Business Beyond Tomorrow
Montreal Sustainability Weekend
Sustainability and Finance:
Are We Radical Enough?
March 11, 2011
Agenda
1. Our UNSUSTAINABLE economic system
1. How we got here
1. Finance: Critical acupuncture point
2. Sustainable Finance: Are we Radical Enough?
1. exponential growth is UNSUSTAINABLE
OVERSHOOT
The global economy now uses up 1.5 times the
earth’s capacity to regenerate the natural capital upon
which the system and life depends.
- The Global Footprint Network
FACT
If everyone were to live like Americans we
would need 5 Earths
http://passmethemalkplease.files.wordpress.com/2008/04/gursky.jpg
Symptoms of an unsustainable system…
http://2.bp.blogspot.com/_JSpbgoKp8LA/SjF4960b8qI/AAAAAAAAFVg/B4
CaOwK2yTk/S1600-R/worldpop_2009_lowerfertility.gif
Symptom: Population Crisis
World 6,826,859,514
http://cdn5.mattters.com/photos/photos/1370157/crowded_train_stations_in_china_10.jpg&imgrefurl
Hurricane Katrina, 2005
Symptom: Climate Change Risk
• Weather-related disasters affecting 1 million up 4X over 4
decades
• Economic losses up 10X
(The Millennium Ecosystem Assessment)
http://www.katrina.noaa.gov/helicopter/images/katrina-new-orleans-flooding3-2005.jpg
Energy Crisis
“Nothing has changed….oil and natural gas are
essential to our way of life.”
- Jack Gerard, American Petroleum Institute
http://cdn.content.compendiumblog.com/uploads/user/206a9a2b-627f-446d-b836-03b603106274/08ef70d7-701448c5-b9a5-7d322cf1fccc/Image/caa79888d3200de8c9ed8dbfb0bfd8c4.jpg
Symptom: Water Crisis
• Lake Meade, primary water source for Las Vegas, projected
dry in 10 years (Las Vegas Sun)
http://www.naturalbuy.com/wp-content/uploads/2008/08/water-crisis.jpg
Symptom: Desertification
The Silent Global Crisis:
• Soil loss: 24 B tons per year* (1992)
• C02 emissions: 28 B tons (2009)
• In past 40 years, 30% of farmland
has become unproductive
http://www.globalenvision.org/files/343342966_d32322dd2a_b.jpg
Wealth Gap vs.
Wellbeing
Worse
Wealth
USA
Disparity:
•2% of population Controls > ½ the World’s Wealth
•50% of population controls < 1% of World’s Wealth
•Income gaps between rich and poor > 2X in last 50 years
Portugal
Wellbeing
UK
Greece
Ireland
Austria
Germany
France
New Zealand
Australia
Italy
Symptom: Increasing Wealth Inequality
Denmark
Finland
Belgium
Norway
Switzerland
Netherlands
Canada
Spain
Sweden
Wilkinson & Pickett,
The Spirit Level (2009)
Japan
Better
Low
v
v
Wealth Gap
http://www.inhabitat.com/2010/10/14/worlds-largest-and-most-expensive-family-home-completed/
High
Symptom: Financial Crisis
http://macleans.files.wordpress.com/2009/04/houses2.j
2.
How we got here: The efficiency of capitalism
Desired
Outcome
EconomicWhat’s
Efficiency
wrong with
this picture?
Finance
Economy
Planet
What does “Sustainability” mean?
UN Brundtland Commission - 1987
“Sustainable development is development that
meets the needs of the present without
compromising the ability of future generations
to meet their own needs.”
The Natural Step
“A state in which society does not
systematically undermine natural or social
systems within the biosphere.”
- 4 Systems Conditions must be met
Harvard Business Review*
“An activity is sustainable when
all costs are internalized.”
“Holding on to an economics-based definition of
sustainability helps reconcile broader social interests
with the measurement of shareholder value.”
* “We Need a Definition of Sustainability”, Chris Meyer - 2008
A system is sustainable when it
does not generate the
symptoms of unsustainability.
The most important chart in the world…
Natural Systems Definition:
Balance of Efficiency and Resiliency
Optimum
Sustainability
100%
Collapse of
Financial System
0%
Resilience
Efficiency
Source: Lietaer, Ulanowicz, Goerner 2008
“What did you do, once you knew?”
3.
Finance: critical acupuncture point
Finance is the fuel source,
what we feed GROWS
Driving financial capital upstream
http://3.bp.blogspot.com/_o0s746IzxZQ/TJwMEtnPvsI/AAAAAAAAAWo/lX-2ewPZzo/s1600/upstream.jpg
Driving Capital Upstream
•Individuals/Institutions (Impact investment)
•Corporations – TBL, B-Corps,
•Government policies (carrots and sticks)
•Public Finance?
4.
Sustainable Finance: Are we Radical Enough?
What is Sustainable Finance?
• Currently no Wiki entry for “sustainable finance”
• Baseline - Top score in 2006 Sustainable Finance
Report* was ABN Amro and HSBC: D+
*WWF and Banktrack
Expressions of Sustainable Finance
•
•
•
•
•
•
Responsible Investing
Community Development Finance
Environmental, Social, Governance (ESG)
Impact Investment
Environmental Finance
Sustainable/Ethical Banking
Sustainable Finance: A Definition (radical)
Finance is sustainable only when in aggregate
it fuels the transition to, and serves the needs
of, an economy that creates more equitable
well-being while respecting the finite
geophysical boundaries of the planet.
Even More Radical…
Unsustainable finance is unethical.
Radical Sustainable Finance – Step 1
•Sustainable Financial System
•Sustainable Monetary System
Sustainability
Optimum
100%
0%
Resilience
Efficiency
Source: Lietaer, Ulanowicz, Goerner 2008
Complementary Currencies: proven models
WIR Bank
• Founded in 1934, Switzerland
• Response to stock market crash in 1929
• The word for “we” in German > economic circle is also
a community
• Has grown from 16 to 62,000 members
• Swiss Franc 1.6 Billion annual turnover
Radical Sustainable Finance – Step 2
•Differentiate and constrain capital flows to
shift economy
•Invest “upstream” in social and ecological
Resiliency
•Requires new goals, tools, metrics, markets
• Private Direct (“Impact investment”)
• Corporate Real Investment
• Government Real Investment
Canadian Tar Sands: “The most destructive
project on earth”
Models of resiliency exist
Basque Country, Spain
• Founded in 1956
• Philosophy: Co-operation | Participation | Social
Responsibility | Innovation.
• Divided into four areas: Finance, Industry, Distribution and
Knowledge
• 85,000 people, 256 companies, 15 Billion Euro turnover
Resiliency can be replicated
Cleveland, OH
• “Import replacement” activity (Jane Jacobs)
• Employee-owned, for-profit companies:
greenhouse produce, laundry service, solar energy
• Based locally, hire locally: permanent green jobs
• Workers earn a living wage, build equity as owners
• Circulate money within community - 5:1 multiplier
Grasslands, LLC: Holistic Management
Restore ecological function, revitalize rural communities.
Profitably.
Radical Sustainable Finance – Step 2
An assessment of Wall Street
• Commercial Lending
• Securities Underwriting
• Trading
• Mergers and Acquisitions
• Retail Banking Services
• Investment Management
• Hedge Funds
• Venture Capital/Private Equity
Imagine: Harnessing Capital
A world in which finance serves a just, resilient
and sustainable economic system…
Sustainability and Finance:
Are We Radical Enough?