Sensible & Sustainable Finance

In recent years, there has been a growing awareness of the need for sustainability in our economies and societies. This movement towards sustainability is not just about being environmentally conscious, but rather a return to sensibility.

The past 100+ years of rapid industrialisation driven by capitalism have resulted in a situation where climate and financial shocks are becoming more frequent and severe. Governments have based their economic and monetary policy on the notion of 'buyer's commerce' - the more people shop, the more jobs can be created and the economy can grow.

Banks saw an opportunity in financing this newfound desire for more stuff, and governments allowed them to increase the money supply in an attempt to boost the economy. However, the reality is that people are poorer in real terms, and this approach has contributed to the current state of affairs.

This newsletter, however, is not about doom and gloom, but rather an attempt to recognise what is real today and how we can turn some of these dysfunctions into opportunities.

One such opportunity over the next two to three decades is to bring a new sense of sensibility into our behaviour. Entrepreneurs, founders, and inventors are already developing innovative solutions and products to address some of the biggest challenges of our time, such as capturing and converting carbon, developing hydrogen cars, building solar farms, protecting children from harmful social and digital content, and incentivising the protection of our forests.

But there is a missing piece to this puzzle: financial services. The banking, lending, and insurance industries have played a significant role in fuelling the journey to where we are today. We now need reverse financial models to correct it. We need ventures that aggressively accelerate behaviour for good and harshly penalise behaviour for bad.

This presents an opportunity hiding in plain sight, but it is easier said than done. To truly make an impact on the United Nations' Sustainable Development Goals (SDGs), we need to build the mechanisms and protocols to sense, read, measure, transport, share, and verify data.

Once we have established a standardised, consistent, and reliable data infrastructure that can inform and guide financial decision-making in a way that promotes sustainable outcomes, the financial services innovation that can take place on top will accelerate the reverse financial model we need.

The next decade presents a huge opportunity for financial services to play a critical role in promoting a more sustainable future. The roadmap to this opportunity is simple (not easy):

• Set standards and protocols to measure "wholistic impact"
• Roll out sensors / extract data from existing sensors to measure "wholistic impact"
• Open the data up and make it available (like credit data is today)

By investing in the infrastructure layer that provides the data and standards to inform responsible financial decision-making, we can help bring about a more sensible and sustainable world.

If you're operating in this infrastructure layer, I'd love to hear from you!