Prof. Schoenmaker’s latest book, Finance in Transition: Principles for a Positive Finance Future shows that the current economy supported by the global financial system is on an unsustainable path. To transition to a positive future, the financial system has to change its goal function from maximising financial value towards optimising integrated value, which combines financial, social and environmental value.
The issues covered in the new book – and more – will be explored at 19:00 on Tuesday 17 November when Prof. Dirk Schoenmaker presents his Open Lecture A social licence to operate for business and finance to mark 50 years of impact for RSM. The online event is the fourth livestreamed and interactive Open Lecture for RSM 50 that requires no business background to join in; these Open Lectures are about issues that everyone experiences. Online audience members can put questions directly to the experts and vote in the opinion polls.
Presenting guidelines for long-term value
Financial institutions have started to avoid unsustainable companies because of the risks involved (these are referred to as Sustainable Finance 1.0 and 2.0). Now, the frontrunners are increasingly investing in sustainable companies and projects to create long-term value for the wider community (the industry calls this Sustainable Finance 3.0). But it’s not a smooth transition. Short-termism is a major obstacle to sustainable finance, and private efforts are insufficient to overcome the obstacles to sustainable finance.
Usefully, Finance in Transition: Principles for a Positive Finance Future develops and presents guidelines for governing sustainable finance and explores how destabilisation of current structures can be anticipated, and how industry professionals can mobilise for a managed transition towards positive finance.
Prof. Schoenmaker and his co-authors point out that the current pattern of unsustainable economic development is supported by the global financial system, whose goal is to create ever more financial value. To re-direct industry efforts, the authors propose a set of guiding principles for a positive finance transition. They are:
- A transition from financial to integrated value which combines financial, social and environmental value;
- Stewardship based on a direct link between financiers and companies; and
- Capital allocation based on long-term societal value.
The three co-authors are Prof. Derk Loorbach, Professor of Transition Science and director of the Dutch Research Institute For Transitions (DRIFT) at Erasmus University Rotterdam; Prof. Dirk Schoenmaker, Professor of Banking and Finance at RSM and founder of RSM’s Erasmus Platform for Sustainable Value Creation; and Dr Willem Schramade, an expert in portfolio management and equity analytics for the Erasmus Platform for Sustainable Value Creation.
The book Finance in Transition: Principles for a Positive Finance Future is available as a free PDF download from RSM’s Series on Positive Change.