r3.0 publishes Sustainable Finance Blueprint Draft For Public Comment
A draft version for public comment of the forthcoming r3.0 Sustainable Finance Blueprint has been released on June 17, 2020, and is open for comments until July 16, 2020. This Medium article summarises the goals and and chapter structure of the Blueprint.
The full Draft For Public Comment can be downloaded here. A structured feedback document is available here. Responses can be sent to
hello@r3–0.org.
The goal of creating Sustainable Finance is predicated on the assumption that we currently live in an Unsustainable Finance regime. Empirical evidence — such as the Planetary Boundaries, Doughnut Economics, Ecological Footprint, and Great Acceleration research streams — substantiate systemic unsustainability as fact. Indeed, our current system is best defined as inhabiting advanced stages of overshoot-and-collapse. So clearly, transformation is required, if humanity wishes to create a truly sustainable finance system that can fuel the transition to a Regenerative & Distributive Economy.
The fundamental question this Blueprint asks is: do current Sustainable Finance initiatives set us on a path of transformation to such new and sufficient finance and economic systems?
The fundamental answer: A resounding no.
So, this Blueprint has its work cut out for it, to propose an alternative pathway that shows promise of achieving bona fide Sustainable Finance.
This report explores this transformative agenda by following the standard practice r3.0 established with its five previous Blueprints (on Reporting, Accounting, Data, New Business Models, and Transformation): assess current practices and ambitions in the field, compare them to what science and ethics dictate is necessary to achieve sustainability (and beyond), and make recommendations on how to fill any gaps.
So, Chapter 1 commences by first laying out the fundamental role of Finance, then turns to identifying the shortcomings of the Finance field’s structural reliance on perpetual growth and debt. The report further solidifies its foundations by summarizing two significant critiques of Finance from the Capital Institute: the five Fatal Flaws of Finance posited by John Fullerton, and the broader Cultural Evolution of Economics presented by Joe Brewer.
In Chapter 2, the Blueprint narrows its focus from Finance broadly speaking, to Sustainable Finance specifically, first defining the normative characteristics of the field based on scientific understanding and ethical imperatives. The report then summarizes its in-depth assessment (included in full as Annexes) of a host of “Sustainable Finance” initiatives, which it finds all fall far short of what science & ethics say is necessary to steer the Finance system back within sustainability thresholds (ecological ceilings and social foundations).
Chapter 3 acknowledges that triggering necessary transformation to Sustainable Finance requires fertile foundational conditions, so it advances a series of Enabling Factors in the form of fundamental Principles drawn from r3.0 and its partners.
- Eight Principles of a Regenerative Economy (Capital Institute), based on universal patterns of living systems
- Nine Disclosure Principles of a Regenerative & Distributive Economy (r3.0), based on best practices in disclosure and transparency
- Eight Principles for Governing a Commons (Elinor Ostrom / David Sloan Wilson), based on Nobel Prize in Economic Sciences research
- Nine Elements of Civic Fiduciary / Equity Culture (Marcy Murninghan), based on action research at the intersection of fiduciary duty & beneficiary interests
Chapter 4 introduces the recognition that transformation to Sustainable Finance requires galvanizing stimulation encapsulated in a set of Activation Factors that have gestated since the initial conception of this Blueprint. The “litmus test” for each Activation Factor is whether it liberates energy toward regenerative and distributive finance. To help frame this Blueprint, we categorize these Activation Factors into four clusters, starting with a foundational Scope cluster framed around a 3-dimensional axis of Asset Sustainability (Vertical Axis), Holistic Asset Inclusion (Horizontal Axis), and Asset Regeneration (Longitudinal Axis).
- Scope: From ESG Integration to Threshold Investing (Vertical Axis); From Monocapitalism to Multicapitalism (Horizontal Axis); From Impact Valuation to System Value Creation (Longitudinal Axis)
- Policy & Governance: From Fiduciary Duty to Strategic Duty; From Alpha Generation to Beta Activism; From Dirty Lobbying to Positive Lobbying
- Engagement: From Tea & Biscuits Engagement to Forceful Stewardship; From Competitive Advantage to Collaborative Advocation
- Practice & Performance: From Scenario Analysis to Transformation Planning; From Outside-In Enterprise & Portfolio Risk to Inside-Out Systemic & Existential Risk
Ultimately, triggering these Activation Factors alone will create necessary but not sufficient change, because they operate within the context of the existing finance and economic systems. For a truly Sustainable Finance System, a transformation to a truly Regenerative & Distributive Economic System is required.
Chapter 5 establishes the terms for necessary transformation, and proposes a set of Transformation Factors needed to shift to new financial and economic paradigms. Given that the overall study of transformation is still emerging, these Transformation Factors a preliminary iteration, and invite further collaboration to develop thinking. These Factors fall into two broad categories: Foundational, or overarching factors, and Functional, or factors that apply to a domain:
- Foundational: Holism; Economies as Ecosystems; Regeneration
- Functional: Multiscale (Bioregional); Post-Growth; Mutualism
The following graphic provides a visual overview of how the Enabling Factors provide a foundation for the Activation Factors to initiate financial and economic system transitions within the existing framework, setting the stage for the Transformation Factors to trigger a paradigm shift to new financial and economic systems.
Chapter 6 presents a series of Recommendations directed to the full complement of constituencies in the Finance ecosystem, clustered into Direct Actors and Indirect Actors. The Recommendations are structured via matrixes that span across all three sets of Factors: Enabling, Activation, and Transformation.
Chapter 7 provides a concise Conclusion.
Chapter 8 consists of the Annexes that include the full assessment of existing Sustainable Finance initiatives, identifying their shortcomings and gaps. It also lists the Working Group Members who vetted the Exposure Drafts of this report, providing expert input and guidance. Finally, it provides information on r3.0 (Redesign for Resilience & Regeneration).
The full Draft For Public Comment can be downloaded here. A structured feedback document is available here. Responses can be sent to
hello@r3–0.org.
