Themes / Finance for the Future
Investing in the Future
Our MAPSS themes are drawn together through a number of cross-cutting projects and thematic engagements with policy, business and civil society on issues related to sustainable prosperity. One of these cross-cutting projects is Investing in the Future.
We are looking at sustainable finance from various angles—our research aims to develop a powerful new framing of investment in terms of a meaningful ‘commitment to the future’. This framing is motivated in part by the lessons from the financial crisis, where speculative, short-term investment was instrumental in undermining financial stability, and in part by the investment needs inherent in the transition to a sustainable, low-carbon economy. Resource productivity, low-carbon infrastructure and the protection of habitats and ecosystems all demand a new portfolio of investment with new governance and facilitating conditions.
Our research aims both to understand the macro-economic challenges posed by this new portfolio and also to explore the pragmatic innovations needed to deliver it. In pursuit of these goals we are (i) developing new economic models of sustainable finance and (ii) engaging with stakeholders at the local, national and international level to transform the insights arising from this research into practice. Our modelling aims to explore issues as varied as: the stranding of conventional (fossil fuel) assets; the stability of financial (and social) returns on sustainable assets; and the relevance of new local and community-led finance for sustainable prosperity. Our stakeholders include businesses, policy-makers, parliamentarians, civil society organisations and the wider public.
One of our core projects is carried out together with the Aldersgate Group, an alliance of leaders from business, politics & society driving action for a sustainable economy. Based on its strong relationships with businesses and financial institutions involved in the green or low-carbon economy, we are focusing on what changes are necessary at a policy, regulatory and business-model level to increase the flows of finance towards green infrastructure projects in areas such as energy efficiency, renewable energy and the improvement of valuable natural assets. The UK serves as the concrete case study and anchor for the research but the work also draws on examples from the EU and beyond. We focus on a variety of investments including: low carbon energy; ecological investment in ‘natural capital’ and resource efficiency or ‘circular economy’ projects. The challenge, we find, is not lack of capital, but a lack of confidence. We need a policy framework that makes investment in low carbon energy generation infrastructure attractive, to boost private spending and growth in this sector, create jobs and generate higher tax revenues for government.
Delivering an effective investment industry has been largely delegated by politicians to regulatory bodies, on the assumption that the measures needed have little relevance to wider social and economic issues. Charles Seaford argues that this assumption is false, and that politicians could usefully consider what may have been seen as purely technocratic issues.
The discourse around ‘natural capital’ potentially offers a way to integrate decisions about the commons effectively into economic decisions. Investing in the commons is key to protecting the flow of services provided to society by natural capital. Recent exploration of the potential for investing in natural infrastructure has highlighted numerous mechanisms, which could help turn this proposition into a reality.
The requirement to reduce emissions to avoid potentially dangerous climate change implies a dilemma for societies heavily dependent on fossil fuels. As renewable capacity requires energy to construct there is an initial fossil fuel cost to creating new renewable capacity. An insufficiently rapid transition to renewables, it turns out, will imply a scenario in which it is impossible to avoid either transgressing emissions ceilings or facing energy shortages.
This paper focuses on the role of the public sector in addressing finance gaps for longer-term investment requirements from seed investment through to early growth commercialisation of green innovation activities. Peer reviewed literature is identified from international studies, complemented by illustrative policy documents where evidence of impact is reported.
Strategic government intervention can maximise opportunities for private green infrastructure investment, our ‘Investing in the Future’ project report with the Aldersgate Group finds, setting out a full list of recommendations for government and industry.
On 16 January 2018, CUSP research fellow Alex White gave evidence to the Environmental Audit Committee on their green finance inquiry. Based on our research with the Aldersgate Group, Alex White argued for the need to create an attractive low carbon investment environment in the UK if we are to see the real benefits of a growing green finance industry.
The publication of Prosperity without Growth was a landmark in the sustainability debate. This substantially revised and re-written edition updates its arguments and considerably expands upon them. Tim Jackson demonstrates that building a ‘post-growth’ economy is not Utopia – it’s a precise, definable and meaningful task. It’s about taking simple steps towards an economics fit for purpose.
This paper explores the ramifications of the combined crises now faced by the prevailing growth-based model of economics. In paying a particular attention to the nature of enterprise, the quality of work, the structure of investment and the role of money, the paper develops the conceptual basis for social innovation in each of these areas, and provides empirical examples of such innovations.
Understanding sustainable prosperity is an essential but complex task. It implies an ongoing multidisciplinary and transdisciplinary research agenda. This working paper sets out the dimensions of this task. In doing so it also establishes the foundations for the research of the ESRC-funded Centre for the Understanding of Sustainable Prosperity (CUSP).