In advance of the paper launch “Go long: The case for investing in long-termism,” EIT Climate-KIC Long-Termism Deep Demonstration partners Volans, 2 Degrees Investing Initiative and Dark Matter Labs participated in a “Go long” online panel discussing the unsustainable status quo of our global economy and what’s needed to shift towards a resilient and regenerative one.
The panel features Richard Roberts and Charlene Cranny of Volans, an initiative that integrates future thinking, sustainability and innovation into corporate strategy; Jakob Thomä and Anne Schoenauer of 2 Degrees Investing Initiative, which is aligning financial markets with climate goals; and Raj Kalia of Dark Matter Labs, an initiative that discovers, designs and develops institutional infrastructure to respond to the technological revolution and climate breakdown we face.
Short-termism has been hardwired into our cultural, political and financial systems. We continue to use resources faster than nature can regenerate them, ignoring future risk in the name of instant reward. The panel discusses:
- How short-termism came to be embedded in today’s financial system
- The emergence of a different economic paradigm – one that recognises the reality of biophysical limits
- A strategy for defeating short-termism and creating a resilient, regenerative economy.
What prevents us from acting long-term?
- There aren’t many incentives for us to think and act in the long-term. For example: Policies are generally oriented around election cycles of four to eight years. Or, while a company may have 20-year liabilities, there are one to three-year performance incentives.
- While uncertainty is a natural part of life, it is used as an excuse not to act long-term.
- Future generations have no voice and cannot advocate for long-termism, so liabilities are imposed upon them without resistance.
What are features of long-termism?
- Cultural, political and financial systems, informed by thinking beyond one’s lifetime (e.g. beyond 100 years).
- An economic system that is bounded, since the planet is bounded, i.e. one that rejects the unlimited growth model.
- An economic system that is democratised and that efficiently and equitably distributes value.
- An economic system with policies and regulations that support planetary regeneration and human flourishing.
- Generational representation and intergenerational dialogue across areas of governance.
What might long-termism look like in practice?
- A move away from quarterly earning guidance.
- Long-term liabilities (e.g. emissions) are adequately priced.
- Policies and regulations for long-term liabilities. Currently, regulatory instruments for publicly traded companies are available such that, if someone becomes over leveraged, shareholders can penalise them and/or they can become technically insolvent. It’s in one’s best interest to de-risk their balance sheet.
- Assets with long-term value are accounted for. Currently, urban trees are booked as a liability on balance sheets on account of maintenance costs, for example. However, the tree’s ability to mitigate liabilities – its value as an air purifier, as reducing urban heat island effect, as offering shade, etc. – is not priced in.
- Decentralised production of capital and more locally produced capital.
- Alternative governing structures and tools to support them (e.g. distributed ledgers).
- Long-term risk and investment metrics.
- Risk management tools (e.g. stress testing and risk analysis).
- Tax incentives, for example differential bank levy on financial instruments with longer time horizons.
- Young people are given a voice in politics (e.g. via citizen assemblies).
- A clear, agreed upon and normalised understanding of what defines a ‘long-term investor.’
How do we get there?
- Act in a more coordinated fashion as a movement.
- Have ready-made answers for questions policy makers are facing today.
- We need ways to transform the core of our existing system and we need to run experiments at the edge to try to find new models. There also needs to be coordination between the two.
- Patient capital for businesses going through the transition.
- To make the shift from risk-based phase to value-based phase, stakeholders need to be engaged with the future, for example by way of scenario analysis, video games, etc.
Watch the long-termism panel discussion video.