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by: Marco Senatore

Many have said that after COVID-19, the world will have to embrace a totally new path. We will need new instruments to make this happen.

The main reason why our current market economies do not serve human beings is, in a nutshell, the following: the means have become the ends. That is to say, what is supposed to be a means to deliver wellbeing (namely money), becomes the goal in itself.

Consider environmentalism. It is of course extremely important to stress the economic and political cost of inaction against climate change. But focusing almost exclusively on the monetary aspects of acting or not acting on climate change overlooks the inherent value of nature for human wellbeing, even without a monetary value attached to it. 

A new political, social, and economic order must be based on values: what is intrinsically good and worthy to be pursued. The values of dignity, nature, connection, fairness, and participation are key for reorienting the economy and putting people and the planet at the centre of it. 

For this purpose, I propose a Market for (moral, organisational, and cultural) Values.

How could we keep a market economy functioning, while putting values at its centre? 

In a ‘Market for Values’, instead of exchanging money, firms, individuals and local communities would exchange documents through a centralised platform. 

Instead of just reflecting economic worth (like money does), these documents would reflect economic worth in terms of the benefits experienced by their previous owners, categorised by high level values, including social justice, environmentalism, inclusivity, propensity for innovation, and multiculturalism. 

For each given value e.g. social justice, the State would define a list of quantitative indicators to measure progress toward it e.g. equal pay for equal work. ‘Documents’ would then be worth more or less based on how well they scored on these indicators.

Each document would not be exchanged with money, but only with other documents and with goods and services. These documents would be a complementary means of exchange with money.

But, unlike money, which is value-neutral, and which does not foster any reflection on the moral and cultural benefits of transactions, these documents would make economic transactions possible and contribute to progressively building a collective awareness about the importance of some values. 

How would growth in a ‘Market for Values’ take place?

In order to enhance the worth of in a document in terms of the value of environmentalism, for example, indicators to act upon with might include:

  • For local communities: a minimum percentage increase in green areas over a period of time. 
  • For companies: a minimum reduction in CO2 emissions and a given level of investment in negative emissions technologies. 
  • For individuals: to volunteer for green charities. 

After taking actions to enhance the environmental value of the ‘document’, these documents can be sold on the centralised platform for higher value goods and services or other documents.

Reconciling Economics with Ethics

Since the centralised platform would be open and transparent, even after having sold these documents, it is likely that companies for example would continue to practice environmentally responsible practices, to maintain their reputation. 

A Market of Values would foster a culture of prioritising the ends e.g. social justice, before deciding on what the means should be, such as the jobs we create, the cities in which we live, and the skills that we may want to acquire. Existing Wellbeing frameworks, such as the ones adopted in Iceland and Scotland, rely on quantitative indicators for desired policy outcomes or outputs at the national level. By contrast, in a ‘Market for Values’, quantitative indicators would measure inputs, the collective actions of all people. This would also foster a spirit of community, as I have highlighted in my book Exchanging Autonomy. Inner Motivations as Resources for Tackling the Crises of Our Times.

If in the Market, we saw that the worth of documents promoting certain values is growing faster or greater than the worth of ‘money’, we would know that we are making progress toward an economic system that centres wellbeing.

You can read more about the mechanics of a ‘Market for Values’ in several articles on the World Bank’s blog, London School of Economics’ Business Review, openDemocracy, Berlin’s Forum for a New Economy, New School’s Public Seminar and the Sheffield Political Economy Research Institute.

What do you think of the idea of a Market for Values? Please share your thoughts!

Marco Senatore works at the Ministry of Economy and Finance of Italy. Marco formulated this proposal for a ‘Market for Values’ in his book, “Exchanging Autonomy. Inner Motivations As Resources for Tackling the Crises of Our Times” (Xlibris, 2014). This article represents only his personal views. You can connect with Marco on Twitter, Facebook, and LinkedIn.  

Marco Senatore works at the Ministry of Economy and Finance of Italy. Marco formulated this proposal for a ‘Market for Values’ in his book, “Exchanging Autonomy. Inner Motivations As Resources for Tackling the Crises of Our Times” (Xlibris, 2014). This article represents only his personal views. You can connect with Marco on Twitter, Facebook, and LinkedIn.  

The Faces of the Wellbeing Economy Movement is a series highlighting the many informed voices from different specialisms, sectors, demographics, and geographies in the Wellbeing Economy movement. This series will share diverse insights into why a Wellbeing Economy is a desirable and viable goal and the new ways of addressing societal issues, to show us how to get there. This supports WEAll’s mission to move beyond criticisms of the current economic system, towards purposeful action to build a Wellbeing Economy.

Reposted from Junxion 

Capitalism is suffering from a crisis of legitimacy and nowhere is that truer than in the banking sector. Following the 2007/8 crash, banks have focused on compliance and getting their house in order, but they have broadly failed to win back the trust they lost.

Working together in a process convened by the UN Environment Finance Initiative (UNEP FI), a group of 30 banks have developed the Principles for Responsible Banking—a framework for all banks to show that they understand their purpose is to serve and contribute to meeting society’s needs and individuals’ goals. Following a six-month global consultation, the final version of the Principles and supporting documents were released this week (July 25, 2019). The Principles will be opened for signature on 22 September 2019 at the UN General Assembly.

To cite r3.0—the multi-stakeholder platform that promotes Redesign for Resilience and Regeneration of which Junxion is an Advocation Partner—it’s the kind of ‘radical collaboration’ needed for system change. The Principles for Responsible Banking aim to create nothing less than the sustainable banking system of the future.

Who’s involved?

The 30 founding banks come from around the globe and include China’s ICBC—the world’s largest bank—BNP Paribas, Barclays, Citi, National Australia Bank, BBVA and South Africa’s Land Bank. A further 40-plus banks have committed to becoming signatories and these include Standard Chartered, ABN-AMRO and Amalgamated Bank from the US.

There are also a number of non-bank endorsers of the Principles—banking organizations such as the European Banking Association and the World Savings Bank Institute as well as specialist service providers such as Datamaran and responsible investment advocates such as ShareAction.

What are the Principles for Responsible Banking?

The Principles for Responsible Banking are a framework for all banks to show that they understand their purpose is to serve and contribute to meeting society’s needs and individuals’ goals.

The six principles signatory banks commit to are:

  1. Alignment We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.
  2. Impact & Target Setting We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.
  3. Clients & Customers We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
  4. Stakeholders We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.
  5. Governance & Culture We will implement our commitment to these Principles through effective governance and a culture of responsible banking.
  6. Transparency & Accountability We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals
How will banks implement the Principles?

Within four years of signing the Principles banks must fully implement the three key steps of analyzing positive and negative impacts, target setting and implementation, and reporting on progress.

The impact analysis has to ‘identify the most significant (potential) positive and negative impacts on the societies, economies and environments where it operates’ and identify the business opportunities to increase the positive and decrease the negative ones.

Secondly, banks have to set two or more targets covering at least two of the priority impact areas. These targets have to be SMART (specific, measurable, achievable, relevant and time-bound). Banks have to begin taking steps to meet the targets, including establishing a governance and oversight structure to monitor progress.

Thirdly, banks have to publish their impact analysis and report their progress in implementing the Principles and meeting their targets, and this self-assessment has to be subject to limited assurance.

So what?

A responsible business professional might say this is sustainability 101 for banks: Set a vision, improve performance with the help of some targets, engage with all the people that matter in the shape of your customers and stakeholders, look at how you make decisions and your company culture and report on progress.

But it’s not just any old vision that the banks can set for themselves: it’s a vision of what the world needs. The draft Implementation guidance for Principle 1 talks about ‘creating consistency between the bank’s value creation model and the SDGs and the Paris Climate Agreement …’. This is big: the Principles are normative, explicitly calling on banks to work towards how the world should be.

It’s not just any old vision that the banks can set for themselves: it’s a vision of what the world needs.

And this theme is continued in Principle 2 about measuring impact and setting targets. On the face of it, that looks like any sound sustainability programme. But those targets have to meet or exceed the targets in the SDGs and the Paris Climate Agreement. Again, signatories have to contribute explicitly to what society needs.

And if those targets are judged to be failing to address that bank’s most significant targets or are not in line with the ambitions in the SDGs and Paris, then that bank can be removed from the signatory list. So, the Principles have teeth.

Will the Principles achieve any real change?

There are definitely reasons to be cheerful. The Principles elevate sustainability to the strategic level—this is more than some risk analysis on an individual transaction or an ESG (environmental, social and governance) screen on a particular portfolio. The Principles are saying society’s goals have to form an integral part of banks’ own strategic objectives.

And they are deliberately designed so banks can ‘start where they are’. No matter their starting point or context, developed or developing country, banks can get on board so the Principles create a framework for the global banking industry.

A key determinant of how much progress banks will make to delivering on the promise of the Principles lies  in the interpretation of ‘alignment’—a question that was raised In the public consultation that just closed. The official answer is that ‘Alignment requires that a bank’s business strategy is consistent with and geared towards making a positive contribution to the SDGs, the Paris Climate Agreement and relevant national or regional frameworks, where a bank is best positioned to do so through its business.’

This is clearly designed to leave space for individual banks to make their own judgement. But James Vaccaro, director of strategy at the ethical Triodos Bank, one of the founding banks that led the development of the Principles, is confident that the Principles are well designed to achieve change across the banking system:

“We have our ‘light on the hill’ in the shape of the SDGs and Paris and we have that ‘ramp effect’ where companies make progress as they individually go through their iterations of analysis, engagement and implementation. But crucially there is sharing between the individual signatory institutions as well. And that means you will have a race to the top, which creates the right conditions for non-linear change and the potential for the banking industry to take some really big steps towards the world we want.”

What’s the big opportunity here?

This is much more than a voluntary industry initiative that banks glibly sign up to, warns Madeleine Ronquest, Head of Environment, Social and Climate Risk at South Africa-based FirstRand Bank—also a founding bank of the Principles:

“We want to properly apply our minds so that the process and the information we publish will stand up to scrutiny. And there is a lot of groundwork that needs to be done in advance, engaging critical stakeholders, internally and publicly, spending as much time as may be required and being as inclusive as possible. The Principles are very aspirational and very ambitious and that was the intention in developing them. Signing them represents a serious commitment.”

The real opportunity of the Principles is to convince a sceptical world that businesses can and will collaborate for the common good.

So, they are not going to be easy to implement—but we all know they are necessary. The Principles represent an outstanding opportunity for the banking industry to do the right thing. To demonstrate that they are serious about backing up their social purpose statements with real impact that ‘achieves shared prosperity for both current and future generations’, as the Principles’ mission statement says.

And given the crucial role that finance plays in society’s collective efforts to create a better future, there is a lot riding on how banks step up here. It’s more than securing their own legitimacy and creating the sustainable banking system of the future, it’s about financing the change we need to see in the world.

Even more than that, we need these industry initiatives—these ‘meso-level’ activities in r3.0 parlance – to succeed and society has to see that they do. The real opportunity of the Principles is to convince a sceptical world that businesses can and will collaborate for the common good.

It’s what we at Junxion call being ‘audacious, together’. It is leadership.

 

Adam Garfunkel is an owner and Managing Director at Junxion. For more than 20 years, he’s been involved in corporate sustainability initiatives and led the team that created the communications strategy for the Principles for Responsible Banking.