The Real Power of Disincentives In Sustainable Finance
ABSTRACT
The recent mass media’s focus on environmental issues is helping HNWIs to realise the good life they live in necessitates uncontaminated large space, a place in which air, water and food are of the purest quality and where children can be educated on the field to be part of a radical ecological restoration, needed for their health on this planet.
THE BIG GREEN-CRAZE
The SDGs craze and momentum has brought great interest toward understanding nature again, stimulating the growth of startups. New and old companies are leading this, they are impacting the direction of UN goals, across the sectors agricolture, forestry, manufacturing, energy, transportation, water and waste, ICT and buildings.
The financial instruments market, that could “instantaneously” change by new binding regulations, has taken so far mostly ideological steps into green investing, through ESG standards definitions and public incentives in the form of dedicated funds. Data shows the percentage of green funds (as a broadest definition, including greenwashing practices) is growing exponentially, but it is still in the infancy of its potential share.
Meeting the demand of a relatively more conscious public of investors, asset managers started researching and assembling the criteria to enable the allocation which makes ethical-driven client’s portfolios partly or totally eco-friendly, by investing in the so called Beneficial corporations, selected SME and few passive index, namely alike.
Is pushing change, by incentivising new liquidity into economic activities, always impacting the way toward a cleaner and more efficient life on Earth? This, it seems, is the ambition of some of the greatest financial institutes. There are many publications around this topic out there. You will probably think that the problem is not only very complex, but almost impossible to grasp and control in its totality.
But even if the impact of the new companies which are now responsible of inverting the damage that has been done for centuries to the earth would be such to fulfil every dark spot needing green regeneration, that alone would not stop pollution and harm to the environment.
Since neo-liberalism and industrialisation are still dominant and spreading wildly into unde(r)veloped countries, and since the population is still growing exponentially, the pollution on earth is unstoppable if the anti-environment mechanistic technosphere’s process of growth do not stop and revert too.
This is why there is an urge to focus especially on disincentives, the ones that government and international laws are not yet able or willing to impose on corporations in such a way that they would adopt rightly, from the first day, radical regenerative practices.
The roadmap’s timeline for this change starts by ceasing the harmful behaviours; most apparently are generally believed to be more profitable or, as they would claim, impossible to stop right away.
THE ECONOMIC AND THE FINANCIAL DISINCENTIVE
We are exploring two main categories of disincentives that could be strongly laid on companies acting against nature or, let’s say, against SDGs’ goals.
One is economic and the other is financial. Both are based on people understanding of economics. One is demand-based boycott from consumers at the FMCG level and the second is asset-based boycott from private investors at the ESG and ISO criteria level.
I am going to explain what I intend for both and why the activation of such disincentives would imply a broad strategy. It’s much needed. Consumers and investors might eventually come together and foster a severe and impartial attitude towards the industrial lobbies, in the name of Regeneration.
TOWARD REGENERATION
The Economic, or demand-based Boycott should take place as soon as the consumer of a “guilty” product realise that the the money they’re using for the purchase will enrich the owners of the company and this profit will be used to continue the production, presumably of that particular good too.
If we’re talking about a business which has been recognised as non compliant with SDGs’ goals, the retail consumer might want to reach out for substitute products, which may have been created in a less harmful way for the environment and which quality ought to be better.
This would provide a great opportunity for new models of competition, based on the search for available market share in the replacement of environmentally-inconvenient practices.
Advice should be offered to those looking for alternatives, guiding the choice of consumers in the direction of “safer” goods.
The Financial, or asset-based Boycott should arrive thanks to a better information, free and independent from the well known interest of the many industrial sectors, often lobbying with the media and entertainment economic force to maintain power.
This data, made public, would increase simple awareness about Health and the Environment.
Not only this information would drive demand for new financial instruments, but fintech and regtech trailblazers ought to become conscious and responsible about SRG (Scientific Regenerative Guidelines.)
