Moving from doing no harm to doing good: Are we at the brink of a paradigm shift?

The investment world is currently shifting towards more societal impact and sustainability. This series of blogs focuses on the most striking changes and the possible obstacles on the way.  Following Raworth (2017) donuts economics, six main shifts might transform our current thinking.[1] These shifts are based on behavioural economics theory, but applying them to societal change might make us realize we are in the middle of a paradigm shift.

Firstly, on a global scale collaboration and awareness for the current societal challenges is greatly increasing. About 5 years ago, it was impossible to engage business in investing in political objectives. Now we collaborate in the triple helix. Most larger companies, banks and investors have a foundation supporting social and environmental goals. According to investors, consumers have become more socially responsible.

Secondly, to move from doing no harm to doing good, we need to shift from self-interested to socially reciprocating – meaning that people have to cooperate more and need to be more aware of each other. In the absence of larger gains on the financial markets, this trend manifests in positive social and climate action in numerous alliances.

“New leadership in monetary policy at the ECB and UN are demonstrating more socially and environmentally responsible behaviour and question current environmental behaviour. It only takes 5 giants in the financial world to change the tide towards a social and environmentally responsible behaviour.”

Sabine Desczka, Impact investment Researcher

Thirdly, we see a shift in values as we cannot escape the consequences of extreme bush fires and reduced harvests that hit the most vulnerable in particular, deteriorating air quality and other distressing news. New leadership in monetary policy at the ECB and UN are demonstrating more socially and environmentally responsible behaviour and question current environmental behaviour.
It only takes 5 giants in the financial world to change the tide towards a social and environmentally responsible behaviour according to the Stockholm Resilience Institute and we are well on the way with most larger banks offering green funds and impact investment funds linked to a higher policy agenda.[2] Moreover, an increasing number of wealthy women and conscious millennials change our preferences for the better so that common banks reconsider their business strategy.[3]

Fourthly, as a society, we move from isolated thinking to interdependent thinking, meaning that people are getting more socially dependent of each other and more affected by social norms than they think. It has become impossible to escape the consequences of an ever-growing world population that needs to manage space as a common good, as any individual decision affects others. If we do not want to end up in conflict, we need to become more conscious of our immediate or wider environment. Therefore, a growing number of people acknowledge the planet as a strategic partner in decision making.[4]

Fifthly, we acknowledge more and more that people are less rational than is often assumed, simply because not all information is available or because it is not possible to oversee all information available to take a purely rational decision. The current Covid pandemic shows our daily struggle with what should be rational behaviour.

And finally, people gain a better understanding of using nature as part of daily live instead of dominant over nature.

Taking these considerations in mind illustrates that the investment world undergoes significant changes in social, technological, economic, environmental and institutional rules and practices. So, how can we actually invest in societal impact?

Call for partners

Wageningen Economic Research provides valuable insights to fill the knowledge gap between the agrifood sector and impact investors. We work evidence based with quantitative and mixed method research design to provide the metrics underlying impact investment. With this blog, we want to raise awareness for the impact investment movement and we want to increase our outreach to find likeminded readers to partner up create new knowledge and comment on our intentions to support impact investment. If you are interested, please contact Sabine Desczka.

References

[1] Kate Raworth, 2017, Doughnut Economics, 7 Ways to think like a 21-Century Economist , no brand, UK 2018

[2] Agri3Fund – Forrest Protection and Sustainable Agriculture, Rabobank and UN Environment, www.rabobank.nl, retrieved 12-03-2020.

[3] Cents and sensibility: Women of wealth and the family office, Article | 29 May, 2018 12:00 PM| By James Bee

[4] GIIN 2018 Impact Investment Survey https://iris.thegiin.org, accessed 15 March 2020.

Sabine Desczka

Sabine Desczka

Senior Research Coordinator Impact Investment at Wageningen Economic Research, part of WUR, the Netherlands. Economic (1999) and legal (2010) background from Hamburg University, Germany and Leiden University, the Netherlands, on impact research. Current research interests: Impact Investment in agro-food and climate, Impact Assessment, Impact Evaluation, Cost Benefit Analysis, Ecosystems analysis and systems thinking, blended finance and knowledge creation for sustainable development.

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