Financing sustainability transitions: in search of a new, civic-led orthodoxy
By: Dominic Hofstetter
Tags: Design Thinking, Civic Engagement, Climate Change, Community, Systems Thinking

As technology advances, these harmful power imbalances risk being replicated further and faster. The incentives, values and ownership models baked into finance will play crucial roles in the means of creation and distribution: how behavioural data from mobile phones, public spaces and smart homes are owned and used; or how Artificial Intelligence is developed and applied to our everyday lives; how gene editing is applied and owned in our food system; or even how social media and other online platforms that breed polarising content, unsustainable consumption patterns and mass disinformation structure their business models. Whatever the scope of the transition, how it is financed matters.

This makes it all the more crucial to see sustainability transitions and the finance that drives them through an economic, political, cultural and social justice lens and recognize that these transitions happen alongside — and not isolated from — other structural shifts in society. In other words, sustainability transitions are not just about carbon neutrality, but rather a need to move away from the prevailing logic of an environmentally and socially extractive economy towards a regenerative and inclusive economy capable of fundamentally addressing the most tangible and pressing challenges of the 21st century. As the Climate Justice Alliance puts it,

“The transition itself must be just and equitable; redressing past harms and creating new relationships of power for the future through reparations. If the process of transition is not just, the outcome will never be. Just Transition describes both where we are going and how we get there.”

Rewiring Capital and Value

Rebalancing this relationship between communities and finance requires more than just new capital formations, new funds and new grant structures. It requires the systemic rewiring of capital itself, away from asymmetric power, control and value extraction, towards more distributed and democratised forms.

It also requires a rewiring of how we see value. Reconfiguring the relationships between financial capital and community capital can unleash the multiplicity of equitable returns and co-benefits, recognising that value flows from investments can take many forms, but too few are incorporated into conventional financing models. Reductions in liabilities, such as the health risks associated with fuel poverty, are rarely accounted for fully. Longitudinal and intangible outcomes, such as increased social resilience from one generation to another, fail to be valued fully when investment decisions are made. The failure to capture these values reinforces a warped view of what constitutes a “good” or “bad” investment.

If our finance systems are to go beyond capital formations motivated largely by short term, narrow economic returns alone (financial ROI / social ROI that use conventionally static or negatively biased discount rates), and begin to recognise the multiple civic returns possible, there is a need to explore new ways of measuring, accounting and financing for civic value creation for a new symmetry of power and mutuality. It is in this rewiring of capital and value that we can create the systemic conditions for just transitions.

Our TransCap x CivicValue x CommCap exploration

The intersection of new investment logics (transformation capital), new forms and flows of value (civic value) and the tangible and intangible assets in our communities (community capital) is where our shared exploration sits. It is where we seek to further unpack and explore the tensions and contradictions that their combination surfaces by testing and validating key components of each, and how they intersect.

The aim is to generate insights and learnings relevant to a diverse range of place-based transitions. While the transitioning of, for example, urban neighbourhoods towards a just carbon neutrality and universal wellbeing will be different to transitioning rural land systems towards sustainable and ecologically enriching uses, there will be common challenges and relevant points of connection to draw from.

We have purposefully brought together a collaboration that spans a diverse set of vantage points, knowing that diversity is strength and that to work in complexity is to embrace entanglements and often conflicting perspectives.

The TransCap Initiative is a collaborative space for developing, demonstrating, and scaling systemic investing in some of the places that matter most for human prosperity — such as cities, landscapes, and coastal zones — as well as in value chains and other real-economy systems. We apply systems thinking, human-centred design, and the principles of mission-driven innovation to explore how financial capital can catalyse the transformation of systems in service of a low-carbon, climate-resilient, just, and inclusive future. The TransCap Initiative has been initiated and is currently being convened by Climate-KIC.