Finance Transition Lab - reshaping Finance beyond ESG

North Star Transition is launching Finance Transition Lab, an initiative aimed at reshaping finance to go beyond ESG. The Lab will start with a series of three Dialogues, the first of which will be held on June 10th, 2021. Jyoti Banerjee answers our questions.

Researchers tell us that one in three investment dollars these days incorporate ESG criteria into their asset allocation decisions. ESG’s ascendancy is a strong signal that the finance community has begun to recognise the convergence of societal and commercial value. So why the need to push beyond ESG?

We need more than ESG. Much more.

The working assumption for many in the financial system is that “doing ESG” means that they are meeting any environmental or societal obligations that might be placed on them. ESG might be a useful first step in a journey, but it falls far short if it is to be the destination.

The current approach is not going to deliver in the way it needs to: it focusses on “doing less harm” rather than truly delivering transformative societal outcomes, and it exacerbates the multiple crises we now face including climate change, biodiversity loss and social disenfranchisement.

We believe a new, regenerative approach to finance is required that starts from a systemic perspective rather than the individual ones of the investor and the investee companies. An approach that delivers a financial system that fosters regenerative outcomes.

But there are countless initiatives already…

Why do we need more initiatives? We don’t. We definitely don’t need more initiatives on lowering carbon in investment portfolios, or temperature scoring, or meeting Paris guardrails. It’s not that those issues are sorted. Far from it. Our perspective is that those issues will be difficult, if not impossible to resolve, if each issue is viewed in isolation.

So the Finance Transition Lab is about driving systemic change – thinking beyond ESG, yes, but really concentrating on what finance in a regenerative world would look like, because the carbon and climate initiatives often seem to imply that if only we can solve this pesky carbon problem, everything else can go forward as usual.

Where does North Star Transition fit into this?

North Star Transition, a not-for-profit, has been set up to address systemic challenges through radical reframing and holistic collaboration.  We are already deploying this method in other sub-systems: reconnecting food, health and nature, for example, in the Wales Transition Lab. North Star Transition works deeply within a sub-system while also connecting relevant sub-systems, recognising the interdependencies and dynamics that make up the whole. We start with a process that brings people together to listen and understand, which then catalyses the emergent ideas and solutions needed. We frame this role as convening, imagineering and collaborating on effective solutions.

We are not a think-tank - more a do-tank, to coin a phrase.

How will the Finance Transition Lab work?

We are setting up Finance Transition Lab to go “beyond ESG”. The Finance Transition Lab begins with a series of dialogues, followed by the co-development of action orientated initiatives in parallel with the exploration of the fundamentals needed for a new system that supports regenerative outcomes. The Dialogues phase, spanning 5 months, will culminate in a public paper on “regenerative finance” laying the ground for collaborative action. Further invitations to join the movement will be extended to major financial and corporate networks, and will be presented at major, relevant global events.

Figure 1: Finance Transition Lab is hosted by North Star Transition. It has three phases, starting with Dialogues.

We are inviting participation in this first phase from key financial institutions, customers of these institutions, and NGOs or multi-lateral agencies, and from leading academics.

North Star Transition is partnering with Preventable Surprises and UCL’s Climate Action Unit for the first phase of the Finance Transition Lab. Preventable Surprises is a group of investment industry insiders and related experts who seek to persuade institutional investors to accept their fiduciary responsibility to mitigate systemic risks before the next preventable surprise. The Climate Action Unit is a partner of all our activities at North Star Transition. We are also pleased to have Steve Evans, director of the Centre for Industrial Sustainability, University of Cambridge, and Cary Krosinsky, Yale University, join us in this work.

Each participating company in the Finance Transition Lab is invited to make a contribution for the Dialogues programme. We are also inviting sponsorship of the entire Finance Transition Lab initiative.

Finance Transition Lab is a defining initiative at a critical juncture. We want to work with those who will help ensure that the Lab accelerates the transformation of financial markets and enhances their relevance, thought leadership and social acceptance.  Will you join us?