Finance for a Better World: The Shift toward Sustainability

270 Pages·2009·1.37 MB·English

by  Henri-Claude de Bettignies, François Lépineux (eds.)

Finance for a Better World
Finance for a Better World
The Shift toward Sustainability
Editedby
Henri-Claude de Bettignies
and
François Lépineux
Editorialmatterandselection©Henri-ClaudedeBettigniesand
FrançoisLépineux2009.Individualchapters©theirrespectiveauthors2009.
Softcover reprint of the hardcover 1st edition 2009
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Financeforabetterworld:theshifttowardsustainability/edited
byHenri-ClaudedeBettigniesandFrançoisLépineux.
p.cm.
Includesbibliographicalreferencesandindexes.
ISBN978–0–230–55130–5
1.Banksandbanking.2.Socialresponsibilityofbusiness.
3.Sustainabledevelopment—Economicaspects.I.Bettignies,Henri-
Claudede.II.Lépineux,François,1968–
HG1601.F462009
332.1—dc22
2008041044
10 9 8 7 6 5 4 3 2 1
18 17 16 15 14 13 12 11 10 09
Transferred to Digital Printing in 2010
Contents
ListofFigures vii
ListofTables viii
NotesontheContributors ix
1 Introduction 1
Henri-ClaudedeBettigniesandFrançoisLépineux
PartI MicrofinanceandSociallyResponsible
Investment:EvolutionandImpacton
HumanRights
2 Microfinance,FinancialInclusionandSocialResponsibility 7
IsabelleGuérin,MarcRoesch,andJean-MichelServet
3 ExplainingtheTake-OffofSociallyResponsibleInvestment 30
PasqualeArena
4 SociallyResponsibleInvestment:GlobalConvergenceor
LocalDivergence? 51
CélineLouche
5 TheUseofShareholderProposalstoAddressCorporate
HumanRightsPerformance 71
AdamM.Kanzer
PartII AdoptingaSustainablePerspectivein
FinancialInstitutionsandMarkets
6 SustainableBanking:theBancoRealModel 91
LeoJohnsonandChristelScholten
7 Insurers’CorporateResponsibilityPolicies:aResponse
totheIndustry’sBadImage? 118
Henri-ClaudedeBettignies,FrançoisLépineux,and
CheonKheongTan
v
vi Contents
8 TheRelativeValuationofSociallyResponsibleFirms:
anExploratoryStudy 140
AliFatemi,IrajJ.Fooladi,andDavidWheeler
9 BuildingtheCaseforLong-TermInvestinginStockMarkets:
BreakingFreefromtheShort-TermMeasurementDilemma 168
StevenLydenberg
PartIII IsaParadigmShiftUnderway?
ThreePioneeringReflections
10 FinancingAgricultureinDevelopingCountries:Governance
ModelsPromotingSustainability 189
SolèneMorvant-Roux
11 InnovativeInvestmentsforSustainability:Solutionsfor
theTwenty-FirstCentury 204
AndyWhite
12 Financialization:LimitsandWaysOut 225
PaulDembinskiandFedericaViganò
13 Conclusion:ManifestoforFinancethatServes
theCommonGood 240
ObservatoiredelaFinance
Index 244
List of Figures
4.1 Overviewoftheglobalconvergenceandlocal
divergencemechanisms 61
6.1 BancoRealmodel2006 107
8.1 CARduringtheeventwindowforthefirmsthatare
addedtotheindex 163
8.2 CARduringtheeventwindowforthefirmsthatare
deletedfromtheindex 163
11.1 USnetcharge-offratesonconsumerloansvshousehold
netsavingsrate 206
11.2 Subprimemortgage-backedsecurities’performance 207
11.3 Chartoffueleconomystandardsinmajormarkets 214
11.4 The2005fleetfueleconomyforthemajorautomakers
intheUSmarket.Efficiencygainswerespentonspeed
andsafety,notmileage 215
11.5 Regionalgrowthintheautomarket 217
11.6 Subsitutionratesbasedonpowertrainscores 218
11.7 PotentialcostofCO emissionsata30/tonneemissions
2
cost.Calculationsarebasedonthelatestfiguresavailable
foreachcompany’sScope1&2emissionssetforthunder
thereportingguidelinesoftheGHGProtocol.Expected
reductioncostisbasedonassumed10%reduction
requirement 221
11.8 CarbonBeta™performersvslaggardsglobally 223
vii
List of Tables
4.1 OverviewofthemaindifferencesbetweenJapan,
theUSandEurope 59
6.1 Establishmentandtransferofsustainabilityinitiatives 101
6.2 ExamplesofstakeholderengagementinBancoReal
sustainabilityinitiatives 105
8.1 Definitionofcharacteristicsusedtocreatethecontrol
groupfirms 148
8.2 ComparisonoffirmsincludedintheDominiIndex
withtheircontrolgroupwithregardto:(i)Market-to-
bookratio;(ii)ROA;(iii)ROE;(iv)ROS;(v)Leverageratio;
(vi)Capitalexpendituresasafractionofsales;(vii)R&D
capitalexpendituresasafractionofsales;(viii)Advertising
expendituresasafractionofsales;(ix)Excess
equityvalueasafractionofsales;(x)Tobin’sQ 149
8.3 Comparisonofthetotalrisk(standarddeviationof
returns)offirmsincludedintheDominiIndexwith
thoseofthecontrolgroup 155
8.4 ComparisonofbetasoffirmsincludedintheDomini
Indexwiththatofthecontrolgroup 156
8.5 Comparisonofdailyreturnstotheshareholdersoffirms
includedintheDominiIndexwiththoseofthe
controlgroup 157
8.6 ComparisonofalphasoffirmsincludedintheDomini
Indexwiththatofthecontrolgroup 158
8.7 ComparisonofSharperatiosoffirmsincludedinthe
DominiIndexwiththoseofthecontrolgroup 159
8.8 Abnormalandcumulativeabnormalreturnsexperienced
bytheshareholdersoffirmsaddedtotheDominiIndex 162
8.9 Abnormalandcumulativeabnormalreturnsexperienced
bytheshareholdersoffirmsdeletedfromtheDomini
Index 162
11.1 Scenariowinnersandlosers 219
11.2 Who’sbettingwhereonpowertrains 220
11.3 CO emissionsandpotentialCO emissionsliability 222
2 2
viii
Notes on the Contributors
Pasquale Arena is Associate Professor of Business Economics, Vice-
presidentofthemanagementandcontrolprogramanddelegateofthe
Dean for business ethics at the Faculty of Economics, University of
Catania, Italy. He is a member of the Italian Academy of Business Eco-
nomics, oftheItalianSocietyofAccountingHistory, andoftheItalian
SocietyofAccountingandBusinessAdministration.Co-founderofSPES
and co-founder and member of the Board of EBEN Italian Chapter, he
is also a member of the Scientific Committee of the PhD in Business
EconomicsatUniversityofCatania.HehasbeenamemberoftheScien-
tificCommitteeoftheResearchConference2007FinanceandSocietyin
EthicalPerspective.HisareasofresearchfocusonBusinessEthics,Corpo-
rateSocialResponsibility,BusinessEconomics,PublicManagementand
GovernanceandAccountingHistory.WithregardtoBusinessEthicsand
CSRhehaseditedCorporateSocialResponsibility:ScientificDevelopmentand
Implementation, 2006 by Aracne and he is also the author of the paper
“The Contribution of Ethical Codes in the Development of CSR”. His
researchworkiscurrentlyorientedtowardsunderstandingthepotential
roleofthecollectivedimensionincorporateandpublicgovernanceand
invariousorganizationalcontexts.
Henri-Claude de Bettignies is the EU Chair Distinguished Professor
of Global Governance and China-Europe Business Relations, CEIBS, in
Shanghai where he has created the Euro-China Centre for Leadership
andResponsibility(ECCLAR).HeisalsotheAVIVAChairEmeritusPro-
fessorofLeadershipandResponsibilityandEmeritusProfessorofAsian
Business at INSEAD. Between 1988 and 2005, with a joint appoint-
ment at Stanford University (Graduate School of Business), he shared
histimeequallybetweenEurope,CaliforniaandtheAsiaPacificregion.
Professor de Bettignies started the development of the Ethics initiative
at INSEAD, and pioneered a new approach (AVIRA) to enlighten busi-
nessleaders.Overa16-yearperiodtheAVIRAprogrambroughttogether
900ChairmenandCEOsfrom60countries,keentoenrichtheirvision
and enhance their “responsible” leadership competence. Henri-Claude
teaches MBAs, E-MBAs and executives at CEIBS and at INSEAD in the
areasofethicsandCSR,HRmanagementandcorporatetransformation.
ix
x NotesontheContributors
OntheeditorialBoardoffiveacademicjournalshehaspublishedmany
articlesandfivebooksonmanagementinJapan,inAsia,andonbusiness
ethics.
PaulH.DembinskiisProfessorattheUniversityofFribourg,wherehe
teaches International Competition and Strategy, and Ethics in Finance
and Business. Since 2002, he has also taught at the Tischner European
University in Krakow, Poland. He is also the initiator and Director of
FoundationoftheObservatoiredelaFinance(1996)www.obsfin.ch.The
mission of the Observatoire de la Finance is to promote awareness of
ethical concerns in financial activities and the financial sector. Paul H.
Dembinskiisalsothefounderandeditorofthebilingualjournalentitled
Finance&theCommonGood/BienCommun(1998).Since2006hehasheld
the“EthicsandFinance”chairattheCatholicInstituteofParis.Apolit-
icalscientistandeconomistbytraining,PaulH.Dembinskihaswritten
adozenbooksandsome60scientificarticlesinthefieldofinternation-
alization of enterprises, globalization, competition, ethics and finance.
Hislatestbook,calledFinance,ServantorDeceiver?,willbepublishedby
PalgraveMacmillaninspring2009.
Ali Fatemi is the Chairman of the Finance Department at DePaul
University where he also holds a position as a Professor. Previously
he held positions at Kansas State University and Wichita State Univer-
sity, and has been a Visiting Scholar at UCLA and at the University
of Maastricht. He also has had teaching assignments at Ritsumeikan
University,ErasmusUniversity,TilburgUniversity,JustusLiebigUniver-
sity, Johann Wolfgang Goethe University, Europa Universität Viadrina,
BahrainInstituteofBankingandFinance, andtheCzechManagement
Center.HeisagraduateofOklahomaStateUniversity,wherehereceived
his PhD (1979) and his MBA (1975). Professor Fatemi has published in
leadingacademicjournalsincluding:JournalofFinance,JournalofBusiness
Research, Journal of Economic Psychology, Global Finance Journal, Pacific-
Basin Finance Journal, Financial Services Review, and Japan and the World
Economy. His current research deals with issues related to mergers and
acquisitions, executive compensation, dividend policy, and corporate
governance.HewastheeditorofJournalofAppliedFinance(2000–7),and
has served as a member of the editorial board or a reviewer for a vari-
ety of domestic and international finance journals, including European
FinancialManagement,GlobalFinanceJournal,TheInternationalJournalof
FinanceandManagerialFinance.