Today we are covering the fourth of our five pillars: Regenerative Financing. This is one of the most intriguing pillars of the framework, given the advances in global financing innovation. Simply put, regenerative financing uses money as a tool to solve systemic problems and regenerate communities and natural environments. With this approach, circulation replaces accumulation. Conventional financing is too myopic to fully address the systemic failures we now face. However, our belief at INTEGRATE is that there is no tradeoff or negative correlation between investing in ESG innovation and impact returns. In fact, the opposite may be more true when innovation is catalytic. Many are.
If one chooses to invest in an ESG innovation, how does one finance that innovation using a balanced stakeholder economics? The possibilities are growing:
Donor Advised Funds (DAFs): 100% tax offset for 2021 income
Net Interest Margin (NIM) Leverage: Bond risk with venture return potential
Perpetual Purpose Trusts
Green Bonds (lower average cost of capital)
Letters of Credit backed by Impact Guarantors (project finance)
rCAPM (regenerative) [a way to lower the discount rate in cost of capital]
We are beginning to see innovations in the world of finance. The Capital Institute has a wonderful way to look at the whole:
“The universal patterns and principles the cosmos uses to build stable, healthy, and sustainable systems throughout the real world can and must be used as a model for economic-system design.”
John Fullerton, the founder and president of the Capital Institute, wrote an inspired 29 page booklet on regenerative finance. In it he asks the question…
“What would Finance look like if it were to operate genuinely in service of healthy human communities, and without undermining the long-term health of the planet in the process?”
We encourage you to deep dive on this topic and join the growing ranks of CFOs who are leaders in helping to create a regenerative present.
To learn more about this topic, please join us at the INTEGRATE21 Conference at Fordham University in New York City on November 8-10.
At Salesforce, credit is due to CFO Mark Hawkins for integrating sustainability factors into filings with the U.S. Securities and Exchange Commission. Hawkins’ vision of a company’s call of duty, uncommon among CFOs, is woven within the cloud software maker’s corporate culture to consider a sense of "ohana," a Hawaiian term for family, within its ranks. Hailed as an archetype of the modern CFO, Mark unpacks stakeholder capitalism and how it’s changing how companies interrelate with customers, employees, investors, and the community. Keeping true to his motto, he is embarking on his next chapter to help grow ESG adoption, help others, and is always looking to learn something new.
Recent Insights and News for CFOs
A recent report by Morningstar India said 13% of the overall mutual fund industry’s AUM (Assets Under Management) is managed by women fund managers. However, there is one area where women are taking the lead: ESG investing. Investing and Governance
Governance of sustainability comes to the forefront as governance issues remain the most prominent and dynamic ESG Relevance Scores (ESG.RS) across all of Fitch Ratings’ asset classes. Over 2Q21, 86% of all ESG.RS score changes were in governance factors. This reflects how, increasingly, governance of social and environmental risks and contingency planning are seen as strategic concerns for businesses. Governance
Sustainability-linked finance is about to sweep the world, and property investors will be among the first in its path. Banks globally have been preparing for the new lending paradigm, which is forecast to incorporate green priorities into all property-secured lending and issuance within a decade. The European Union (EU) is leading the charge this week with its Sustainable Finance Strategy. Financing
ESG is more than just a new burden for compliance. Compliance departments are tackling an expanding universe of responsibilities as environmental, social, and governance issues and potential regulations have emerged as a critical priority within organizations. Reporting
Dedicated sustainable investing assets could reach $13 trillion globally by 2025, according to a paper released Thursday by asset management consultant Casey Quirk, a practice of Deloitte Consulting. Investing
Cit, IFC, and McCormick set up a new sustainable financing initiative. Under the initiative, suppliers can qualify for discounted rates on short-term working capital financing when they meet sustainability standards accepted by McCormick. The higher the supplier’s performance level in meeting these standards, the more they save.Financing
Cheryl Dorsey is a pioneer in the social entrepreneurship movement, and the president of Echoing Green, a global organization seeding and unleashing next-generation talent to solve the world’s biggest problems. She became the first Echoing Green Fellow to head the social venture fund in 2002. Cheryl’s global nonprofit Echoing Green provides seed funding to social entrepreneurs like 2020 fellow Shanté Elliott, founder of TasselTurn, a coaching platform for homeless and foster-involved youth. In 2019, she led $2.7 million worth of investments in 54 organizations working to create positive systemic change. In 2020, Echoing Green launched a Covid-19 fund, which distributed more than $220,000 in emergency grants to a number of its fellows experiencing urgent financial crises.
Featured ESG Innovation
Thrive Lot: The amazing people at Thrive Lot are on a mission to create a world of food abundance. Together with master growers, their platform transforms traditional yards into beautiful, edible landscapes and forest gardens through agroecological systems design. Where most simply see green grass, Thrive Lot identifies endless opportunities for natural systems to provide nourishment and habitat for all organic life on earth. By changing landscapes, they (we) change lives. It is very easy to sign up for their service.
Up & Coming Events
See most of the U.S. environmental finance events in this one place.
Integrate21: The conference for regenerative financial executives - Transforming Corporate Finance to Regenerative Finance, through ESG | Nov. 8-10 — Fordham University in New York
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