Funding Governance for Systemic Transformation — Allocating Investment and Grant-Making for a Regenerative and Distributive Economy (r3.0 Blueprint #8)

This is part 1 of a series of Medium articles on r3.0’s newest Blueprint, released on September 6, 2022 at the 9th r3.0 International Conference in Amsterdam and online. This first part serves as the Executive Summary. The full version of the Blueprint can be found here.

Context and Purpose

Proposals for systemic transformation based on “regenerative” principles and methodologies are emerging as the means for responding to global systemic breakdowns. New funding from investors, governments, and philanthropists is beginning to flow rapidly into this domain. We face a challenge in allocating it towards work that supports urgently needed positive systemic transformation, as opposed to greenwashed initiatives rooted in “business-as-usual” paradigms.

We propose that regenerative funding governance methodologies and practices are required in order to ensure that regenerative outcomes are achieved at systemic levels.

While the term “regenerative funding governance” is one that we have coined, the principles it embodies are not new. Some are among our most ancient, such as the idea that life is sacred, while money is not. Similarly, the practices it refers to have been modelled in a myriad of ways. We have grounded our work with stories about some of these, via a series of case studies. We have also explored the edges of this domain with a variety of action-learning activities. Like all things “regenerative,” we hope the term takes on a life of its own, evolving in dynamic relationship with the complex ecosystem of work taking place in the field we have highlighted. We intend to serve this field through dialogue and continued action-learning, sparked by this Blueprint and supported by many of the people who have collaborated on it. We invite our readers to join us in that continuing journey.

Core Learnings

  • Funding governance authority needs to be shared more broadly. Those who control funding allocation must grant more authority to, and choose to be held accountable by, those who are most impacted by the projects being funded, including those who steward the communities and the land being affected by those projects. This requires cultivating trust, and moving at the speed that trust supports. Because trusted relationships have already been developed over time within communities, networks, and social movements, the fastest way to move at the speed of trust is to give those entities governance roles.
  • Deconcentration of wealth, political leverage, and land ownership must be a core purpose of regenerative funding governance. Business-as-usual practices continue to extract wealth from the people and from the commons upon which all beings rely. Regeneration requires that the harms from this extraction (which has been going on for centuries) be repaired, and that the goals of justice and equity be centred in the work we do going forward.
  • Investing in learning is strategic. Adaptation depends on the rate of learning being at least as fast as the pace of change. Faced with rapid systemic transformation, investing in learning should have at least as high a priority as investing in desired outcomes. Investing in learning also mitigates risk, since adaptation requires the capacity to change and evolve. And since our systems are complex, continuous learning is often necessary to gain a sense of how to move towards the regenerative outcomes we seek.
  • “Scale-linking” provides a pathway for global change while supporting the shifting of power from global and national levels to bioregional and local ones. This can include large-scale institutions becoming downwardly accountable, as well as network structures with the capacity for trans-local and trans-regional governance taking over some of the functions these large-scale institutions now perform.
  • The human heart and soul are front-lines in the battle for a regenerative future. All those who embrace “modernity” are to one degree or another “colonised” by the ways of thinking and being on which our current systems are based. This includes our personal relationships to money, and especially the notion that security and status derive from its accumulation. It also affects our relationships to those who view funding governance differently. “Us versus them” thinking is a natural, fear-based reaction to a world that is visibly breaking apart so quickly and in so many different ways. When combined with the business-as-usual story that “there is no alternative” to many of these same failing systems, we are faced with a soul-killing double bind. In the funding governance domain, such trapped thinking shows up, on the one hand, as a lack of trust on the part of many who currently hold funding allocation authority along with a desire to hold onto that authority, and on the other,as the vilification of the people holding those purse strings by many who recognize that regeneration requires money to flow in new directions and in much larger quantities. Regenerative design thinking challenges us to seek a higher-order path forward by reconciling these restraining and activating forces, rather than settling for weak compromises or declaring all-out war against our brethren. We are all on the same side of this “battle.”

Applying the “Three Horizons” Framework

How can systemic transformation be achieved, and what role does regenerative funding governance play? There is a robust debate around the degree to which the institutions that currently dominate funding governance can transform or must be replaced. Many also believe neither option can address the crises we face before they take us over the edge of civilisational collapse. We find that the Three Horizons framework, developed by Bill Sharpe and the International Futures Forum (1), gives us a generative way to think together about what a paradigm shift in funding governance systems might look like, regardless of the stands (or lack thereof) that we each take in this debate.

In this model, the desired future is referred to as “H3,” and the current paradigm is termed “H1.” The messy transition space of “H2” lies in between, characterised by both generative initiatives that support the evolution towards H3 (H2 “plus”) and exploitative ones that simply seek to profit from the collapse of H1 (H2 “minus”). While this framework appears to suggest a simple progression over time, we recognise that reality is far more complex, and that regenerative approaches must embrace complexity and non-linearity. We did not plan from the outset to centre Three Horizons, and the fact that it took on such a prominent role in our work reflects the “aliveness” we experienced as we played with it, even when that generated resistance and criticism.

The Critique chapter (and the two associated Case Studies) address the ways we currently choose to allocate financial capital, which are dominated by markets that reward short-term profit maximisation and the externalisation of costs, and are core drivers of climate chaos, biodiversity loss, and the breaching of planetary life support system boundaries. They are built on centuries of colonialism and systematic race and gender-based violence. They support continued concentrations of wealth and power, and are reliant on the unsustainable exponential growth of an excessive and wasteful consumer culture. This remains true despite the emergence of ESG (environmental, social, and governance) and impact-investing frameworks that claim to balance profits with the needs of people and planet.

Governments often achieve some redistribution of wealth and deconcentration of power, but many attempts to address market failure are half-hearted and tainted by state capture. Redistribution through philanthropy makes a modest contribution to ameliorating the most egregious problems of our times, but it is bound up with the status quo through tax privileges, and is limited by a “charity” mindset and by legal frameworks, not to mention that the amounts of funding it controls are small compared to the total economy.

An industry of consultancy services reinforces this failing market orientation, arguing that “there is no alternative” to H1. It feeds off short-term corporate profits and has historically defended and manipulated the so-called “free market” system that prioritises them. They also influence a distribution chain of partners and recipients of philanthropic and government resources. Whilst some grant recipients make a valiant effort to challenge the status quo, almost all are hamstrung by financial and legal demands for upward accountability, many of them fearful to bite the hand that feeds them.

As the Three Horizons framework predicts, extractivist elements of the H1 paradigm for funding governance are showing up in the transitional H2 domain. New initiatives are being put forward to address systemic harms, while still embodying the patterns that led to those harms in the first place, e.g. “greenwashing.” It is our hope that this Blueprint contributes meaningfully to the task of distinguishing between such H2 “minus” initiatives and the H2 “plus” practices that are moving us towards regenerative approaches to the allocation of funding in all contexts (i.e. investment and both private and public grant-making). The “patterns of regenerative funding governance” that we articulate offer the starting point for a rubric that can support that discernment — a critical need as more and more money is being allocated to initiatives that claim to be “regenerative.”

We also offer visions for what it might look like if funding practices based on H2 or H3 perspectives became dominant, but we do so with caveats. While these visions can be seen as prescriptions, we recognise that a regenerative approach must emerge and evolve organically through relationships among actors, rooted in the physical places they inhabit. We also recognise that, as a group that consists almost entirely of people in the Global North and of European descent, we have cultural blinders that make it hard for us to see past the H1 mindset, even when we endeavour to do so. We have sought guidance from other voices. We are committed to focusing our post-Blueprint work on lifting those up further, and on holding space for diverse perspectives to be reconciled in ways that generate new possibilities.

Our H2 vision centres on shifting the system into being more downwardly accountable and inclusive. The industry of consultancy service providers that reinforce the governance structures of H1 (extracting “rent” in the process) now supports investors, governments, and philanthropic organisations by facilitating engagement with those on the ground, fulfilling their stated missions of giving voice to, and serving the needs of, those whose voices are not currently being heard in the halls of power or reflected in corporate agendas. The suite of investment approaches that seeks to balance profits with environmental and social benefits matures, and begins to fulfil its promise. Systemic approaches, based on collaborative ecosystems that include meaningful bottom-up input, begin to emerge.

An H3 Vision — Ecosystems for Funding Regeneration

In our H3 vision, which we lay out in some depth in the Conclusion chapter, the transition to “people power” goes further, with structures embodying “deep democracy” giving global citizens co-equal status with government and markets in funding decision-making. These structures take diverse forms, based on place and culture. The needs of communities and bioregions are centred through “governance ecosystems for funding regeneration.” These integrate input from the people, government, and markets, and support the “scaling out” of a diversity of initiatives to bring about planetary regeneration.

Philanthropy is no longer needed and all major funds have spent down, having surged their resources into H2+ initiatives to boost the transition to H3. This funding flowed mostly to those on the front lines of resistance to the extractive economy, who have also been leading the way to new alternatives. Tax codes have been amended to eliminate the ability of wealthy individuals and corporations to avoid paying taxes and to claim status as donors by funding philanthropic endeavours.

The markets and government remain as key funding governance players, employing a combination of H1 and H2 activities that are compatible with an H3 world. Government provides large-scale financial support for regenerative activities, as well as universal basic incomes or services. Markets are far more locally-based, such that they nurture rather than disintermediate human relationships. Financial profit is subordinated to the regeneration of all other capitals. The main driver is a change of heart on the part of most investors, who now accept much longer-term paybacks, lower prospective rates of return, and greater risk. Why? Because they no longer see the accumulation of financial wealth as the source of status and security, they refuse to profit from exploitation and ecocide, and they find joy, meaning, and an experience of connection to others and to the more-than-human world in funding the regeneration of Mother Earth.

Patterns, Case Studies, and Action-learning

Activities in these three categories formed the core of our inquiry into the nature of regenerative funding governance methodologies and practices.

Patterns of Regenerative Funding Governance. A collaborative effort led to the articulation of a range of patterns that provide guidance in the design and evaluation of funding governance approaches. This 1.0 version (2), with sixteen patterns divided across four themes, was tested and validated via the Blueprint’s case studies and action-learning activities, prototyping what could evolve into a comprehensive “pattern language.”

  • Essential Frameworks: taking a long-term view; cyclicity; looking beyond money
  • Key Enablers: connected learning cycles; margin-centered design; funding the process and its participants
  • Core Values: emergence; redefining notions of “we”; co-learning between funders and fundees; metrics focus on process before outcomes; scale-linking
  • Contributing Dynamics: develops and deepens relationships; community capital stewardship; bioregions; works with existing relational fields; questions existing power structures

Case Studies. Based on an open invitation to Blueprint Working Group members, two “negative” and six “positive” case studies were identified for exploration. These are not intended to be comprehensive or representative of the range of initiatives that exist in different parts of the world.

  • Regenerative vs. Corporatized Nonprofits. The contrast between The Nature Conservancy and 350.org, showing how some not-for-profits have adopted corporate attributes, undermining their ability to challenge the status quo.
  • Funding Governance Dysfunctions. Idiosyncratic or Inherent? Governance issues at the Science Based Targets initiative (SBTi) and the connection to its funders.
  • TRC Council. A prototype of an ecosystemic approach to funding governance, where those who seek financial support effectively manage a funding commons for their mutual benefit and that of the field.
  • Chorus Foundation. A place-based, democratic approach to philanthropic governance with a built-in spend down plan.
  • The Hypha DAO and SEEDS. How the new design of decentralised autonomous organisations (DAOs), when combined with evolutionary governance protocols and processes, provides enabling conditions for the emergence of regenerative funding governance.
  • Happy Money Story. A collaborative, playful, and creative process for distributing budgets, that shifts the focus from output and work done in a project, towards more needs-based considerations.
  • Barichara Regeneration Fund. A bioregional investment prototype in Colombia, informed by ideas around creating commons as a pathway to Earth regeneration.
  • Regen Foundation. How technology in the form of a DAO and the use of cryptocurrency can support a more regenerative governance structure.

Action Learning. Six groups formed to engage in various kinds of inquiry at the growth edges of regenerative funding governance.

  • Labs for Humanity. Learning about indigenous-led solidarity economies that use technology to create decentralised governance (DAO) and finance (DeFi) according to their values.
  • Bioregions as a Framework of Value. How regenerative investment at systemic landscape scale needs to respond so that human adaptation moves faster than the pace of geo-systemic change.
  • Social Movement Investing Study Group. Based on the Center for Economic Democracy’s paper (3) advocating investment with the goal of building community power as the path to transformation.
  • Connecting Interviews from the Field. Eleven interviews with leaders in the regenerative space, resulting in a call for fully resourcing process facilitation as a leverage point for regeneration.
  • Blueprint Internal Funding Allocation. Distributing grant funding received to support the Blueprint among its contributors, using a request-based process that gives authority to each participant.
  • Mapping the Field. How “social system mapping” might be used to lift up innovative funding governance work and support the emergence of “ecosystems for funding regeneration.”

Next Steps

In order to catalyse conversation about the concept of regenerative funding governance, and to amplify the work of those who support it, we are organising a “post-Blueprint activation” initiative, through which we intend to convene a number of constituencies:

  • Those who are engaged in regenerative work
  • Those with authority over the allocation of financial capital of all kinds
  • Those seeking to deploy financial capital in service to regenerative work
  • Those seeking to create structures that gather and move money in a regenerative way (“ecosystems for funding regeneration”)
  • Others who wish to contribute to the field of regenerative funding governance.

We invite you to consider connecting with us around any of the following possibilities, as well as others you are drawn to that support those overall goals:

  • Convening dialogue on key questions emerging from this work. This includes outreach to both “mainstream” players who may see themselves as operating solely in the H1 →H2 domains, as well as a greater diversity of people working at the margins of funding governance innovation whose voices we wish to help lift up.
  • Articulating and sharing more case studies to fill in the many gaps left by the non-systematic approach we employed for selecting the ones we have offered.
  • Developing a 2.0 version of the Patterns of Regenerative Funding Governance and experimenting with it in our work, with the eventual goal of a 3.0 version that is a comprehensive “pattern language.”
  • Continuing and expanding upon the action-learning activities we have engaged in, all of which are ongoing works-in-progress (see the respective reports in that section for details).
  • Providing financial support for all of the above, as well as for innovative governance work being done by other initiatives, via the creation of one or more “funding ecosystems” as an action-learning experiment in new ways to gather and allocate money.

If any of these possibilities resonate with you, or you wish to learn more about them, please contact blueprintactivation@r3–0.org.

Footnotes:

(1) The International Futures Forum website has a comprehensive section on the Three Horizons: https://www.iffpraxis.com/three-horizons. For purposes of this paper, we have drawn on the “commons of shared practice” based on the Three Horizons framework provided at https://h3uni.org/. The diagram on this page (and the ones used in other sections of the Blueprint) can be found in the Resources section of their website along with a tutorial on the framework: https://resources.h3uni.org/tutorial/three-horizons/.

(2) For a full description of the patterns in the 1.0 set, see this Miro board: https://miro.com/app/board/uXjVPeICqAM=/

(3) Ariel Brooks, Libbie Cohn, and Aaron Tanaka, Social Movement Investing: A guide to capital strategies for community power (https://www.economicdemocracy.us/mvpt)

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r3.0 is a pre-competitive & market-making non-profit delivering groundbreaking Blueprints, Transformation Journeys and Conferences for system value creation.

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r3.0

r3.0 is a pre-competitive & market-making non-profit delivering groundbreaking Blueprints, Transformation Journeys and Conferences for system value creation.