Mainstreaming Social Impact Bonds – A Critical Analysis
Editors: Walker, T., Goubran, S., Dumont-Bergeron, A., Schwartz, T., Vico, K.
Social impact bonds (SIBs), also called pay-for-success contracts or social benefit bonds, are comparatively new financial contracts that aim to provide a novel way for private investors and service providers to fund and offer social services. To date, there is relatively little empirical and theoretical evidence on the performance as well as on the advantages and disadvantages of SIBs. In addition, data on completed and ongoing SIBs is comparatively sparse, and public disclosure requirements are limited or non-existent. These shortcomings have so far prevented SIBs from becoming a mainstream tool in the impact and ESG investment space. Our study aims to address these shortcomings by (1) providing a detailed bibliometric and content analysis of the extant literature in the field, (2) identifying problems related to the structure, implementation, benchmarking, and post-completion evaluation of SIB contracts, and (3) cataloguing existing data on SIBs and identifying additional data that should be disclosed to reduce information asymmetries and increase investor confidence in the SIB model. Our analyses reveal numerous issues that need to be addressed if SIBs are to become a mainstream financing tool and we offer detailed recommendations on how to resolve them.
Socially Responsible Practices and Financial Performance in Hybrid Organizations: Does Strategic Orientation towards Stakeholders Matter for the Performance of Microfinance Institutions?
Editors: Wijesiri, M., Walker, T., Tremblay, D.-G.
As microfinance is essentially a community-based business, the concept of social responsibility is already central to its purpose and conduct and plays a key role in corporate strategy within the industry. However, there is a distinct lack of research into the relationship between corporate social responsibility (CSR) and financial performance in the microfinance sector. This study fills this gap by investigating the impact of CSR disclosure on the financial performance in microfinance institutions (MFIs). Our study is based on a sample of 388 MFIs for the period of 2011-2014. To examine this relationship, we created a CSR index by aggregating three distinct social responsibility constituents: environment, clients, and employees. We use a data envelopment analysis (DEA) model to measure the financial performance of each MFI over the period. Results show that CSR engagement of MFIs is not in harmony with the pursuit of achieving better financial performance. Moreover, results reveal that better financial performance results in improved CSR performance of MFIs. From a slack resources viewpoint, this suggests that those MFIs doing well financially can meet the various needs of their key stakeholders. The overall findings show that causality of direction between CSR and financial performance run in both directions.
Environmental Risks and Agricultural Commodities
Editors: Dezfouli, K. M., Walker, T.
As microfinance is As natural disasters are expected to increase both in severity and frequency, their impact on traded assets and commodities is likely to rise in tandem. We use a unique data set of natural disasters that occurred around the world during the period 1970 to 2015 and study their impact on the price and price volatility of globally traded agricultural commodities. Our results show that natural disasters affect most of the commodities examined in this study by causing an increase in their price volatility whereas prices are only marginally affected. In addition to this, we find that the total damage caused by a natural disaster affects the magnitude of price and price volatility changes of a given commodity. Finally, natural disasters affecting countries with a higher share of the global production of a commodity have a more significant impact on the price and price volatility of that commodity.
Decisions for Substitutable Products in a Retailer Dominant Channel Involving a Third-Party Logistics Provider
Editors: Chen, X., Xu, P., Walker, T., Yang, G., Huang, S.
This paper investigates pricing and ordering decisions in a supply chain comprising two competing manufacturers, a dominant retailer, and a third-party logistics (3PL) provider. Product distribution functions may be implemented by the 3PL provider and the two competing manufacturers. The advantages of logistics outsourcing lie in the lower cost and the professional logistics service, which affect the decision-making of the supply chain members. This paper adopts a novel approach to logistics outsourcing, in which it is regarded as an endogenous variable when supply chain members make decisions. We obtain the equilibrium decisions of supply chain members with the aid of a Stackelberg game. Furthermore, we investigate the effects of various parameters, such as market size, price sensitivity, product differentiation, and production costs, on equilibrium decisions, thereby gaining valuable managerial insights. Finally, we present numerical analyses with respect to the above parameters in order to examine our theoretical results and to study their effects on channel performance.
Corporate Governance and Safety in the Aviation Industry
Editors: Fardnia, P., Walker, T.
The purpose of this study is to examine whether airlines with poor corporate governance characteristics exhibit poorer safety performance after controlling for a series of firm-level and country-level variables that characterize the airline and the country it is headquartered in. Specifically, we regress the number of accidents of each airline on various corporate governance variables along with six firm-level financial variables and seven country-level variables during the period 1990 to 2016. We find a negative relationship between an airline’s corporate governance quality and its accident rate. Specifically, our results suggest that airlines with less qualified, older, and busier directors, as well as airlines with a higher risk of director succession, exhibit more frequent accidents. Moreover, the longer the CEO’s tenure in an airline, the lower the number of accidents. The study also examines whether a country’s macroeconomic and institutional environment affects the safety of airlines that are headquartered there. As expected, the results suggest that airlines based in countries with more stringent legal regulations, stronger law enforcement, and better air transport infrastructure have better safety performance.
Green Building Standards and Sustainability: Real or Illusionary Contributions to the Sustainable Development Goals?
Editors: Goubran, S., Schwartz, T., Cucuzzella, C., Walker, T.
The reliance on green and sustainable building and real estate standards (GSBRES) and their influence on the industry requires a critical assessment of their relevance to the Sustainable Development Goals (SDGs). Here we develop a comprehensive target level subject catalog of more than 1500 terms which we use to conduct formal content analysis for three GSBRES – covering the design, operation, and investment phases. We find that the largest portion of these standards falls outside the focus of the 2030 Agenda, that even when they are aligned with certain SDGs they address limited targets, that they are overwhelmingly misaligned with the transformative objective of the agenda, and that they ignore important synergies with human–focused targets. However, current research overlooks these gaps. To avoid an illusion of contribution to sustainable development, more comprehensive case- and evidence-based analysis is needed to evaluate the contribution of normative standards to achieving the SDGs.
After the Storm: Natural Disasters and Bank Solvency
Editors: Bitar, M., Gramlich, D., Walker, T., Zhao, Y.
Natural disasters and their associated damages are expected to increase, yet there is little evidence regarding their implications for financial institutions nor any guidelines on how, e.g., banks and banking regulators should respond to the increased risk they impose. This study addresses this gap in the literature by exploring (1) whether and how banks are affected by natural disasters, and (2) whether the effects differ across different types of banks. Based on a comprehensive dataset on natural catastrophes around the world and detailed financial statements for 9,928 banks that operate in 149 countries, we examine how natural disasters affect bank solvency. Bank solvency is a core parameter that grants banks a “license to operate” in the financial markets and is based on a variety of accounting and regulatory parameters that describe a bank’s capital and reserves. In this regard, our study also adds to the discussion of what type of capital and capital ratio best reflects a bank’s sensitivity to risks. Our main finding is that damages from disasters matter: They negatively affect capital ratios, and the severity of their impact depends on a banks’ location, capitalization, and business model. In addition, we find that accounting measures of solvency are similarly sensitive to disasters as are regulatory measures.
Opportunities and Barriers to Transit Oriented Development Around New Light Rail Projects: The Case of Montreal
Editors: Walker, T., Cucuzella, C., Owen, J., Goubran, S.
The aim of this paper is to explore the relationship between new residential and commercial real estate developments and their geographic proximity to Montreal’s Réseau express métropolitain (REM) light rail stations. Currently, local zoning laws and building regulations within individual boroughs and across the wider city of Montreal restrict high-rise developments around transit locations, especially metros and REM stations. To explore this phenomenon, we will commence our analysis by identifying the zoning regulations and the heights of new buildings around newly built stations. As the REM is an incoming new mode of transit, it is interesting to understand how new developments around these new stations are being planned and executed. In addition, we plan to analyse the existing situation (i.e. pre-existing buildings that were in place before the REM stations were being developed) and buildings built after specific dates – with the dates tied to specific policy changes. In other words, we will look at both regulations and the built environment (physical).
Social Impact Bonds: The First Years in Review
Editors: Walker, T., Dumont-Bergeron, A., Brown, J.
Over the last decade, Social Impact Bonds (SIB)—also called Pay-For-Success (PFS) contracts in the U.S. and Social Benefit Bonds (SBB) in Australia—have become an increasingly popular funding mechanism for the procurement of social services. This financing method consists of a contract where private investors fund social interventions by providing service providers with working capital to enforce said interventions. The investors are later repaid by the government or commissioner if the intervention meets its agreed-upon outcomes. Third parties, such as an intermediary or an evaluator, are often used to ensure the collaborative aspect and objectively assess the outcomes, respectively (Gustaffson-Wright et al., 2015; OECD, 2016). Among other aspects, SIBs provide upfront funding for coordinated efforts, encourage long-term investment, foster accountability, and promote collaboration between a broad range of stakeholders (Burand, 2013). As of October 2019, 168 social impact bonds have been recorded worldwide, whether completed or implemented, since the first SIB in Peterborough, United Kingdom, in 2010 (Gustafsson-Wright and Boggild-Jones, 2019). Most SIBs target in the employment and social welfare sectors while the others take part in the health, education, criminal justice, and environment and agriculture sectors (Gustafsson-Wright and Boggild-Jones, 2019). Considering the recent nature of this incentive, not enough work has been published to assess the weaknesses of social impact bonds and whether they meet all or some of their objectives. Almost every article and report end with the acknowledgment that more research needs to be done. It seems crucial to understand how to optimize this tool as tangible benefits hang in the balance. While this paper cannot achieve all these objectives, its goal is to present an overview of the current situation of social impact bonds, with an emphasis on the key factors to achieve success. This paper examines the benefits and disadvantages of SIBs and their implementation process, introduces a literature review of scholarly work and reports on SIBs, and discusses SIBs in practice through the lens of specific case studies.
Social Impact Bonds: A Critical Analysis of Existing Databases
Editors: Walker, T., Schwartz, T., Vico, K.
The research conducted in this paper critically evaluates available Social Impact Bond (SIB) databases. Three SIB databases are analyzed in the paper: Social Finance UK, Instiglio, and Nonprofit Finance Fund. To examine each SIB database presented in the paper, a specified criterion is used which looks at each SIB database for its (1) usefulness to investors, (2) frequency of updates, and (3) the usefulness of data variables to capture information about each SIB. The results show that the Nonprofit Finance Fund has the superior database to the other two studied in this paper due to the depth of information provided in their database. The drawback from their database is that it is geographically restricted to SIBs in the United States. After critically analyzing each database, five data variables are recommended to add to future SIB databases: (1) Estimated transaction costs, (2) historical outcome benchmarks, (3) independent evaluators, (4) level of risk, and (5) progress update (percent of outcome reached). It is sought through the recommendation of the aforementioned variables, to fill in for information that is currently lacking in SIB databases. This paper is the first to do a comprehensive review of SIB database.