Understanding investment for sustainable prosperity – breaking down the silos

by FERGUS LYON

The CUSP work programme is looking at sustainable finance from various angles. Through our transdisciplinary research and by combining the different perspectives, we aim to reach a richer understanding of investment and shed light on issues that have hampered the development of a green economy and more sustainable forms of prosperity. In this blog, Deputy Director Fergus Lyon explains, how the collaborative research of academics and practitioners can help break down the traditional silos that have constrained not only sustainable prosperity in practice, but also attempts to research these most urgent and complex problems.

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In the Centre for the Understanding of Sustainable Prosperity (CUSP) research is exploring ways of flourishing within ecological limits. A major issue for CUSP is to identify the new and modified forms of investment and finance that can create sustainable business models, infrastructure and economies. As Tim Jackson has shown in the new edition of his book Prosperity Without Growth, we can find such alternatives in approaches that allow societies to consume less; and in the infrastructures of civic life such as housing, food, health, education and leisure. A key challenge is to explore the different investment models and ways to increase the flows of finance towards green infrastructure, the improvement of natural assets, promoting wellbeing and changes to consumption.

In CUSP we look to develop research that goes beyond conventional disciplinary traditions and the separation of research from practice. We seek ways to combine different disciplines and collaborations between academics and those working in practice and policy. We are therefore bringing together researchers from economics, engineering, finance, geography, philosophy and sociology, alongside our partner organisations including the Aldersgate Group, World Futures Council, Finance Innovation Lab and Social Enterprise UK. By combining these different perspectives, we aim to provide a richer understanding of investment and shed light on issues that have hampered the development of a green economy and more sustainable forms of prosperity. We are starting by drawing on the existing research on this area and then focusing on those areas where our cross-cutting approach can yield most rewards.

For example, CUSP’s ‘Investing in the Future’ project, led by Nick Molho and Alex White at the Aldersgate Group, looks at the business models for increasing flows of finance towards green infrastructure and the associated policy and regulatory context. This work will examine the roles of project financiers and project developers in the rapidly changing policy context in the UK and abroad. We will examine the barriers to greater levels of investment flowing towards sustainable infrastructure, and the solutions to unblocking investments. This requires research that breaks down the barriers between knowledge and expertise related to finance and to sustainable industry.

The role of government and public sector support is an increasingly important factor: this is the focus of research involving a range of CUSP researchers that explores the different forms of public sector involvement in investment. CUSP’s emphasis on a rich and multi-dimensional concept of prosperity as flourishing within ecological limits again requires us to go beyond the existing silos with divisions in policy, practice and research between green investment and social investment communities.

Large scale institutional investors such as pension funds will also play a key role. A research project of the An Economy that Works programme, led by Charles Seaford of the World Future Council, examines the tensions between the short-term objectives of corporate managers and the longer term objectives that might be more important for sustainability. The research, based on the findings of exploratory roundtable discussions with institutional investors in London, focuses on the different types of asset ownership and the roles of the investment consultants advising owners. This work will identify the problems but also examine examples of successful approaches that have supported those controlling assets (such as pension fund trustees).

Complementing this work will be a study of professional meanings held by institutional investors, especially concerning the concept of risk. Nick Taylor and Will Davies at Goldsmiths will be drawing on economic sociology to explore how the concept of risk is constructed and how people devise market-based solutions related to climate change. For example, the experience of the Bank of England and the Financial Stability Board’s Task Force on Climate Related Financial Disclosures can provide insights into how the insurance and re-insurance industries respond to the threats from climate change.

Creating an alternative investment community also requires attention to enterprises operating at a small scale and to innovative start-ups. Small and Medium Enterprises make up just under half of all private sector turnover and our preliminary research has shown the particular gaps in finance for early stage businesses looking to grow. The research, by Robyn Owen, Geraldine Brennan and myself at Middlesex University together with Chris Hewett and Othmar Lehner at ACRN/Oxford University, will focus on crowd funding as one specific set of innovations. This research is drawing on the practical experience coming out of support organisations such as CUSP partner the Finance Innovation Lab, as well as the emerging academic work in this field. Initial work has shown the importance of understanding the relationships between investors and investees and the key role for crowdfunded platforms as trusted intermediaries.

Continuing our approach of bringing disciplines and professions together, CUSP also aims to explore the implications of some of these alternative visions of innovative investment strategies by examining specific scenarios. Simon Mair, Andrew Jackson, Craig Rye, Angela Druckman and Tim Jackson at University of Surrey, Peter Victor at York University, Canada and Roberto Pasqualino and Aled Jones at Anglia Ruskin University, use systems dynamics modelling to gain insights into the resilience of the economy when faced by shocks to the system related to energy or food. This analysis will examine the implications of a change in investment approaches, based on a broad range of indicators such as adjusted GDP, wellbeing, inequality and intergenerational fairness.

Just as solutions to our pressing environmental and social challenges require thinking across traditional boundaries, so our research needs to mirror this. The collaborative research of academics and practitioners can help break down the traditional silos that have constrained not only sustainable prosperity in practice, but also attempts to research these most urgent and complex problems.

Fergus Lyon is Professor of Enterprise and Organisations at the Centre for Enterprise and Economic Development Research, Middlesex University in London and Deputy Director of CUSP. He is leading the research theme on political and organisational dimensions of sustainable prosperity.

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