From critical mess to critical mass: a worldwide web of sustainable finance?
This blog distils insights and takeaways from the Breakthrough Money Basecamp, which was held at UBS in London on 7 July 2017. For a more comprehensive overview of the event, see our summary report.
Towards the end of a long hot day of intense discussions on the future of global finance and sustainability, a voice piped up from the back of the room. It was Gavin Starks, serial entrepreneur and founding CEO of the Open Data Institute.
As we think about transforming the financial system, asked Gavin, what can we learn from the way in which the worldwide web developed?
“We’ve built a billion websites in 20 years. That’s an astonishing achievement.” What was it about the design of the web that unleashed such an extraordinary wave of creativity? Answer: the creation of “shareable, federated standards that don’t require lots of top-down administration.” The internet is, in effect, “a federated network of mess.”
So what does this mean for sustainable finance?
Well, said Gavin, in the plethora of initiatives that already exist — many of which had been spotlighted earlier in the day — “we have got critical mass [to change the system], but it’s also critical mess.”
The question we, collectively, have to answer is: “what’s the minimum viable thing we can do to catalyse a mass movement?”
It’s a great framing of the challenge we face. We may still be some way off having the optimal “federated network” structure in place, but many of the key nodes in that network are already visible.
The Breakthrough Money Basecamp brought into view a constellation of existing and emergent initiatives. These can be divided into three broad categories:
1. Platforms that aggregate investment for the SDGs
Examples featured at the Basecamp include the Business & Sustainable Development Commission (BSDC)’s Blended Finance Taskforce, and Align 17, a soon-to-launch independent, digital platform that will help investors, philanthropists, development finance institutions, multilateral development banks and governments co-invest in the SDGs.
2. Tools and metrics that give real insight into the performance of companies
Steve Waygood, Chief Responsible Investment Officer at Aviva, made the case for free, public SDG corporate benchmarks — something that Aviva is collaborating with the BSDC on.
Later in the day, Martin Rich, Co-Founder of the Future-Fit Business Benchmark, spoke about their complementary efforts to quantify a company’s social and environmental performance. Future-Fit uses the criterion that a company must in no way undermine the possibility that humans and other life will flourish on earth forever to establish a non-financial breakeven point.
A session with Omar Selim, CEO of Arabesque (whose recently-launched S-Ray tool scores the sustainability performance of 4,000+ companies) and Marjella Alma, CEO of eRevalue (whose Datamaran platform enables business leaders and investors to monitor emerging risks) pointed the way towards a future in which Big Data and AI have a much bigger role to play in all this.
Add in blockchain and social media, others suggested, and the age in which transparency was optional may well be coming to an end. “It’s a bad time to be evil,” as Sacha Romanovitch, CEO of Grant Thornton put it.
3. Amplifiers and influencers
Among others, we heard from:
- Valeria Piani of PRI (Principles for Responsible Investment), whose members represent 33% of global private capital under management.
- Nick Robins, Co-Director of the UNEP Inquiry into the Design of a Sustainable Financial System.
- Mark Campanale, Founder of the Carbon Tracker Initiative, which has done extraordinary work in mainstreaming the concept of ‘unburnable carbon’ and ‘stranded assets’ (now championed by the likes of Bank of England Governor, Mark Carney, and the Task Force on Climate-related Financial Disclosures).
- Tessa Tennant, whose kitchen table — as several of the other speakers recounted — has been the birthplace of many major sustainable finance initiatives over the last 30 years.
The work of these and other initiatives mean that we are now in what Nick Robins describes as “the age of recognition”. Mark Campanale underlined the point, saying (with only a hint of exasperation) that “[financial] markets are finally beginning to sense that there are ecological boundaries.”
The same message came through loud and clear from UBS Wealth Management’s Global Chief Economist Paul Donovan. Paul argued that we are currently borrowing the equivalent of 50% of our income on “environmental credit” every year. Add in another 1.5 billion people over the next couple of decades and, unless we make some pretty radical changes, we’re headed towards an environmental credit crunch that will be an economic catastrophe on a scale not seen since the Dark Ages.
There were many other examples in the room that I could list. Already though, it should be clear that there is both critical mass and gathering momentum.
One question remains: can we put just enough connective tissue in place between these initiatives to translate momentum into transformation? Too much and we risk stifling the dynamism that enables “critical mess” to become impact at scale. Too little and we risk just being left with the mess.
This is an issue that we will continue to explore as part of Project Breakthrough. Our aim is to bring key players together and catalyse the kind of innovative thinking that could accelerate the transition to a truly sustainable financial system.
The Breakthrough Money Basecamp was the second in a series of London events. The first — held at the RSA in mid-June — was on the theme of ‘Reimagining Carbon’.
