Published 2023 –
The transformation of our economy to meet the needs of human wellbeing within planetary boundaries requires a supportive and regenerative financial system with a focus on long-term value creation. In recent history, the financial system has developed into a practice of optimisation and the creation of financial value at the expense of people and planet. In essence today’s financial system extracts value from natural, human and social capital while increasing the gap between rich and poor. This has significantly impacted the interaction between the financial and economic systems –shifting from ‘finance supporting the economy’ to ‘the economy supporting finance’. As a result, an overly financialised economic system has developed that is now more part of the problem instead of actually contributing to improving human wellbeing within planetary boundaries. The current relationship between finance and the economy is having a negative impact because finance demands high financial returns in the short term instead of acknowledging that long-term value creation for all stakeholders is needed to respond to the current planetary and human emergencies as well as abate future crises.
This paper sets out why it is important to go deeper into the systemic dysfunctionality of our current financial system and shift from today’s predominant doctrine of ‘financing change’ towards a ‘change finance’ agenda and why this is a crucial building block from a system change perspective. ‘Change finance’ is not the outcome of a new economy but the very prerequisite of changing the way we want to meet the needs of humans on a finite planet.
The authors draw on key analysis and state-of-the-art research which recognise the need to fundamentally transform the financial system instead of tweaking the current system. This paper sets out core principles for a regenerative financial system and introduces a systems framework to demonstrate four levels of potential in changing systems and realigning the financial system in support of a regenerative economy. It concludes by setting out the main barriers to ‘Changing finance’ and outlines six deep projects for further exploration and collaboration with partners.
Authors: Tom Jess, Peter Blom and Sandrine Dixson-Declève