Theories of Change: Change Leadership Tools, Models and Applications for Investing in Sustainable Development PDF
Preview Theories of Change: Change Leadership Tools, Models and Applications for Investing in Sustainable Development
Sustainable Finance Karen Wendt Editor Theories of Change Change Leadership Tools, Models and Applications for Investing in Sustainable Development Sustainable Finance SeriesEditors KarenWendt CEO.EccosImpactGmbH,PresidentofSwissFinTechLadies Cham,Zug,Switzerland MargaretheRammerstorfer ProfessorforEnergyFinanceandInvestments InstituteforFinance,BankingandInsuranceWUVienna Vienna,Austria SustainableFinanceisaconciseandauthoritativereferenceserieslinkingresearch andpractice.Itprovidesreliableconceptsandresearchfindingsintheevergrowing fieldofsustainableinvestingandfinance,SDGeconomicsandLeadershipwiththe declared commitment to present the theories, methods, tools and investment approaches that can fulfil the United Nations Sustainable Development Goals and theParisAgreementCOP21/22alongsidewithde-riskingassetsandcreatingtriple purposesolutionsthat ensuretheparity ofprofit,people andplanet throughchoice architecturepassionandperformance.Theseriesaddressesmarketfailure,systemic risk and reinvents portfolio theory, portfolio engineering as well as behavioural finance, financial mediation, product innovation, shared values, community build- ing,businessstrategyandinnovation,exponentialtechandcreationofsocialcapital. Sustainable Finance and SDG Economics series helps to understand keynotes on international guidelines, guiding accounting and accountability principles, prototypingnewdevelopmentsintriplebottomlineinvesting,costbenefitanalysis, integratedfinancialfirstplusimpactfirstconceptsandimpactmeasurement.Going beyond adjacent fields (like accounting, marketing, strategy, risk management) it integratestheconceptofpsychology,innovation,exponentialtech,choicearchitec- ture,alternative economics,blueeconomysharedvalues,professionsofthefuture, leadership,human andcommunitydevelopment,team culture, impact,quantitative and qualitative measurement, Harvard Negotiation, mediation and complementary currency design using exponential tech and ledger technology. Books in the series contain latest findings from research, concepts for implementation, as well as best practicesandcasestudiesforthefinanceindustry. Moreinformationaboutthisseriesathttp://www.springer.com/series/15807 Karen Wendt Editor Theories of Change Change Leadership Tools, Models and Applications for Investing in Sustainable Development Editor KarenWendt ECCOSImpactGmbH Cham,Switzerland ISSN2522-8285 ISSN2522-8293 (electronic) SustainableFinance ISBN978-3-030-52274-2 ISBN978-3-030-52275-9 (eBook) https://doi.org/10.1007/978-3-030-52275-9 ©SpringerNatureSwitzerlandAG2021 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartofthe materialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation, broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant protectivelawsandregulationsandthereforefreeforgeneraluse. The publisher, the authors, and the editorsare safeto assume that the adviceand informationin this bookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor theeditorsgiveawarranty,expressedorimplied,withrespecttothematerialcontainedhereinorforany errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional claimsinpublishedmapsandinstitutionalaffiliations. ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSwitzerlandAG. Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland Foreword Why Research and Use Cases About Theories of Change? Thesheervolumeofarticleson“sustainablefinance”accompaniedbyconferences andbusinesseventsonthetopicisanexcellentindicationthatthetippingpointinthe world of finance and investment may be reached: sustainable finance has the credentials to become the new paradigm in the investment world! A number of spindoctorshavebeenworkingonthismovementforatleasttwodecades,including a broad variety of players from diverse backgrounds: The Global Alliance for Banking on Values has been showing that impact investing is feasible and NGOs havebeenchasingbanksandwealthmanagers,likeUnfriendCoal,whoconvinceda numberofinsurancecompaniestodivestcoal.ThinktanksliketheWorldResources Institute and the Carbon Tracker have been creating awareness about the stranded costsofcarbonandcarbonvalueatrisk,theinsuranceindustryhasbeenstartingto divestcoal,investorslikethe100%divestinvestmovement,pensionfundslikethe Norwegian Pension Fund, multilateral banks, and development finance institutions have been changing their investment and finance strategies and policies, multilat- erals like the OECD with its responsible business conduct approach hold OECD countryplayersliablefortheirbusinessconduct,politiciansmanagedtofindanew societalcontract,withtheParisAgreement,scientistsprovidedinputandmodelsfor arevisedportfolioengineering,theRockefellerFoundationcoinedthetermimpact investing,andmostrecently,alsoBlackrockspokeaboutintroducing. The question has evolved from “why would we care” and “what are we talking about” to an impressive granularity of perspectives and approaches in redefining investment and finance. Paul Polman has repeatedly pointed to the finance and investmentindustryasthebiggestleverofchangetorealizetheSustainableDevel- opmentGoals(inshortSDGs).Recently,theEUhaspublishedthefirstpartsofthe EUActionPlanforsustainablegrowthincludingthetaxonomy,developmentoftwo low carbon benchmarks, increased reportingrequirements, and its envisaged green bondscheme.Alothashappenedandmoreisunderway. v vi Foreword Sodoweneedtotalkabouttheoriesofchangeorareweallinthemiddleofthe changeinaneffectiveandefficientmanneralready?LookingattheEUActionPlan, it becomes clear that investors need green assets to invest in and that these assets havetobecreatedbyassetowners.Lowcarbonbenchmarksandinvestors’aware- ness are still to be created. The UN has estimated the funding gap as large as 3–5 trillionUSDannuallyforinfrastructurealone(includingpower,transport,buildings andindustrial,communication,agriculture,forestry,andwater).Thefocushasbeen for too long on investors only, leaving out sustainability-linked finance and asset owners. ESG has been used a lot as a differentiation tool from other players, but achievingtoolittleontheground. Also,theEUislookingatbothsidesnow:totheinvestorsandtotheassetowners inordertoacceleratethegreentobrownratio. At the moment it appears that all efforts bundled together will not take us to achievement of the goals fast and consistent enough. As an example we look at recentstatementsbymembersoftheClubofRome.“Despiteallgoodeffortsfrom Sustainable Finance experts, so far, the underlying global challenges have not yet beensufficientlyresolvedandapproacheshavenotbeenabletosteertheworldtoa more sustainable development path”, says Olivier Jaeggi, Founder and CEO of ECOFACT. Early September 2015, investors met with the Club of Rome and Prof.JørgenRanders,co-authorofLimitstoGrowthandauthorof2052:AGlobal ForecastfortheNextFortyYears,inBerlintoengageinadialogueaboutthe“next forty years”. He was shockingly pessimistic. In his view, no relevant progress had beenmadeoverthepast36–43years.Onereasonmaybethattheeffortshavebeen tooidiosyncraticandtooscattered andmeasures andmeasurementsnotconsistent. Anotherreasonmaybethatthinkingisstillinoldmodels,ratherthaninecosystem approachesandcirculareconomythinking.Perhapswearestillworkingwithwrong models, which are not fit for providing us clear guidance on the impacts of our decisions?Aholisticapproachappearstobestillmissing.Areourapproachesreally fullyassessmentbasedordowetrustsomeeasyKPIs?Dowereallyconsiderallthe relevantvariablesanddowehavequantitativemodelsabletoshowustheimpactsof various decision practices and paths correctly. Is sustainability at the core of the activities or just an add-on filter at the end of our “systemic” assessment? Can we sketchoutpathwaysonhowtransformationworksandhowitfails? Withits17SustainableDevelopmentGoals,theUNhasabandonedtoaccumu- latemoreproblemknowledgeandhasturnedthepagetodescribethesolutions.With its 17 Sustainable Goals (SDGs) the United Nations (short UN) has defined the “what”oftheglobalsustainabilityagendabutnotthe“how”.Thesocietaltransition trajectories and transformation knowledge need additional study, in particular the creationoftransformationknowledge—onhowtoachievethegoals—thecreationof transformationknowledgeisstillinitsnascentstages.Thispublicationcontributesto thediscussioninvariousways.Firstitbreaks thechallenge downinvariousareas. Newpathwaysneednewcollaboration,newnetworks,andecosystems.Aquantifi- cation and clear description of the impacts of any decisions made contributes to transparencyindecision-making.Aswearealreadyusingresourcesbeyondplane- taryboundaries,growth(oftenseenasthekeyinabatingpoverty)needstohappen Foreword vii withoutadditionalresourceusage.Henceadecouplingapproach,decouplinggrowth from resource usage, is a relevant topic. We need intelligent technologies, a trans- parentcirculareconomy(potentiallybasedonblockchain),easeofaccesstofunds for entrepreneurs, and sound management procedures, but also clear investment guidancefromtheESGcompaniesleadingthefield. TheParisAgreementforeseesabreakdownofthe1.5degreetargetinnationally determinedcontributions(NDCs).TheEUisattheforefronttoleadthewaywiththe creationofaframeworkitseekstoshareandapplywithothers. Alotneedstobedoneinthesphereofsustainabilityriskintegrationinfinancial decision-making, and on the need for a change in banks and insurers’ prudential treatment of assets with a favourable environmental and social impact. Likewise asset owners need to know about how a sustainable asset looks like and what it entails. Internal management systems and change management procedures are relevantinordertoallowassetowners,multinationalcompanies,andsmallerplayers toincreasetheirgreentobrownratioquickly.Thefieldforcreationoftransformation knowledgeislarge.Aclearintegrationofoutside-inrisktocomplementinside-out risksisrequiredinordertodealwithtopicslikeclimateadaptationrisk. TheEUhascreateditsInternationalPlatform onSustainableFinanceforPublic Authorities(exchange,compareinitiatives,institutionallearning,bestpractice).This seemstobethefirstusefulsteptocreatemoreconsistencyandcoherenceinthefield of sustainable finance. Another benefit is that this approach makes sustainable financeaccessibletoacorporateaudience. In this volume, we have diligently assembled the best practice use cases and emergingtopicsinthefieldofsustainabilitythatworkundertheumbrellaofatheory ofchangeandweraiseanddiscussinconsistenciesandoffertop-notchsolutionson sustainabilitymeasurement,decision-makingquantification,alternativeassets,alter- nativefinance,changemanagement,andtheroleofcreatinganecosystemandoffer foodforthoughtfornewbusinessstrategies.Isthevolumeexhaustive?Itcannotbe, asthetopicsareemergentandsolutionsinthemaking.However,thiscompendium offers a wide range of best practice models and solutions to pave the way in the creatingprocessoftheoriesofchange. Cham,Switzerland KarenWendt Preface Synthesis of Rational and Emotional Decision-Making The following three articles focus on rational theories of change—rational both in the sense of the word “calculable” and in the sense of using the reason which of courseisrelated.Notonlyintheageofcomputing,ourrationalmindsusenumbers to explain the world around us, to weigh the consequences of the options at our disposal,andtosupportourdecisionswithevidence.Rationaldecision-makingisa commonthreadinourhistory,traceablebacktotheRomansandbeyond. However, the critique of reducing humans to their reason and to numbers is equally old and permeates all eras. Not only does modern neurology place great emphasisontheirrationalityofourdecision-making,ironicallysupportedbystatis- tical studies of decisions in lab settings. Also, philosophies emphasizing rational thinking,fromPlatotoKanttonamejusttwoeminentrationalminds,havealways beenchallengedbymoremysteryorempiricallyorientedphilosophers. Is there a place at all for a theory of change based on rational decision-making givenalltherationalevidenceshowingthatourdecisionsaresteeredbyemotionsto alargeextent?However,dowereallyneedtochoosebetweenaquantitativeanda qualitative approach, between thinking and feeling, and between numbers and storytelling? Are not fundamental large-scale transitions supported by both mind andemotion? We will pick three large-scale changes that required the cooperation of many decision-makers against their own short-term vested interests: the peaceful end of apartheid in South Africa, the pre- and postwar introduction of Western social securitysystems,andthefastanddecisiveworldwidesubstitutionoffluorocarbons (CFC)tohaltthedepletionoftheozonelayer.Inallthreecases,themoralpressure wasforcefullycomplementedbyastrongelementoffearsharedbymanyactorsand decision-makers:lossofreputationandinvestments,thecommunistalternative,and theimminentthreatofskincanceratanunprecedentedscale.However,inallthree cases, data and calculations ensured that the changes could be achieved at an ix x Preface affordableprice,openingnewopportunities,andmostimportantly,thattheoptionof businessasusualwasnotthesafestandmosteconomicaloption. Good and sustainable change requires both reason and emotion, numbers and narratives, qualitative and quantitative. The more connected, the more sustainable thechangeis.Afterall,weworkbestwhenourpartsofthebrainworktogether,not againsteachother. A Theory of Change Underlying Rational Approaches The theory of change underlying “Sustainable Impact through Simulation and Action Leverage” (SISAL, first article in the series) generally applies to rational approacheswithexplicitlinkstothequalitativeworld.Itisbasedonthreepostulates: 1. Individualandcollectivecommitmentarisesfromtransparencyabouttheeffects ofactions. From the perspective of an involved community, better transparency of interconnectivities enables us to have a better understanding of the effects of decisions. This leads to broader commitment for sustainable solutions. Perceived dilemmasbetween individualprofitandsocietalbenefitareoftenaconsequenceof thewaycomplexquestionsarecast,consideringonlyoneperspectiveorchannelof transmission.Transparencywillhelpovercomesuchperceivedtrade-offs. Example: Since centuries, the interdependencies between alp farming activities, mechanismsinnature(soil,weather,plants),andeconomicdevelopmentshavebeen wellknown.Respectingtheseinterconnectionshasassuredtraditionalalpfarmingto provideabasisforlivingthroughoutcenturieswithoutdestroyingthefragilealpine pastures. 2. Weneedlevelplayingfieldsthatdonotputthepersonsactingsustainablyatan unduedisadvantage.Apoliticalandsocietaldebatesetsthegoalsandleavesthe pathways open to reach them. Transparent analysis provides the technical answersonfeasibilityandexecution. Regulatorsandlawmakersplayanimportantrolebycreatingalevelplayingfield with rules that do not put the person or entity deciding and acting sustainably at a disadvantage, for example via the attribution of externalities caused. These rules need to consider desired and potentially undesired effects as well as limited resources. In political and societal debates, we often lack an open and transparent agreement on the desirable outcomes. Instead, assertions on the feasibility of assumedly common goals inhibit the required progress. However, as soon as an agreementontheintendedoutcomeshasbeenreached,dataanalyticsandcomputer
The list of books you might like
