Richard Heinberg’s latest book, The End of Growth: Adapting to Our New Economic Reality, argues for a new economic paradigm. He presents a clear, thorough, and convincing argument that our faith in unrelenting growth and unfettered capitalism has led to the demise of our global economic system. The book is well-cited throughout, encouraging curious readers to dig deeper into the source material that helped shape Heinberg’s case. (He acknowledges in particular our own Capital Institute Founder, John Fullerton, who provided background for the book from his perspective as a former managing director at JP Morgan on how Wall Street has evolved over the past quarter century.)
It is unfortunate that Heinberg’s terms seem harsh, but as a young person who is already concerned with limits to growth, he clarifies that the time is now for an era of qualitative development rather than quantitative growth. The End of Growth appropriately invokes fear and a sense of irreversible urgency but it is all in the cause of productive change towards a more buoyant and adaptable economy.
“Mismeasuring our Lives: Why GDP Doesn’t Add Up,” a panel discussion held at Columbia University on December 7, brought four distinguished economists together for an open conversation that began with the need for policymakers to look beyond GDP as a standard economic measure to address both ecological constraints and human well-being but moved to the central challenge of our time: can economies continue to grow without degrading the ecosystem and if not, what are the alternatives?
Sponsored by the public policy research and advocacy organization Demos, the event featured panelists Alan B. Krueger, most recently the US Treasury's Chief Economist and currently Bendheim Professor of Economics and Public Affairs at Princeton University; Glenn-Marie Lange, Senior Environmental Economist at the World Bank; Juliet B. Schor, Professor of Sociology, Boston College; and Joseph Stiglitz, Nobel Laureate and Co-Chair of the Committee on Global Thought at Columbia University.
Capital Institute contributed to a new Ebook, just published by Harvard University Business School. The Landscape of Integrated Reporting is a collection of articles and thought pieces by those who attended a recent Integrated Reporting Workshop organized by Professor Robert Eccles, co-author of One Report. Our contribution is a letter written by a fictional CEO to her board of directors. Read it below and access the Ebook in its entirety here.
CASSE Issues Enough is Enough: Ideas for a Sustainable Economy in a World of Finite Resources - A Report from the First Steady State Economy Conference
The Center for the Advancement of the Steady State Economy (CASSE) held its first conference, in Leeds, UK, on June 19, 2010, with a focus on finding alternatives to current models of economic growth. Featuring members of the Capital Lab-sponsored 3rd Millennium Economy steering committee Tim Jackson and Peter Victor, the conference brought economists, scientists, business leaders, government officials and the NGO community together to help mold the vision of a steady state economy.
While most global leaders and economists extol the virtues of unfettered economic growth, conference speakers made the point that the economy is a subsystem of the earth’s ecosystem and is a human construct. Despite these known facts and the recent global financial meltdown, exponential economic growth continues to be almost universally perceived as a desirable outcome.
One of the greatest obstacles to the rechanneling of financial flows toward investments that serve a more just and resilient economy is what can only be called the primitive state of corporate integrated value reporting. It is now of course common practice for companies to produce sustainability or CSR reports alongside their financial reports. And a handful of companies are now beginning to issue their financial results and CSR reports under one cover. But in their book One Report, Robert Eccles and Michael P. Krzus have issued a clarion call for companies to embark on something far more ambitious and transformative: collecting, analyzing and presenting their financial and nonfinancial data in such a way that their interrelationship is transparent to all stakeholders.
If you open up the papers lately, you’ll find the discussion of the sovereign debt crisis tends to focus narrowly on offending nations’ profligate spending and borrowing habits. While these behaviors have no doubt contributed to fiscal deficits, what is often overlooked is that addressing another kind of deficit--an ecological one--is of equal importance if nations are to sustain healthy and resilient economies. One bank is working to advance this notion by incorporating into its sustainability rating of sovereign debt a country's resource efficiency.
Bank Sarasin, a Swiss private bank founded in 1841, launched the first investment fund based on the concept of eco-efficiency in 1994 and has been including social factors in its sustainability ratings since 1997. Sarasin’s sustainability rating of sovereign debt assesses a country’s creditworthiness based not only on resource availability but also on resource efficiency. Viewing a country’s ability to repay its debt over the long-term through this holistic prism yields some noteworthy results: resource-rich but inefficient economies such as the United States and Russia appear particularly vulnerable to future rating downgrades while resource-scarce but efficient countries like Japan, the Netherlands, and Germany appear much less at risk.
National Community Investment Fund (NCIF), a certified Community Development Financial Institution (CDFI), was established in 1996 as a nonprofit entity “to invest capital in and enable knowledge transfer to Community Development Banking Institutions (CDBI) around the country.” CDBIs are depository financial institutions that operated in low- and moderate-income areas and have as their mission to generate economic and community development impact. NCIF currently has approximately $150 million in assets under management including $128 million of New Market Tax Credits. It has invested over $24 million in capital in 45 US CDBIs. Seventy-three percent of these institutions are either minority- or woman-owned or managed, and 19 percent are located in rural areas. NCIF has also provided seed capital to six de novo banks.
August 2012 Update— In January of 2012 the CARS™ system was spun-off the Opportunity Finance Network and re-launched as an independent organization. CARS™ continues to focus on providing intelligence on the CDFI industry to investors of all sizes. The organization, has released new products in tandem with its independent re-launch and Paige Chapel has continued on as director. The new CARS™ programs include: customized analytic services, specialized financial trend analysis, training and webinars and subscriptions to CARS™ CDFI ratings database. These services enhance the ability of CARS™ to draw capital into CDFIs by facilitating connections between CDFI’s and investors, while increasing CDFI transparency. Mark Pinsky chairs the new organization. Pinsky had spoken of possible collaborations between CARS™ and the Small Business Administration (SBA); since the original posting of this article the SBA has decided to employ the CARS™ system in their lending selection process. Currently, CARS™ rated organizations manage almost 50 percent of on balance sheet assets among CDFI fund-certified loan funds.—Evan Lozier. Evan is Capital Institute's Summer 2012 intern.
August 2012 Update—In June 2010 Capital Institute posted the profile below of the Global Impact Investors Network (GIIN), a not-for-profit focused on promoting a more transparent and efficient global impact investing market. The Global Impact Investors Network (GIIN) has since made significant strides through a variety of initiatives toward its goal of supporting the growth of the market sector.
August 2012 Update—Since last we spoke with Andrew Kassoy, co-founder of B-Lab, in June of 2010, the organization has been in a state of rapid evolution. When we spoke with Kassoy B-Lab had certified a total of 275 firms as B-Corporations with revenues totaling $1.25 billion. Since that time the number of certified companies has grown to 574 firms generating $3.35 billion in revenues. Sixty industries are now represented among certified B-Corporations, up from 54.
B-Lab has also enjoyed a number of legislative successes over the past two years. For example, the passage of the AB 361 Benefit Corporation Bill in California, authorizing and regulating the creation of new B-Corporations, has helped B-Lab gain additional partners. Similar laws that enable the formation of B-Corporations have been introduced in several other states. In the past four years Hawaii, Maryland, Louisiana, New Jersey, New York, Vermont, and Virginia have all passed B-Corporation laws, while legislation was introduced in three additional states. These pieces of legislation define B-Corporations, and set standards that firms must employ in order to be recognized as such by state governments.
The release of the Global Impact Investing Rating System (GIIRS) in the fall of 2011 was a major step forward in assessing an entity’s effect on all stakeholders. The implementation of this system answers the impact investing community’s call for a set of standardized measurements that would help guide mission-aligned capital to worthy causes. GIIRS rankings allow for a degree of standardization to take place in the impact investment and mission-aligned capital space. Any firm can now request and pay for a GIIRS assessment, and a score of at least 80 makes a business eligible for qualification as a B-Corporation. —Evan Lozier. Evan is the Capital Institute’s Summer 2012 intern.