Getting a view of the big picture when banks make decisions

When thinking about industries that affect the environment, banks may not leap to mind.

But when you consider that banks can choose to finance oil sands development or solar farms, the relationship becomes clear. And it flows both ways:  if a bank holds contaminated land as collateral, it can be held liable for cleaning it up.

Olaf Weber, a professor in the School of Environment, Enterprise and Development (SEED), is helping to pioneer global thought and policy on the interactions between environment, social justice, and finance.  As the Export Development Canada Chair in Environmental Finance, his achievements include:

• Co-editing one of the first scholarly books on social finance
• Leading the development of objective indicators to measure the social and environmental impact of the financial industry
• Developing a system, now used by a major rating agency, to evaluate the environmental, social, and governance performance of companies

Weber is currently working on developing guidelines to integrate environmental and social factors into project financing decisions. He wants banks to be able to assess whether investing in a mine, for example, will result in more jobs or a loss of jobs for a local community.

Green funds

More generally, Weber researches how financial institutions can support sustainable development. “Green” funds, for instance, can influence the share price of companies whose activities may have a positive effect on the environment. On the flip side, people who buy into traditional mutual funds can end up supporting companies whose practices they dislike.

Weber also studies “impact finance,” which supports “specific projects that help people,” he says. “There are projects internationally and also in Canada that help people find jobs or that support farmers, for instance.”

Particularly in the developing world, microfinance loans can help people start businesses and lift themselves out of poverty. Unlike traditional aid, it helps build skills rather than create dependence, he says.

Weber says he’s glad he has come to a university where environment and business are so intertwined.

“It’s good. It makes more sense than the pure business perspective.”