Investing with Impact - Collaboration between Arts & Nature Social Club, Club of Rome Germany and BMW Foundation Herbert Quandt illustrates the opportunities for a sustainable financial system
Author: Julia Schindler
How can we create a financial system that is more sustainable and fairer? This question, which is existential for the future of both society and the planet, was recently Club of Rome Salon discussed. A format that the Arts and Nature Social Club in collaboration with the German Society Club of Rome and the BMW Foundation Herbert Quandt hosted.
The topic: Change Finance and Finance Change
In order to find answers to the central question of the Salon, two central levers for a positive transformation of the financial system were highlighted. On the one hand, the change of the current regulatory and financial framework was debated under the aspect of "Change Finance". On the other hand, the panel of experts focused on "Financial Change" and thus challenges and ways to enable and finance this change.
Collaborations with great impact
The organizers: Club of Rome Germany. The Club of Rome has been acting as a global think tank since 1968, committed to a sustainable future for humanity against the background of long-term and interdisciplinary thinking. Based on the Arts & Nature Social Club sharing this forward-looking vision, the clubs are co-hosting the Club of Rome Salon Series. The aim is to bring together opinion-leading pioneers from art, science and business to create new spaces for thought and to stimulate systematic changes for positive change. Jörg Geier, who designed the salon and led the evening, formed the bridgehead between the two partners as a Club of Rome member and ANSC board member.
Visionary personalities opened the Salon on Change Finance and Finance Change. Among them Peter Blom, former CEO of Triodos Bank, member of the Executive Committee of the Club of Rome and current member of the Supervisory Board of the Dutch Central Bank, Dr. Mariana Bozesan, award-winning integral investor, entrepreneur and member of the Club of Rome and Dr. Daniel Dahm, founder of the United Sustainability Group.
Change finance: Rethinking at the system level
Drawing on his wealth of experience as a banker, Blom made a clear statement:
“There needs to be an overhaul of the financial system because currently the system is not organized in a systematic or circular way, but in a linear way”- Peter Blom
From left to right: Peter Blom, Dr. Mariana Bozesan, Dr. Daniel Dahm and Jorg Geier
Financial processes are still primarily profit-oriented and thus isolated to one goal instead of being thought holistically. A linear financial system does therefore not do justice to the complexity of the challenges facing our planet and our society. However, this is an imperative if we are to achieve our ambitious sustainability goals.
Another problem: The current financial system uses success and economic growth synonymously. According to the classic way of thinking, economic growth can solve social as well as ecological problems. In reality, however, the system is completely disconnected from the real economy. Banks tend to privatize profits and socialize losses, increasing social inequality. Instead, the bank and the economy must be symbiotically linked so that the financial system establishes itself as part of the community and provides services to the real economy.
According to Blom, one way to connect banking to the real society is to introduce new end regulations. For example, he said, a bank should prove at least 60 to 70 percent of its balance sheet in the real economy and not in abstract financial markets. The EU Green Deal and sustainable finance reform are an important step in this regard. However, only one step. The inclusion of certain nuclear and gas energy activities in the list of economic activities covered by the EU taxonomy illustrates that there are still some obstacles to change.
Finance Change: Investing with impact
according to dr Another central problem stands in the way of change for Mariana Bozesan. In the face of global challenges today, finance, profit and money would almost be considered meaningless or even banal. The development needed: To establish a new way of looking at money that accelerates impact investing. This means investments that are made within the meaning of Sustainable Development Goals contribute to the solution of social, economic and ecological problems.
Currently, investors have to choose between traditional profit-oriented and impact investing structures for every investment. Bozesan sees integral investing as a solution to this dichotomy. An approach that eliminates the choice between profit and impact. Investments are made in exponentially growing companies that also address global problems technological development encounter. The big challenge:
“The majority of the financial world is not willing to invest venture capital in young companies” - Dr. Mariana Bozesan
Although the majority of companies come from young entrepreneurs, the proportion of venture capitals willing to take risks is simply too small to facilitate change at scale. Given the buzzword entrepreneurial resilience, however, this is a mistake. Young green companies focused on implementing the SDGs engage in more authentic discourse, as existential concerns and goals are at stake. Accordingly, the loyalty and trust necessary for investments increase - on the part of investors as well as consumers. This ensures entrepreneurial resilience in high-risk contexts.
Priority: Environmental & social capital over financial capital
Last but not least, Dr. Daniel Dahm the financial system in direct relation to our ecosystem. According to him, capitalism is currently based on the over-prioritization of financial capital over ecological and social capital. The consequence:
“We are reaching the tipping point of the ecological system, putting our water, climate, ecosystem diversity and biodiversity at risk” - dr Daniel Dahm
Our task as humanity is therefore to redesign and update our infrastructures. And to negotiate between the natural foundations of life and our demands and ideas of prosperity and consumption.
The imbalance of the ecosystem is due to human activity and financial investments, such as the extraction of raw materials and the exploitation of natural, material and energy resources. However, prosperity should not be based on the cost of ecological resilience and social unfairness.
"There are several studies that confirm that "green" or SDG-oriented companies have greater resilience." - Jörg Geier
For this, 4 guiding principles for sustainable business can be summarized:
- A methodical transformation of the investment culture is needed
- Externalization of negative impacts on the environment and society must be avoided at all costs
- A good investment does not legitimize negative consequences for nature.
- Sustainability reports and supposedly greenwashing impact reports are not good enough greenwashing-beneficial impact reports are not good enough
What does all this mean?
The Club of Rome Salon made it clear that a sustainable transformation of the financial system is feasible. And it can be done within our planetary boundaries. Above all, it is important to focus on sustainable investment models, such as impact or integral investing, as well as on the savvy of technological progress. Nevertheless, there is still much room for improvement, which can be created in particular through institutionalized regulations and must represent the change in values of our society.