Last week I was in the event: “Collaboration for sustainability – how to move forward?” hosted by the Sustainability Forum and the Sustainable Future Hub at Lund University. Since my last post I have been thinking in ways for governing complex processes such as financial inclusion, so I came to this event in hope for the final “answer”. Spoiler, I didn’t find the final answer, but a very good one I must admit.
In my last week post I finished pointing at three important discussions. Two of them that I want to bring back today. As part of my quest in understanding the ruling paradigms and powers around financial inclusion and alternative monetary models I found myself immersed in Financial Markets. Here, I believe, is where the “BIG players” are taking the decisions that define our future through the investments they make. As you might know, monetary policy in many countries is influenced by how Wall Street acts (or reacts) to different policies or events. To put make this a little more tangible, imagine how much influence could organizations such as Japan’s Government Pension Investment Fund (GPIF), which manages assets of around USD $159,215 billion (2018) or Goldman Sachs, which managed around 933 Billion have if they decided to move their investment to companies that comply to high standards of sustainability. But do they really have the power to influence policy making? I recommend you to watch the movie “Too Big To Fail” so you get some idea of what I am talking about.
Some of these actors where in the Bloomberg Business Forum talking about Climate Change and sustainability. Even though I have been following these conversations recently, for what I understand this is definitely and advance in getting sustainability in the “Game”. There are many interesting takeaways of this forum, but I want to highlight one point of a panel in which Denis Duverne (AXA), David Solomon (Goldman Sachs), and Hiro Mizuno (GPIF) participated. Through their discussion they reflected on the need for more transparent information about assets environmental impact. Solomon’s answer: “we are working on it…. but the answer is we are working on it”. However, he later suggested the need for a clearer government climate policy framework that sets the guidelines that sets the standards for the data companies must share in regard to their climate impact.
So, I want to come back again to my initial question and its relation to the event “Collaboration for sustainability – how to move forward?”. As the title of the event hints, the discussion focused on collaboration and how to achieve this by including different stakeholders. The key speakers came from IIIEE, STEPS and Venture Lab. Per Mickwitz from IIIEE gave an interesting perspective on how different agendas need to include small actors if we want to make relevant and impactful collaborations. So, it was a perfect moment to find the answer to my governance reflections: How can we get citizens point of view in discussion where not necessarily interests of the big and smaller actors are aligned? Well, he gave a good answer to a quite complex question. Transparency and communication. This might seem quite obvious, and that is why I brought the Bloomberg Business Forum to the discussion. How much transparency can actors immersed in the current economic paradigm (e.g Goldman Sachs) can allow? What are the incentives for organizations that are locked in a system they created for transforming to a more sustainable paradigm and allow small actors in the conversation? I still don’t have the answer but there is going to be an interesting workshop about “The capital market – a driving force in the transformation towards sustainable businesses?” hosted by the Sustainability Hub at LUSEM that I hope will bring some interesting perspective.
Let’s wrap up. Governance of complex processes (e.g. monetary policy) includes many stakeholders, all of them with different and even conflicting interest. The incentives for some of the big players to “buy” the sustainability paradigm are not very clear, and thus governments might need to develop adequate accountability frameworks to re-frame the current incentives. But then how can people that are not at this level of conversation get heard? It is not clear yet, but Transparency and Communication might be a one way to follow. Perhaps Complementary Currencies could be useful to explore this idea. But can money have agency? Believe me, I am working on it.
Inspired by these reflections, in my next post I will get a little bit more into the topic of Financial Inclusion and try to connect some of the thoughts I have been working on lately, specifically in regards to Digital Money and Blockchain. By the way, if you find my posts interesting I also post in the Agenda2030 Graduate School blog, where I will focus more in the sustainability perspective, so feel free to join the conversation there as-well!
One of the pitfalls of the Complementary Currency (CC) field of study is the lack of research in the institutionalisation and governance models. CC tend to be informal responses to social and economic tensions and rarely have engaged in a formal and structured process of institutionalisation. However, if governments want to adopt or even design CC that strengthen their communities and aim for a sustainable future, it becomes important to study how can they be managed and controlled while allowing the individuality embedded in GI. Management accounting, has already approached the governance challenge in organisations, and might be useful for the study of CC. Malmi and Brown (2008) define management controls as “all the devices and systems managers use to ensure that the behaviours and decisions (…) are consistent with the organisation’s objectives and strategies”. The authors identified five types of management controls: cultural, planning, cybernetic, reward and compensation, and administrative controls.
In CC literature the main focus has been in the practical aspects of governance (e.g. rules for participating in the CC; exchange fees; community trust-building activities) however, little has been said in regard of the management of CC as organisations. There might be a space for development in CC field of study since accountancy theory has already researched how organisations, in different context though, can be managed through control mechanisms. However, research has identified that the current management control systems “(…) can even create dysfunctional trade-offs between social, environmental, and economic objectives instead of seizing their synergies” (Lueg and Radlach, 2015, pg. 159). This presents a difficulty if the sustainable practices that the Agenda 2030 advocates for are to be embedded in CC governance models.
Lueg and Radlach (2015) studied how sustainable development has been integrated in different organisation’s control systems. The authors observed a tendency for controlling sustainable development, mainly through cybernetic and administrative controls, and suggested that this might occur due to “the fact that organisations had already employed them (cybernetic and administrative controls) to measure financial performance (…) (and) they extended them to sustainable development without considering other forms of control” (Lueg and Radlach, 2015, pg. 161). However, this p r a c t i c e o f i n s e r t i n g s u s t a i n a b l e development in controls originally designed for financial performance, creates tensions between the social, economical, and environmental values that future governance practices should consider. Thanks to technological developments, a common practice in CC is their development as digital currencies and now is possible to extract real time data, for analysing and accountancy. For example, in Kenya, Grassroots Economics Foundation has develop a blockchain based cryptocurrency that is able to record how the currency are being used in a transparent and technologically secure way, allowing communities to register data that could be used for the development of cybernetic controls that embed accountancy values that are aligned with the 2030 Agenda.
In order to better understand the importance of terminology and notions that define the values embedded in the governance mechanisms for CC, financial accountancy theory might be of use. As Zhang and Andrew (2011) argue in their study of neoliberalisation of control frameworks, accounting frameworks provide coherence and legitimacy for the practices that want to be reinforced. In the process of framing accountancy practices, Zhang and Andrew (2011) point out the importance in defining the identity of the users and the purpose of the reporting. The authors argue, that these users have a considerable influence in the conceptual and technical components of the accounting information. In this process, the choice of language and terminology becomes of great importance since “(…) the recognition of this has the capacity to empower users to engage critically with the reporting process and to consider the kinds of assumptions that underlie a report” (ibid, pg. 22). Moreover, Sandell & Svensson (2014, pg. 9) suggest that financial reports ”partake in the symbolic production and reproduction of reality”.
Language has an important role in the way organisations account to their stakeholders. Sandell & Svensson (2014) explain how through textualization and contextualisation, financial reports “explicates, explains, justifies, and makes sense of the financial measure in the financial reports” (ibid, p.6). Moreover, they describe how organisation use verbal accounts as discursive responses to evaluations and questionings, and in consequence frame the preferences and organisational processes that favour certain decisions and legitimise the interests of particular stakeholders (ibid). This framing practice can be seen in CC in many aspects. For instance, CC are usually named based on the values they want to promote, for example in Kenya the ECO-Pesa was named due to their environmental objective. In other cases they are named based on the community’s cultural identity. An example of this can be found in Spain, where a CC called “Turuta” makes reference to a dance originated in Catalunya, region known for its independence interest. CC are mainly developed for localised contexts each with unique values, interests, and problems. In consequence, even though the concepts brought from accountancy theory might be applicable to CC, it is important to study the discourses language and communication practices that are relevant for the CC. Thus, in order to use accountancy theory it is worth asking how can CC be understood as organisations embed sustainability values, motivations, and local? I believe that communicative theory of the firm will allows to approach this question.
Originally posted in https://agenda2030.blogg.lu.se/the-uns-agenda-for-financial-development/
Embedded in the 2030 Agenda Sustainable Development Goals we can find Financial Inclusion. By signing the 2030 Agenda resolution, nations aim to build strong foundations for inclusive and sustainable economic growth. To achieve these goals, policies aiming to increase productive capacities, productive employment, resilient infrastructure, and financial inclusion are promoted. It is not a surprise then that, during the 2019 United Nations High-Level Political Forum (read more), the event “Financial Inclusion for Development: Building on 10 Years of Progress” was held.
But before we enter into the details of the event, it is worth asking what definition of financial inclusion is reproduced in these “diplomatic spaces”. By reading the UN Resolution 70/1 Transforming our world: the 2030 Agenda for sustainable development, it is clear that the economic growth discourse has been established as the ruling paradigm for the SDGs. I believe we should be critical about what “growth” implies for sustainability, however the green growth/degrowth debate requires a more detailed analysis that I will address in a later post. The World Bank has defined financial inclusion as “individuals and businesses having access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way”. And who better than the United Nations Secretary-General Special Advocate for Inclusive Finance for Development (UNSGSA) to stress how: “financial inclusion is within 7 SDGs and we are under 8 global targets”. So yes, I will say that financial inclusion has relevance in the development agenda.
The world’s? financial inclusion agenda – Money is Power
Amongst the attendants at this event, we could find President of the World Bank, Melinda Gates, and PayPal’s CEO, amongst other important actors of the financial development discussion. I recommend you to watch the whole event here, however, the main takeaways I would like to highlight are: (i) Public, Private, and NGO actors need to trust each other to solve the troubles of financial inclusion; (ii) Artificial Intelligence, Blockchain, and Digital Money are key technologies for financial inclusion; (iii) Financial literacy of women would be the focus of the World Bank policy development; and (iv) one of the main focuses of financial inclusion from the SDG perspective is gathering better data to make decisions regarding private investment and policy . The discussions held in the forum were expected considering the technological trends in today’s economies. There is one last thing I do want to highlight from Melinda Gates speech: “Money is power. If we want to empower people, we have to ensure that they have means for saving”. This was one of the few references to money in a Financial Inclusion event, but a very strong one I must admit.
Reflecting on the event, key questions emerge for further discussion:
-Which inclusive economic (de)growth the paradigm should we advocate for?
-If Money is the way to empower the commons, why are financial services “delivered” by banks and not self-managed by the communities?
– Assuming technologies such as Blockchain and Digital Money are the present and future of financial inclusion, then the question is who should govern these infrastructures and under which parameters?
Through the analysis of this event I have mentioned the agenda for the financial inclusion of the developing world. However, growth paradigms and governance structures are important themes that were left without an appropriate discussion and that are worth following up on. And I will!
This blog post is based on a presentation made for a seminar hosted by Lund University’s Agenda 2030 Graduate School.
Juan Ocampo is a PhD candidate within the Agenda 2030 Graduate School at LUSEM – Lund University