Key issues to be addressed
There are several key issues that need to be addressed in finance. Listed below are several challenges that are being discussed in organisations and forums around the UK.
Purpose: The purpose of financial and monetary systems should be to serve the interests of society and the environment. However, over the last year, the financial system has become one which is self-serving. The whole system now needs to be reshaped so that it puts the needs of society and the environment at its core. How should a national and even a global discussion about re-framing the purpose of finance be convened?
Scale and simplicity: A recalibration of the scale of financial institutions is essential in order to connect the finance to the real economy. Large institutions, complex products, advanced technological transactions have all created a system that is far removed from this reality. As a result an unstable, disconnected, impersonal and distant system has been created and one not driven by the needs of people, communities and the environment. What sort of new models of finance could be created that would be simpler and manageable in scale?
Time Frames: The existing financial system is geared to short-term horizons that do not complement the long-term needs of society and the environment. The investment community in particular works on a 90-day cycle yet climate change requires us to think ahead to the next 50 years. In this sense, much more work needs to be done to recalibrate the time horizons of the financial system. How should the financial system be adjusted so that it works for future generations?
Transparency: Related to accountability, people need to be able to understand how their money is being invested and what impact their savings are having upon the world around them. In order for society to make better decisions to hold the financial system to account, finance needs to be more transparent about the indirect impact of its ‘finance footprint’, which is generated through its investments, lending, and transactions. What sort of new mechanics are required to ensure that the financial system is more transparent concerning its impact?
Accountability: Through our pension funds alone, people in the UK own about 20 per cent of British companies. This gives pension funds an enormous influence over company behaviour on environmental and social issues. What if people were aware of the impact of their money and knew that it could be invested in a way that had a positive or negative impact on the environment and society? How do we inspire people to want to take accountability for their ‘finance footprint’ just as they are increasingly taking responsibility for their impact in other ways, such as buying fair-trade products?