Four reasons why transforming finance is more important than ever
In his first blog, our new CEO, Jesse Griffiths, shares why he joined the Lab.
I have a brilliant new job. Amid the heartbreak and disruption of the COVID-19 pandemic, this new work gives me energy, purpose and hope. Here are four reasons why, for me, the Lab’s mission to transform finance for people and planet is more important than ever.
1. A radical shift in finance is needed to combat climate change
Fifteen years ago, I got my first break into a career focussed on transforming finance, working as a policy officer for an environmental organisation. My first priority now is to craft a new strategy for the Lab to 2030 – and climate change is at the forefront of my mind. The next ten years will determine whether we are on track to meet the global goal of stopping temperatures from rising 1.5 degrees above pre-industrial levels, or entering an increasingly dangerous and cruel new world where the lives and livelihoods of billions will be threatened, with the poorest bearing the brunt.
The financial system plays an outsized role in both the problem and the solution. A recent report found that 35 major banks funnelled $2.7 trillion into fossil fuels in the four years after the Paris Agreement was adopted in 2015, with UK-based banks leading the list in Europe. Yet at the same time, the UN estimates that $2.6 trillion was invested in renewable energy over the ten years since 2010. While this gives reason for hope, we know that exploiting the oil and gas fields already in operation – without opening any new fields or using coal at all – would already take us beyond 1.5°C of warming. Meeting climate targets therefore requires a more radical and rapid financing shift.
2. Finance is at the heart of the recovery from the COVID-19 crisis
In 2009 I was at the G20 in London, helping put together a set of policy proposals for hope and action in the wake of the global financial crisis. The economic impact of the current pandemic will be far greater than that financial crisis, but the role of finance will be just as important, for three main reasons. First, the financial system has been at the heart of the economic response to the crisis and has already changed significantly, with the state dramatically increasing its role. The UK banking sector has been used as the conduit for hundreds of billions of pounds of government-backed loans to businesses, while the Bank of England has flooded the system with liquidity, through a £200 billion round of quantitative easing and other major measures. Second, our ability to transform the financial system will determine if we can truly ‘build back better’. I’m excited about engaging with the flourishing conversation about how the recovery can be used to build a more resilient, just, feminist, equal and green economy. Third, the looming threat that the collapse of the real economy could trigger another major financial crisis needs to be averted.
3. The financial system exacerbates poverty and vulnerability
In my last job, I led a team examining how to finance the end of poverty worldwide. My new job is a welcome opportunity to engage with this critical issue in my home country too. The financial system does not serve the poorest well, and too often makes their lives worse. This is why the Lab’s work on innovative ways of improving the financial health, especially of lower-income communities, is so important. The financial system also casts a wide shadow across the whole population, shaping how vulnerable we are to hardship throughout our lives. At a global level, my long-time involvement in the movement for tax justice has taught me how important the UK, as a major global financial centre and sponsor of many tax havens, is to efforts to end the illicit financial flows that have a major impact in the world’s poorest countries.
4. Tackling inequality means focussing on finance
The current financial system is primed to follow the money, magnifying the huge inequalities that, sadly, define our society: the bottom half of the UK population owns less than 10% of total wealth, while the top ten percent have 45%. Multiple aspects of identity, including gender and race are also critical to understanding who the financial system favours, who it does not, and how we mobilise to change it.
Finance should serve society, not the other way around
This belief is at the heart of all four issues and the focus of the Lab’s work.How do we increase transparency and accountability and democratise the financial system so that we can all have a say in how it is run? How do we implant purpose at the heart of financial institutions so that their primary focus is on supporting good outcomes for people and planet? How do we transform finance so that it helps to create a fairer society, rather than contributing to the extremes of inequality that are a defining feature of the early twenty-first century? How, in short, does finance become the servant of efforts to build a resilient, caring, just, green, and meaningful economy? These are the big challenges that motivated me to take the job as the Lab’s CEO. I’m looking forward to working with the our inspiring team, community and partners on the answers.