Once upon a time an international gathering on “Finance4Change” would have meant wrangling over multilateral aid or philanthropic funding to non-profit enterprises. No more. Finance4Change is now the tag line for one of the most tricky tasks today. It is about trying to align capital markets with the life-or-death race to turn business and industry towards sustainability. It is about commercially linking the regeneration of ecosystems with social equity through generation of livelihoods that improve quality of life.
Can this be done? Can capitalism itself be transformed to equate profit with social and ecological gains? The search for answers to these questions has gone into hyperdrive after the latest reports on climate change.
There is now a global consensus that “business as usual” can neither avert environmental collapse nor ensure social justice. But alternative models, or business not-as-usual, require much more than eco-sensitive technologies. They need new financial instruments and a more expansive definition of fiduciary responsibility.
This mission recently brought together some of the leading innovators of the sphere to Tallberg, an idyllic Swedish village. The stated objective of the Tallberg reflections was almost audaciously ambitious—to transform the institutional mechanisms for allocating capital in ways that touch basic ownership arrangements and alter product development strategies.
No, this is not a back-door re-entry of socialism. Rather it is a further deepening of confidence in capital markets. The relatively easy challenges are already being tackled, namely—“missing markets” such as uninsured risks from climate change and un-priced assets such as biodiversity. The tougher barriers are more fundamental and on the fringes of such forums. For example, should a price be put on everything? Should nature be valued only in terms of its benefits or dangers to Homo sapiens?
However, the core motivation of Finance4Change actors is quite clear and simple. It is to address the currently uneven access to information, money and power. This means treating money as a tool, not as the end objective. Otherwise, a wide variety of innovations will continue to be neglected because they do not offer a money-profit margin that fits the expectations of conventional capital markets.
Patient private equity investors are already moving in this direction with social venture capital which seeks long-term triple bottom line returns—namely money, social good and environmental enhancement. However, the growth rate of such investments is too slow for the pace required to shift the global economy towards sustainability. Thus, the proponents of Finance4Change are doing the nitty-gritty work that could help corporations and large institutional investors to make a course correction. For example, the discussion included Oliver Karius, now of VantagePoint, who was part of the team that crafted the Dow Jones Sustainability Index back in 1999.
Since then there has been a proliferation of indices and other kinds of metrics which put the conventional “money-alone” bottom line in the context of social and environmental sustainability. But metrics alone cannot revolutionize the culture of commerce.
For instance, the prevailing business models make it unattractive for a company to produce an energy saving light bulb that has an expected life-span of 35 years because once the market was saturated, there would be few recurring sales. Yet, such a bulb is now about to be produced and marketed by Tendris, a new generation company based in the Netherlands. Not surprisingly, it was Tendris’ USA head, Amber Nystrom, who was the one of the coordinators of the deliberations on Finance4Change.
However, it is equally notable that other coordinators of the discussion were from the core of the old style capital markets—Erik Berglof, chief economist of the European Bank of Reconstruction and Development, and Jim Butcher, head of sustainability at Morgan Stanley, USA.
The discussions also included Mark-Moody Stuart, chairman of the mining giant Anglo American, and Ray Anderson, chairman of Interface, the US-based commercial floorings corporation. Anderson, often called the world’s greenest CEO, has gone far beyond government regulations and reduced his company’s ecological footprint by 45% in the last 10 years while also growing both the size of the business and profits.
The job of setting the cat among pigeons at this gathering fell upon the veteran UK Green Party leader Jonathan Poritt, who is also author of Capitalism as if the World Matters. There is no getting around the fact that 59% of the world’s people live in countries where the gap between the poor and the rich is widening. “So, unless you interrogate capitalism and examine its incompatibility with sustainability there is no hope,” said Porritt.
While this challenge remained at the fringe of the Tallberg discussions, there was a lively tension between confronting dark contradictions at the heart of the current global economy and simultaneously working to tweak the system.
The participants were divided between those who believe that capitalism can be morphed to deliver sustainability and others who see themselves as “guerilla capitalists” of sorts. They would alter the tools of the old system till it is changed beyond recognition!
The core value of such peer gatherings is a deepening of conversation and the mutual challenging of familiar assumptions.
Rajni Bakshi is the author of a forthcoming book, Bazaars, Conversation and Freedom. Comment at email@example.com