the Toolkit (5mins)

3. Carbon Markets and Group Discussion (10min)

4. Breakout Groups - Challenges and Opportunities (20min)

5. Integrated Capital Game (30min)

6. Check-out (20min)

Facilitators:

Participants:

Purpose of the Toolkit:

This toolkit is a platform to help you enter the field of sustainable finance by providing you with knowledge, skills, and access to the community.

You can join our Sustainable Finance Squad to help us to build this toolkit with resources, interviews, trainings, and more.

• Share the research you are working on

• Explore topics of interest

• Network with the industry

What is Sustainable Finance?

Sustainable Finance describes a broad area within the world of finance. We can think of it along a spectrum of activity.

It can get quite complicated...

It is helpful to think of it in terms of Risk, Profit, AND Impact. Where Impact is the additional of ESG (Environmental, Social, and Governance).

Methods to Implement Sustainable Finance

• Exclusionary Screening

Avoid investing in companies in industries that are deemed as unethical e.g. tobacco, weapon, gambling. This strategy is sometimes referred to as Socially Responsible Investing (SRI) and is the oldest form of sustainable investing that first became popular in the 1980s

• Best-in-Class Screening

Also referred to as positive screening, this strategy is based on selecting companies with better or improving ESG performance relative to their peers.

• ESG Integration

Consider ESG risks and opportunities as part of the investment process alongside financial analysis. Some examples are adjusting a company’s financial forecast or cost of capital based on its ESG risks.

• Thematic Investing

Invest in themes that are specifically related to sustainability such as clean energy, carbon transition, education, healthcare.

• Active Engagement

Exercise ownership rights through direct engagement with companies. Some examples are voting in annual general meetings, meeting with company representatives, filing a shareholder resolution.

• Impact investing

Investments are made with the intention to generate positive and measurable impact alongside a financial return.

There are many misconceptions that research is changing.

Carbon - A Key Piece to the Puzzle

Will finance really ever be sustainable unless we price in externalities?

• Understanding carbon and other emissions is a key piece of knowledge future finance practitioners should have

• Reporting and ESG frameworks are grappling with how to measure and price Scope 1, 2, and 3 Emissions

• Analysis of carbon and the need for a price on carbon is going mainstream

Why do we need a price on carbon?

• healthcare costs from pollution

• heatwaves and droughts

• damage to property from fires, flooding, and sea-level rise

• a choice - move to greener technologies, or continue polluting and pay

• capital markets will compare companies’ true cost of capital

"While no one would suggest we immediately stop driving, flying, or using steel, the sooner we admit these activities come with a cost, the better."

Time for an Activity

We need the world of finance to help with this future.

Will it be a Positive one? or a Trouble one?

• What do you think are the most important issues to address?

• How can finance be used to prevent or facilitate these issues?

Now Let's Role Play

Choose one of your most important issues and use the following game to discuss that issue.

COMMUNITY ENGAGEMENT How engaged is the enterprise in its local community?

ECOLOGICAL STEWARDSHIP What is the ecological footprint of the enterprise? What steps is it taking to improve its positive impact or mitigate its negative impact?

EQUITABLE OPPORTUNITY How does the enterprise create opportunity for people who have been impacted by racial, social and economic inequality? How many quality jobs does it create? What is the composition of management and leadership?

EQUITABLE OWNERSHIP Who has the opportunity to own this enterprise? How is ownership structured to create meaningful, social impact?

LOCAL CONSUMPTION To what extent does the enterprise create products and/or services for the local community?

LOCAL PRODUCTION How much of the enterprise's supply-chain is sourced locally? How much production takes place locally?

NEGATIVE SCREENS To what extent does the enterprise earn revenue from business sectors that the fund has screened out (such as fossil fuels, private prisons, defense sector, etc.)?

WORKPLACE DEMOCRACY How democratic or participatory is the enterprise? Do workers have a voice? How is information and decision-making distributed?

Below are just a few of the many partners that we have supporting the development of the Sustainable Finance Toolkit.

Join us and support our mission of sharing sustainable finance resources and programming with future leaders. If you'd like to participate, please reach out to Stephen Snider at stephen.snider@oikos-international.org.