Blueprint 6: Sustainable Finance
Purpose of the Blueprint
This Blueprint seeks to define Sustainable Finance, and identify best practices for achieving this goal. Simply speaking, financial sustainability results from the creation of positive current and future value; more holistically, achieving sustainability through finance entails aggregate positive (or “regenerative”) impacts on social and ecological systems, many of which are currently on degenerative trajectories toward collapse.
Current “state of the art” ESG Integration (which assesses environmental, social and governance factors across all asset classes and investment strategies) moves in the right direction, but by definition falls short. “ESG does not, by nature, carry a true sustainability gene,” says Global Reporting Initiative Co-Founder Allen White, due to its focus on incremental progress. “Incrementalism alone, at the end of the day, is insufficient. Sustainability requires contextualization within thresholds. That’s what sustainability is all about.”
So, Sustainable Finance requires a systems-level approach that assesses sustainability thresholds (or the carrying capacities of the capitals) to create what’s called “system value” across financial, social and ecological systems in order to transcend the “predatory delay” of incrementalism.
This Blueprint sets out to identify existing mechanisms and trends, as well as recommending necessary developments and innovations, to transform finance into a regenerative model. It will focus on transcending existing shortcomings in the financial realm (systemic short-termism), as well as shortcomings in the social and environmental realms (endemic incrementalism.) The goal is to identify the “sweet spot” where long-term (“durable”) financial value creation converges with regeneration of social and ecological systems (“system value”).
The Blueprint will cover all three primary areas of finance: equity, debt (fixed income), and insurance.
|Link to other r3.0 Blueprints
Areas the Blueprint will cover
|Thresholds & Allocations
|Sustainable finance and investing requires systemic support for economic, social and ecological thresholds, allocated to the portfolio level. This was labelled “threshold investing” as early as 2013.
|Fiduciary Duty -> Strategic Duty
|Current interpretations of fiduciary duty obsess on short-term shareholder value creation (profit maximization); a proper interpretation (enforceable through redefined case law) calls for a “strategic duty” to ensure long-term system value creation.
|Monocapitalism -> Multicapitalism
|Current decision-making in finance predominates on a single capital – financial; sustainable finance bases its decisions on the multiple capitals – particularly respecting their carrying capacities.
|Systemic Risk & Existential Risk
|Traditional finance assesses portfolio risk; sustainable finance assesses systemic risk and even existential risk, including the risks of predatory delay.
|Forceful Stewardship & Beta Activism
|Transforming finance to achieve sustainability requires fiduciaries to shift from what’s called “tea & biscuits” or “tummy tickling” engagement to “Forceful Stewardship” pressing for transformative change of the business models of portfolio holdings. Similarly, “Beta Activism” acknowledges that systemic risks / dynamics at the beta level now transcend enterprise- or even portfolio-level risks / dynamics at the alpha level, prompting forward-looking investors to engage on systemic issues.
|Scenario Analysis -> Transformation Planning
|Building on Recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) to conduct climate scenario analyses, investors should take the next step of using their influence to encourage portfolio companies to produce transformation plans to new business models that create future value in the context of the SDGs and the Paris Climate Accord.
Resources the Blueprint will build upon
|This is the most comprehensive research in the field, which this Blueprint will build upon in order to advance the implementation of Recommendations.
|Global Initiative for Sustainability Ratings (GISR)
|GISR folded, opening up its assets for inheritance by other initiatives. The r3.0 Sustainable Finance Blueprint has secured permission to inherit the GISR Principles.
Expected outcomes of the Blueprint
|Blueprints typically result in a repository of source materials numbering in the hundreds, compiled into a repository.
|Infographics from virtual dialogue
|Blueprint development typically involves a virtual dialogue on Convetit for each Exposure Draft, resulting in infographic reports.
|After vetting two Exposure Drafts with the Working Group of 20-40 global experts, a Public Comment period precedes final publication.
|The final version of Blueprint #6 will be published as a r3.0 Blueprint Report.
Parties who should be involved
|Main role – (S)=sponsors; (W)=work/research partners; (D)= Data providers; (V)=validating / networking partners
|Finance-oriented foundations, governments, multilaterals; finance firms
|Research partners (R)
|Research universities and think tanks; individual experts
|Work partners (W)
|Advocation Partners and Transformation Journey Program Participants
|Data providers (D)
|ESG Data Providers
|Validating / networking partners (V)
|r3.0 involves influential players that aren’t in a position to contribute formally in this Blueprint Project to reflect and add opinions where deemed necessary. This increases the visibility of the project and recognition of the outcome
Management of the Blueprint project
|Call for participation, set up of working group, budget check, official launch
|Literature collection, analysis, 1:1 expert interviews
|Structuring of outcomes, 1st meeting working group
|Development of first draft blueprint with participants
|Online Think Tank, infographic development
|Structuring of outcomes, 2nd meeting working group
|Final draft to working group, public comment period
|200k EUR, accepting donations as matching funding, and corporate contributions between 10k and 20k EUR
Sustainable Finance Blueprint Repository
+1 413 387 58 24
OnCommons / r3.0
+31 64 600 14 52
Working Group Members
Founder, KPA Advisory Services
Executive Coach, Animis Philanthropic Ventures Inc. and the WINfinity Framework
Director, Center for Applied Cultural Evolution
Jane Fiona Cumming
Co-Founder & Director, Article 13
Director of Sustainability, Cabot Creamery Cooperative
Founder, Global System Change
Catharina B. Dyvik
Program Manager, Blended Finance Taskforce / SYSTEMIQ
CEO, Natural Logic Founder Critical Path Capital
Founder, Capital Institute
Managing Director, Junxion
ESG Disclosure Lead, ING
Owner, Griemert Consult
Founder, MenschBank e.V.
Paul F.M. Hurks
RA Director International Affairs, NBA
Policy Advisor, Province of Noord-Brabant (NL)
Managing Partner, ESG Portfolio Management GmbH
Head of Impact Transparency & Sustainability, GLS Bank
Head of Wealth Management Programs, Center for Sustainable Finance and Private Wealth (CSP), University of Zurich
Managing Partner, Arjuna Capital
Founder & CEO, Impact Entrepreneur, LLC
Director, Shareholder Rights Group
Partner, Strategic Vision Domini Impact investment & CEO ,The Investment Integration Project
Founder, The Urban Tree Village
Chairman SDG Charter Foundation (Netherlands); Co-Founder/Chair True Price Foundation
Professor Social Value, Staffordshire University
Prof. Dirk Schoenmaker
Academic Director, Erasmus Platform for Sustainable Value Creation
Chief Executive Officer, Preventable Surprises
Founder & Chair, Preventable Surprises
Head of Economics, President of the Board, Regen Network
Mark van Clieaf
Managing Partner, Organizational Capital Partners
Rens van Tilburg
Director, Sustainable Finance Lab
Dr. Koos Wagensveld RA
Professor Financial Control, HAN (Hoogeschool Arnhem Nijmegen)
Chairman of the Board, “Forum Nachhaltige Geldanlagen e.V”
Osler Chair in Business Law, Osgoode Hall Law School, York University (Toronto, Canada)
Vice President & Senior Fellow, Tellus Institute Co-Founder, Global Reporting Initiative
President, Alan Willis & Associates