Sustainable communities can be described as places where:
- the needs of everyone in the community are met and people feel safe, healthy and ultimately happy
- our environment is appreciated, protected and enhanced and damage to the environment is minimized
- our economy is vibrant, employment opportunities are improved and our working lives are more rewarding
Creating a Sustainable Society involves:
Protecting and Enhancing the Environment
- use energy, water and other natural resources efficiently and with care
- minimize waste, then re-use or recover it through recycling, composting or energy recovery, and finally sustainably dispose of what is left
- limit pollution to levels which do not damage natural systems
- value and protect the diversity of nature
Meeting Social Needs
- create and enhance places, spaces and buildings which work well, wear well and look good
- make settlement ‘human’ in scale and form
- value and protect diversity and local distinctiveness and strengthen local community and cultural identity
- protect human health and amenity through safe, clean and pleasant environments
- emphasize health service prevention action as well as cure
- ensure access to good food, water, housing and fuel at a reasonable cost
- meet local needs locally wherever possible
- maximize everyone’s access to the skills and knowledge needed to play a full part in society
- empower all sections of the community to participate in decision-making and consider the social and community aspects of decisions
Promoting Economic Success
- create a vibrant local economy that gives access to satisfying and rewarding work without damage to the local, national or global environment
- value unpaid work
- encourage necessary access to facilities, services, goods and other people in ways which make less use of the car and minimize impacts on the environment
- make opportunities for culture, leisure and recreation readily available to all
Fueling action with impact investments
Impact investing is another type of SRI investing that seeks financial returns alongside measurable social and environmental impact (unlike green bonds, which only promise to invest in but not measure environmental impact). Between 2013 and 2017, the global impact investing market grew from US$25.4 billion to US$228 billion (Global Impact Investing Network). As the market grows, major financial institutions like Black Rock and UBS are joining pioneers like Bridges and Calvert.
With all these funds seeking investments, companies may be able to access external funds that align with their environmental and social benefit initiatives. This may be easiest for companies that have an environmental or social purpose (for example, renewable energy or education). However, even more traditional companies could potentially seek investments for specific projects.
The type and the stage of an organization plays a role in determining how to access these markets.
Early-stage businesses or social enterprises (businesses with a specific social or environmental purpose) can look to a range of fast-growing networks of angel or early-stage investors, including Angel.co or F6S.
Social enterprises can also explore social impact bonds (SIBs), increasingly known as pay-for-performance contracts. These are a complex investment vehicle in which a principal (often a government funder) invests in an NGO or program that’s expected to have a social or environmental benefit. A third party is typically engaged to verify achievement of the benefits, which triggers payment to the NGO. One recent example is Activate, the Heart & Stroke Foundation’s SIB to prevent hypertension, which involves Public Health Agency of Canada and the MaRS Centre for Impact Investing (MCII). However, the benefits of SIBs may be outweighed by the complexities.
For more established companies, there are other ways to structure deals to support projects with environmental or social benefit. Companies with advanced finance capabilities might consider more complicated instruments like real options or special purpose vehicles:
- Real options give an investor an option to make an investment in a tangible (real) asset. For example, a company could offer an investor greater access to a promising green or social benefit project for a small upfront investment, with the right to choose to expand their involvement later, wait, or abandon the project.
- Special purpose vehicles or special purpose entities enable a parent company to place an asset in a subsidiary and security it or otherwise offer it to investors. This approach is already used to manage billions or possibly trillions in public private partnerships including governments, multilateral organizations and lenders/investment banks. However, private markets are shy about this approach because it was used — corruptly — by Enron.
Need help to find capital? Seek out the experts
Sustainability professionals have come a long way in understanding how to manage risk – and add value – to their companies. We’ve had to access new capabilities, including making a stronger business case; understanding materialism, measurement and reporting; and delivering both business and social value.
These are all powerful advances. However, the better sustainability professionals get, the more it becomes apparent that we need more fuel — that is, more financial resources — for our sustainability initiatives than is accessible in internal pools of capital.
To overcome this challenge, we can access new pools of external capital, but we’ll need to learn and engage in another set of capabilities: finance and investment. Newer, smaller enterprises might consider seeking help from specialist advisory firms to find the right investors. Larger, established companies can draw on their internal finance experts.
Happily, the investment market is looking for good work to fund. Perhaps the time is right for sustainability professionals to work with experts and our financial colleagues to connect our work with the capital markets and have a greater positive environmental and social impact than ever before.
