Buddy, can you spare a trillion?
Scale and what's big enough in a global pandemic
Earnest green entrepreneurs with robust business plans for carbon offset programs or other climate-fixing initiatives were among the dignitaries milling about the recent COP26 summit in Glasgow.
They were in search of investors to capitalize their idea to the tune of, say, $5 million. Maybe, they were even more aggressive by seeking $100 million, which sounds like quite a lot.
We can hope they had more success than the actual conference at meeting some positive conclusion for their efforts. However, even fully capitalized, a $100-million venture will have little overall impact in the climate crisis.
It’s not big enough.
At Bank of Nature, we use “think big” terms like “nature-scale” or “planet-scale” or “geologic-scale” for a better read on how big is “big".
By “planet-scale”, we mean projects that work for the entire planet at once, rather than by country-to-country or by haves and have-nots.
For example: A synchronous, seven-continent, science-backed decarbonization initiative. That’s a big business plan with risk and scope beyond what governments, industry, venture capitalists and capital markets can accept or even coordinate. (And, as a reminder, we’ve paid for space exploration, wars and COVID without much discussion about the cash outlay.)
In today’s news, the US government is debating the second of two infrastructure bills of (maybe, together) USD$3 trillion over a 10-year spend on, for example, building actual bridges and expanding high-speed internet. The political foofaraw has more to do with minimizing the cost to certain status quo players than maximizing the benefits to the nation. It’s also a not-so-subtle Trojan horse for the climate debate, with clever policymakers including a sizable investment (proposed at about US$.5 trillion over 10 years) in climate mitigation within the second bill that has yet to pass.
The “t-word” is the celebrity here, a number once so big as to be meaningless is now critical to fixes that can be meaningful.
The 2008 financial crisis cost trillions globally. A couple of Harvard profs pegged the cost of COVID-19 in the US at USD$16 trillion when they published a paper in October 2020 more than a year ago at the time of this writing. The richest people in the world are still about USD$750 billion shy of a trillion in personal wealth.
The UN Environment Programme estimates that global mitigation and decarbonization efforts will cost $500 billion to $1 trillion+, each year, but will yield $26 trillion in economic gains. That last bit, of course, is to convince us that addressing climate at scale is good business, when saving our future species is not enough motivation on its own.
Back to our green entrepreneurs in search of wee millions.
Based on traditional business, the A-round investors will need an exit strategy within the near term with a wealth-creating yield worthy of the original risk-taking, regardless of the dent the project makes in the climate crisis.
Think about it. Someone has to make money from the climate crisis before we can fix the climate crisis. Imagine all the effective ideas left on a shelf because they don’t have good ROI.
Here’s the other truth: If shareholders were feeling the pinch in their portfolios, real action at scale would be happening. It’s not, which says the money gatekeepers see the continuing climate crisis as an opportunity for wealth creation and not as a threat to wealth creation, yet.
They want the crisis. They don’t want a fix.
The UN can say there is a $26 trillion upside to climate action. Climate inaction at scale says the status quo does not agree, or that their financial modeling says that there is a $26 trillion and one cent upside to staying the toxic course.
It’s not clear how long the climate crisis money train chugs along before it changes tracks. That’s what protestors and activists are fighting. This is the stuck point we refer to in the conflicts of both industry and government to fully address the climate crisis.
What’s big enough?
At Bank of Nature, we’ve identified fiduciary money (pension funds, endowments and other aggregated funds of public savings) as an untapped, existing source for big-scale money. Right now, that money makes more money via speculative, Wall Street-style capital markets where they bet public savings on the movement of share prices. At Bank of Nature, we propose that fiduciary money should flow through a new organization that is neither government nor industry. That organization, like our proposed proxy for nature, would be a peer to government and industry and unimpeded by growth imperatives beyond what is sufficient for investors to meet their fiduciary minimums. This new “safer alternative path” would be a dedicated finance channel for fiduciaries to wield their trillions and to fulfill obligatory missions to stewardship and fiduciary duty, including future generations.
Bank of Nature, designed as a proxy for nature, is asking its partners for a trillion.
Go ahead. Gasp. Guffaw. Dismiss the audacity as crazy talk. Yes, traditional capital finance won’t let us in the door. However…
We aren’t pitching this to speculators requiring a term-definite exit. We’re pitching to stewards, with the timeless scale and mission to engage in this leadership right now.
And, actually, we’re asking for multiples more trillions, but let’s start with one.
That’s 10,000 $100-million business plans.
In traditional capital finance models, that would be 10,000 $100-million businesses that, each, generate a favorable return for investors in the near term. Seed capital investors expect to be out with their winnings within three years, maybe six. They have none of the social obligations of pension funds.
In a “Fiduciary Finance” model, which is Tim MacDonald’s innovation that drives Bank of Nature’s nature-first philosophy, a pension fund could write that check now. It would be secured and rewarded with the low threshold of, say, a 7% annual minimum return that maintains its fiduciary duty to members, including those who live in whatever climate-changed future we create. It would capitalize enterprise that meets the fiduciary’s sworn mission, vision and (worldview) values.
Here’s what the 2021 summary from OECD says about the global pension fund market:
Pension fund assets exceeded USD$35 trillion at end-2020, increasing in 2020 despite COVID-19 shock in almost all countries
Earnings in financial markets underlie the growth in assets
Equities and bonds accounted for nearly 75% of pension fund investments on average at end-2020
The outlook for pension funds is relatively positive for Q1 2021
Red flag words? Assets, equities, outlook, Q1.
Fiduciaries for the future
We don’t question the integrity of professional fiduciaries. We wonder aloud whether they are trapped in a finance convention and might not see a way out that helps them better meet the foundational objectives of the funds they protect.
We ask these fiduciary money managers at these vastly rich funds a few honest questions:
What specifically are they doing today to live on indefinitely within the constraints of overlapping global pandemics, like the climate crisis?
In what initiatives are they invested that continue the climate crisis and what specific investments help to end it?
How specifically do they fulfill their obligations toward stewardship — the fiduciary’s leadership mission to protect the value of their members’ aggregated savings?
We know there are fiduciaries, like pension fund stewards, who will say $1 trillion is a lot of money that is well spent when it works directly for the benefit of their current and future members. Introduce us to those fiduciaries with an eye on the future. We have proposal.