Blueprint 6: Sustainable Finance  (forthcoming)

Purpose of the Blueprint

AspectExplanation
Introduction

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.

Focus

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
  • Reporting Blueprint: Redefine the purpose of finance; Integrate threshold-based success measurement; Activate scalability of sustainability through financial intermediation.
  • Accounting Blueprint: Influence transformation of financial accounting to assess multi-capital, long-term system value creation
  • Data Blueprint: Drive transformation of data market from incrementalist ESG focus to threshold-based sustainability focus
  • New Business Models Blueprint: Leverage investor / financier influence to spur transformation to sustainable business models
  • Transformation Journey Blueprint: Provide pathways of change that can be disseminated, piloted, and scaled through the Transformation Journey Program

Areas the Blueprint will cover

AspectExplanation
Thresholds & AllocationsSustainable 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 DutyCurrent 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 -> MulticapitalismCurrent 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 RiskTraditional 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 PlanningBuilding 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

ResourceExplanation
UNEP InquiryThis 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

OutcomeDetail
RepositoryBlueprints typically result in a repository of source materials numbering in the hundreds, compiled into a repository.
Infographics from virtual dialogueBlueprint development typically involves a virtual dialogue on Convetit for each Exposure Draft, resulting in infographic reports.
Public comment After vetting two Exposure Drafts with the Working Group of 20-40 global experts, a Public Comment period precedes final publication.
Blueprint #6The 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
Sponsors (S)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

FunctionRole Description
Program managerRalph Thurm
BP Lead(s)Bill Baue
Corporate Participants7-10
Network Representatives7-10
Non-Profit Representatives7-10

Timeline

MonthActivities
1Call for participation, set up of working group, budget check, official launch
2-3Literature collection, analysis, 1:1 expert interviews
4Structuring of outcomes, 1st meeting working group
5-6Development of first draft blueprint with participants
7Online Think Tank, infographic development
8Structuring of outcomes, 2nd meeting working group
9-10Final draft to working group, public comment period

Resources

ContributionsDescription
Funding200k EUR, accepting donations as matching funding, and corporate contributions between 10k and 20k EUR
In-kindpossible
Sustainable Finance Blueprint

forthcoming

Lead Author

Bill Baue

Senior Director

r3.0

+1 413 387 58 24

Ralph Thurm

Managing Director

OnCommons / r3.0

+31 64 600 14 52

Working Group Members

Keith Ambachtsheer

Keith Ambachtsheer

Founder, KPA Advisory Services

Trae Ashlie-Garen

Trae Ashlie-Garen

Executive Coach, Animis Philanthropic Ventures Inc. and the WINfinity Framework

Salomon Billeter

Salomon Billeter

Founder, sim2sustain

Joe Brewer

Joe Brewer

Director, Center for Applied Cultural Evolution

Jane Fiona Cumming

Jane Fiona Cumming

Co-Founder & Director, Article 13

Jed Davis

Jed Davis

Director of Sustainability, Cabot Creamery Cooperative

Frank Dixon

Frank Dixon

Founder, Global System Change

Catharina B. Dyvik

Catharina B. Dyvik

Program Manager, Blended Finance Taskforce / SYSTEMIQ

Gil Friend

Gil Friend

CEO, Natural Logic Founder Critical Path Capital

John Fullerton

John Fullerton

Founder, Capital Institute

Adam Garfunkel

Adam Garfunkel

Managing Director, Junxion

Radoslav Georgiev

Radoslav Georgiev

ESG Disclosure Lead, ING

Sven Griemert

Sven Griemert

Owner, Griemert Consult

Jessie Henshaw

Jessie Henshaw

Founder, HDS

Silke Hohmuth

Silke Hohmuth

Founder, MenschBank e.V.

Paul F.M. Hurks

Paul F.M. Hurks

RA Director International Affairs, NBA

Astrid Kaag

Astrid Kaag

Policy Advisor, Province of Noord-Brabant (NL)

Christoph Klein

Christoph Klein

Managing Partner, ESG Portfolio Management GmbH

Jan Köpper

Jan Köpper

Head of Impact Transparency & Sustainability, GLS Bank

Taeun Kwon

Taeun Kwon

Head of Wealth Management Programs, Center for Sustainable Finance and Private Wealth (CSP), University of Zurich

Natasha Lamb

Natasha Lamb

Managing Partner, Arjuna Capital

Laurie Lane-Zucker

Laurie Lane-Zucker

Founder & CEO, Impact Entrepreneur, LLC

Sanford Lewis

Sanford Lewis

Director, Shareholder Rights Group

Steve Lydenberg

Steve Lydenberg

Partner, Strategic Vision Domini Impact investment & CEO ,The Investment Integration Project

Tim MacDonald

Tim MacDonald

Producer/Publisher, Evergreencore

Magdalena Matei

Magdalena Matei

Founder, The Urban Tree Village

Herman Mulder

Herman Mulder

Chairman SDG Charter Foundation (Netherlands); Co-Founder/Chair True Price Foundation

Jeremy Nicholls

Jeremy Nicholls

Professor Social Value, Staffordshire University

Prof. Dirk Schoenmaker

Prof. Dirk Schoenmaker

Academic Director, Erasmus Platform for Sustainable Value Creation

Raj Thamotheram

Raj Thamotheram

Founder & Chair, Preventable Surprises

Will Szal

Will Szal

Head of Economics, President of the Board, Regen Network

Mark van Clieaf

Mark van Clieaf

Managing Partner, Organizational Capital Partners

Rens van Tilburg

Rens van Tilburg

Director, Sustainable Finance Lab

Dr. Koos Wagensveld RA

Dr. Koos Wagensveld RA

Professor Financial Control, HAN (Hoogeschool Arnhem Nijmegen)

Volker Weber

Volker Weber

Chairman of the Board, “Forum Nachhaltige Geldanlagen e.V”

Cynthia Williams

Cynthia Williams

Osler Chair in Business Law, Osgoode Hall Law School, York University (Toronto, Canada)

Allen White

Allen White

Vice President & Senior Fellow, Tellus Institute Co-Founder, Global Reporting Initiative

Alan Willis

Alan Willis

President, Alan Willis & Associates

Sponsors

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