Michael Mainelli & Simon Mills
Long Finance (Released for Publication January 2018), 50 pages.
Financial Innovations & Sustainable Development - A Paper For The Business & Sustainable Development Commission
By Michael Mainelli & Simon Mills
Sponsored by the Business and Sustainable Development Commission (BSDC)
Long Finance (January 2018), 50 pages.
This report was commissioned from Z/Yen by the Business and Sustainable Development Commission (BSDC) as part of a research programme designed to examine how the financial services sector could support the Sustainable Development Goals (SDGs).
The paper argues that financial systems are tools that can aid achieving the Sustainable Development Goals, yet also need to exhibit sustainability of their own. Some specific innovations that might provide disproportionately large benefits for sustainability include:
Financial Measurement and Products:
- confidence accounting – representing financial information in its true form as ranges would help highlight the value of reducing uncertainty and the importance of SDGs over the long-term;
- mutual distributed ledgers (aka blockchains) – provide a solid underpinning to the registries society uses in all areas and enable communities to work together without creating ‘natural monopolies’ over information; monetary systems:
- digital fiat currencies – governments using digital currencies may gain much greater control over their monetary systems, reduce corruption, and have more effective tax systems;
- common tenders – community monies of many forms could be a major boost to specific community values and encourage credit creation among trust groups; financial technology:
- identity – systems in use for financial services could transform much wider areas of government, health, and qualifications for approximately 2.4 billion people, especially in providing access to other property rights;
- peer-to-peer lending & insurance – these tools are engaging communities and providing better assessments of risk and reward from people ‘on the ground’;
- mobile money – this innovation is bringing access to banking and finance services to millions of the world’s poorest people, who until recently did not have access to these services.
Financial Structures and Systems:
- policy performance bonds – these mechanisms have great potential in aligning financial incentives with wider SDGs;
- land value taxation – in combination with extensive tax reform, i.e. not just another tax, could simplify tax systems and encourage sustainable development.
- disaster reinsurance – a combination of reinsurance and catastrophe bonds could help to ensure longer-term investment and returns-on-investment in risky areas.
While, perhaps with the exception of digital fiat currencies, these innovations are already here, they are often ignored or unevenly implemented. This paper concludes that, of all the innovations discussed, providing identity systems for the 2.4 billion people without legal identity is a single tool that could transform all areas of sustainable development.
This report was commissioned in May 2016 and released for publication on Long Finance in January 2018.