Vienna, October 25, 2018 - “Banks and SDG Assessment” was the title of a multi-stakeholder workshop held at the Wirtschaftsuniversität Wien (Vienna University of Economics and Business) on October 23, 2018. The event was organized by the Regional Centre of Expertise (RCE) on Education for Sustainable Development - the Vienna University of Economics and Business’ regional network for research, education and knowledge interactions on questions related to regional and trans-regional sustainable development - together with the Umweltbundesamt (Environment Agency Austria) and Impact Finance Organization imfino. The workshop, which focused on the UN Sustainable Development Goals (SDGs), Impact Investing, and most importantly, the significance of impact assessment, was attended by more than 20 participants, representing the above-mentioned organizations as well as major Austrian banks. The workshop was aimed at introducing an SDG-aligned impact investing measurement matrix to the bank representatives and find out from them what they think about this new rating tool and whether they could use it to create SDG-aligned portfolios for their customers and contribute to fostering the impact investment market in Austria.
“Risk-Return Is No Longer Everything”
Following a brief introduction of the workshop agenda and self-introductions of the participants, the first actual input presentation centred around the topic of sustainable finance and investments. Here, Margarethe Rammerstorfer from the Vienna University of Economics and Business took the floor and immediately drew in the audience with a strong statement to the effect that impact investing does not mean having to give up financial return. It was possible to invest with both positive social and environmental impact and financial benefit in mind, she argued, and made the point that investors all around the world increasingly demanded investment options where both aspects could be combined.
She then went on to give a brief explanation of the differences between Socially Responsible Investment (SRI) with its focus on ESG (Environment, Social and Governance) criteria and actual Impact Investing. Whereas the former is still very much geared towards measuring sustainability in terms of social and personal norms, which then lead to excluding investment options where those are not met, impact investing is an inclusive approach in that it aims at creating investment options that offer the prospect of a decidedly positive social and environmental return. Still, both approaches have inherent problems, remarked Rammerstorfer – in the case of SRI, it was the danger of companies engaging in “green-washing” to avoid being excluded from investment portfolios because of the negative impact they create, whereas the tricky issues regarding Impact Investing are risk assessment and liquidity.
The Question of Measurability: SDGs Play Major Role
To address these two major Impact Investing-related problems it is necessary to establish quantitative and qualitative standards to measure the positive social and/or environmental impact of investments. The UN SDGs could be used as a starting point, suggested Rammerstorfer and went on to say this approach could also serve as a contribution to the SDG and broader Agenda 2030 strategy of the United Nations.
At this point, a representative from the Umweltbundesamt gave a brief outline of the history of the SDGs and the various ways the Goals are incorporated in Austrian policy strategy. The bottom line on this was that, while individual ministries such as the Federal Ministry for Sustainability and Tourism have action plans for the implementation of the SDGs, which are then collected by an inter-ministerial working group, a strong concerted effort towards implementation is nevertheless missing. At the same time, progress in this direction is urgently required, since Austria has to issue an official report on its SDG implementation activities to the High-Level-Political Forum (HLPF) in 2020 – as one of the last EU countries to do so!
Impact Measuring Matrix with SDG Focus – A Tool for the Banks?
The SDGs are an opportunity and have the potential to become a major force in driving economic development, argued Martin Wildenberg from the RCE Vienna. He then went on to explain the investor-entrepreneur “matchmaking” platform designed by RCE’s cooperation partner imfino. The idea behind the platform is to provide its users with a tool that enables investors to find appropriate projects to invest in and entrepreneurs to look for suitable companies interested in investing in their projects.
Wildenberg then went on to describe RCE and imfino’s joint project for an SDG-aligned impact investing measurement matrix. Sponsored by the Austrian Research Promotion Agency (FFG) and initially modelled on already-existing measurement tools such as IRIS or PRI, the focus of the new RCE-imfino matrix is on measuring positive impact. Sustainability and impact – this is the idea – must become part of a company’s core business – not just a nice additional feature.
This project, which also involves the umbrella organization of Austrian banks, seeks to develop a transparent, practice-oriented impact assessment approach designed to find answers to two crucial questions: How to measure and represent impact? and How to create an assessment approach that is SDG-aligned? Due to the limited scope of the project, the measurement matrix can, at this initial stage, be used in two ways: as a means of assessing the impact of small and medium enterprises in a few select sectors such as energy and tourism, and for promoting and supporting start-ups in their efforts to establish themselves on the market.
Having presented the impact assessment project and the vision behind it, Wildenberg then suggested major banks should use the SDG-aligned impact assessment approach to help promote the impact investing market in Austria. He made the point that banks would be ideally positioned to serve as a bridge between businesses and impact investing measurement. They are in possession of the relevant contacts and data and could promote the concept of impact assessment among their clients. In this sense, they would then become a marketing partner for organizations such as imfino, enabling them to acquire customers within the small and medium size business and start-ups scene.
Banks: Interested, but also Skeptical
The following discussion, which centred around this suggestion, however, showed clearly that banks still have strong reservations towards embracing the new Impact Investing assessment concept. They presented various arguments for their reluctance to take up the impact investing assessment proposal, one of the most frequently uttered being the objection that the target groups for SDG-aligned impact assessment – small and medium enterprises and start-ups - are not represented among the banks’ clients in large numbers. Due to the small size of these businesses, they are not eligible for traditional loans and thus unlikely to approach traditional banks. And what about larger companies and organizations? Would the assessment tool be suitable for assessing their positive impact as well? Not at present, argued the project designers from the University of Economics and Business, pointing out that the assessment matrix project currently lacked the scope and capacity to extend it to larger businesses where assessment would require a much higher degree of complexity. The banks likewise do not see much potential to support start-ups, arguing that there were few of those that stayed in Austria anyway. Most start-ups went abroad where conditions for young entrepreneurs were better, so the objection.
To put it in a nutshell, large Austrian banks overall do not see themselves as partners in SDG-aligned impact assessment with organizations as imfino. Rather, they are more likely to remain committed to their traditional strategy of engaging predominantly with larger businesses - at least for the time being, until the capacity of the impact assessment tool can be sufficiently enlarged to incorporate big business as well!
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