Appetite for Disruption – a call for new disruptive finance policy ideas to promote a sustainable economy

The Finance Lab and its participants from mainstream finance, academia, environmental NGOs and social entrepreneurs, have a shared vision of an economy and finance system which serves the needs of people and planet, rather than the other way round. We think that the finance system, as it currently operates, is not fit for this purpose and requires some form of fundamental change if we are to create an economy that encourages sustainability, protects the environment and supports the needs of society and productive business.

A growing number of individuals and organisations share this vision and diagnosis of the problem. This is not to say that all of the problems of society and environment are solely the fault of the financial system, but that change to it is a necessary, not sufficient condition to solving those problems.

This is the starting point for the new project, Disruptive Finance Policies: promoting a sustainable economy, which will draw on the collective efforts of this group in order to promote good ideas, facilitate collaboration, stimulate further policy innovation and ultimately help create the political will for change. The project, supported by the Calouste Gulbenkien Foundation, will ask what are the most promising policy ideas that could disrupt the existing finance system in a way to overcome some of the biggest barriers to a sustainable economy? A summary of the project can be downloaded here. Dispruptive Finance Policy – project summary

The first stage is to review the current work in this area, and hold a series of in depth dialogue interviews with the key thinkers from the wide spectrum of mainstream finance, social entrepreneurs, academics, business and NGOs that is the hallmark of Finance Lab work. As we find interesting themes and ideas, we will use this blog to promote them and encourage others to do the same. So if you have ideas to contribute to this project or want to recommend the work of others, please get in touch.

What do we mean by disruptive policies?

We are focusing our attention on policy ideas that have the potential to create transformational change in the finance system, resulting in a more sustainable economy. Mainstream policy debate has so far failed to meet the scale of the challenge it faces with solutions that measure up. There are plenty of worthwhile initiatives, such as the Green Deal, Big Society Capital, the Green Investment Bank, but they are either being implemented too slowly, with insufficient funding or limited powers to affect radical change. More disruptive policy ideas can come from different quarters, and there are many being worked on already, with which we want to engage and promote.

First, there are those who see the transformation only coming from outside the current system, probably imposed by new government policy, top down disruption. This might involve reform of the banking system pioneered by the New Economics Foundation, or pricing of externalities through environmental tax reform, or a more accurate valuation of the climate change risks in the pricing of fossil fuel companies on the London Stock Exchange as advocated by Carbon Tracker.

Second, there are those working on disruption from within the mainstream finance system. The growth of the green bond market as encouraged by the Climate Bonds Initiative, is one example of the many attempts to attract institutional investment into low carbon infrastructure. Public finance institutions like KfW in Germany, the European investment Bank and the soon to be created UK Green Investment Bank, have a role to play here. There are also coalitions of institutional investors playing an increasingly active role in climate change and other ESG debates.

Finally there are bottom-up disruptors, who also operate within the existing finance system, but are creating innovations that could promote a more sustainable economy. The ethical investment movement has been playing this role for many years, but they are now being joined by social finance entrepreneurs, peer to peer lending and community financing of renewable energy.

The Finance Lab will be engaging with all these three elements of the finance system, and probably discovering new ones along the way, in an effort to highlight the need for more disruptive policy and stimulate more collaboration and innovation of such ideas. Ultimately we would like the project to help build some greater political will for bolder policy making to transform the finance system into one which can facilitate a sustainable economy.

Follow our progress and contribute ideas through this blog and by contacting me on chris.hewett@financeinnovationlab.org