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May 2012: Joined Up Investment Opportunities for a Sustainable Economy

In May this year the Green Investment Bank (GIB) was finally established. According to the BIS web site the GIB is “the world’s first investment bank solely dedicated to greening the economy……working towards a ‘double bottom line’ [sic] of both achieving significant green impact and making financial returns”.

Established with £3bn starting capital, and - subject to banking regulations - theoretically able to leverage very large private capital investments, the GIB may yet become a game changer in bridging the austerity versus growth paradox in the UK. With hundreds of billions of pounds needed for low carbon infrastructure investments in the UK, from railways to green energy to sustainable housing, the GIB model may yet emerge as one of the smartest and most efficient models for generating growth again in the British economy.

The month before, in April, the UK Government launched Big Society Capital – a £600m scheme under the leadership of venture capitalist Sir Ronald Cohen which recycles cash from dormant bank accounts into repayable loans for social enterprise. Critics were
quick to point out that such loans cannot replace the need for grants in a sector that is set to lose billions of pounds and hundreds of thousands of jobs over the lifetime of the coalition government.

And yet, in these days of austerity, there is something very empowering about the process of human development through enterprise. The success of microfinance based social businesses such as Grameen in Bangladesh, and Kiva, the internet site that allows individuals to invest sums as little as $25 in start ups all over the world, shows the enormous potential for unlocking recyclable funds for social good.

So it is salient to note that in a recent report from the Institute for Sustainability Solutions Research: The Big Society and the Environment - Better Together, former Friends of the Earth Campaigns Director Roger Higman and Plymouth University academic Rory Shand argue that the Government is missing a big opportunity in not bridging the economic, the social and the environmental agendas quite as explicitly as it might. Having interviewed 15 well known leaders of environmental NGOs, the authors concluded “there is an urgent need for Government and civil society to come together and re-establish the conditions for synthesizing the best in the Big Society and ‘greenest government ever’ agendas” and they proposed a number of steps to achieve that.

It seems the Government has not yet accepted the need to simultaneously invest in social, environmental, human and financial capital. And BIS, DECC, DWP and the Treasury have still not quite processed the need to integrate their investments to get maximum bang for buck for society. We simply do not know if Big Society Capital will prioritise loans to greener social enterprises, or if the GIB will prioritise low carbon infrastructure investments that build social capital. A thousand community energy companies using CHP or three nuclear plants? It will make a fundamental difference to British society how these financial investment decisions are prioritised.

Happily, advocates for joined up investing are emerging thick and fast from the more enlightened wings of the NGO and corporate worlds.

The Ellen MacArthur Foundation has recently been re-packaging and promoting long established ideas of ‘industrial ecology’, ‘cradle-to-cradle’ and ‘closed-loop’ processes within the concept of the ‘circular economy’. Armed with this perspective businesses should reduce waste in their processes as much as possible and those wastes that cannot be eliminated through innovation should be captured and reused by neighbours rather than discharged to the environment. Today eco-industrial parks based on this kind of thinking are springing up in China and elsewhere based on successful experiences in Northern Europe and Canada.

Sustainability Director for global IT consulting firm Atos, Giles Hutchins has spent some time thinking about what businesses of the future will look like. For him the key to making optimum system design changes is for business leaders to look to nature for inspiration and to abandon their fear of change. Consistent with the work of Janine Benyus and her concept of ‘biomimicry’, Mr Hutchins’ forthcoming book The Nature of Business (Green Books) explains how leading businesses are starting to get closer to natural and social systems design with consequent financial benefits.

Whether governments fully embrace the opportunities for joined up investments in nature, people and social relations in time to resuscitate our ailing 20th century financial systems remains to be seen. But we have to hope that those that do are more successful than those that do not and are therefore in a position to build more resilient and sustainable economies in the future.

Professor David Wheeler, Pro Vice-Chancellor (Sustainability) and Dean of Plymouth Business School (At time of writing)

This article will appear in the forthcoming edition of Croner Environment.

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