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 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

FACTIf 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…

Symptom: Population Crisis

http://cdn5.mattters.com/photos/photos/1370157/crowded_train_stations_in_china_10.jpg&imgrefurl

World 6,826,859,514

http://2.bp.blogspot.com

/_JSpbgoKp8LA/SjF4960b8qI/AAAAAAAAFVg/B4CaO

wK2yTk/S1600-R/w

orldpop_2009_lowerfertility.gif

•Weather-related disasters affecting 1 million up 4X over 4 decades

•Economic losses up 10X

(The Millennium Ecosystem Assessment)

Symptom: Climate Change Risk

http://www.katrina.noaa.gov/helicopter/images/katrina-new-orleans-flooding3-2005.jpg

Hurricane Katrina, 2005

Energy Crisis

http://cdn.content.compendiumblog.com/uploads/user/206a9a2b-627f-446d-b836-03b603106274/08ef70d7-7014-48c5-b9a5-7d322cf1fccc/Image/caa79888d3200de8c9ed8dbfb0bfd8c4.jpg

“Nothing has changed….oil and natural gas are essential to our way of life.”

- Jack Gerard, American Petroleum Institute

“Nothing has changed….oil and natural gas are essential to our way of life.”

- Jack Gerard, American Petroleum Institute

http://www.naturalbuy.com/wp-content/uploads/2008/08/water-crisis.jpg

Symptom: Water Crisis•Lake Meade, primary water source for Las Vegas, projected dry in 10 years (Las Vegas Sun)

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

Symptom: Desertification

http://www.globalenvision.org/files/343342966_d32322dd2a_b.jpg

Symptom: Increasing Wealth Inequality

http://www.inhabitat.com/2010/10/14/worlds-largest-and-most-expensive-family-home-completed/

Wealth 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

Spain

Denmark

Norway

Finland

Sweden

NetherlandsSwitzerlandBelgium

GermanyAustria France

Canada ItalyAustralia

IrelandGreece

New Zealand

UK

Portugal

Japan

USA

Better

Low Wealth Gap

Wel

lbei

ng

Worse

High

Wilkinson & Pickett, The Spirit Level (2009)

Wealth Gap vs. Wellbeing

http://macleans.files.wordpress.com/2009/04/houses2.jpg?w=660

Symptom: Financial Crisis

2.

How we got here: The efficiency of capitalism

Economic Efficiency

Economy

Finance

What’s wrong with this picture?Desired Outcome

PlanetPlanet

What does “Sustainability” mean?

What does “Sustainability” mean?

UN Brundtland Commission - 1987 UN Brundtland Commission - 1987

“Sustainable development is development that meets the needs of the present withoutcompromising the ability of future generations to meet their own needs.”

The Natural Step 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* 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…

Sustainability Optimum

Efficiency

100%

0%

Resilience

Source: Lietaer, Ulanowicz, Goerner 2008

Natural Systems Definition: Balance of Efficiency and Resiliency

Collapse of Financial System

Collapse of Financial System

“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/TJw

MEtnPvsI/AAAAAAAAAW

o/lX-2e-wPZzo/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.

Sustainability Optimum

Efficiency

100%

0%

Resilience

Source: Lietaer, Ulanowicz, Goerner 2008

Radical Sustainable Finance – Step 1•Sustainable Financial System

•Sustainable Monetary System

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” 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

• “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

Cleveland, OH

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?