Calling for a rethink of our financial system

In September 2024, the DT Lab, TIPC and Eu-SPRI gathered public and private investors in Barcelona for an Engagement Week, which built new partnerships and an emerging community of practice dedicated to profound systemic change. Under the theme of ‘Scaling experimentation: A catalyst for transformative system change’, participants created the spaces and conditions for fresh exchanges between public and private actors, and new narratives around the agency of investors in tackling transformational failure.

On day three, we kicked off with a keynote from partner of the DT Lab, Hans Stegeman, Chief Investment Strategist at Triodos, titled: “Rethinking scaling: The future of economic growth and the role of finance” about transforming for post-growth finance. You can watch the full keynote and Q&A here.

“Our rules, we have invented ourselves. We can change everything we want if we want to.”

Stegeman used this platform to call for a rethink of our financial system, with the aim to address interconnected crises effectively. Stegeman highlighted the need for fundamental change in economic structures and a mindset that equates growth with progress. He discussed how the current economic system – one that prioritises growth – is not improving global wellbeing, as measured by indexes like the Sustainable Development Goals Index and the Human Development Index.

“Globalwellbeing (…) is not increasing as much as we want it to be. Always exceptions from country to country. But the global picture is very, very clear. So if you have a system that’s not doing okay and it does not deliver for anyone, maybe we should think a little bit bigger.”

Stegeman highlighted problems with the finance system:

·      It’s a highly leveraged system – which means we have a lot of debt

·      We have an increased disconnect with the real economy

·      It’s an extractive system – a system that's completely disconnected from the planetary boundaries

·      It’s a concentrated and non-diverse system – the power lies foremost with asset managers

·      This leads to unequal outcomes – those who are already rich are served better than those who are not

·      It's normative and asymmetric – it’s easy for the financial sector to extract rather than regenerate 

“We have made a system dependent on economic growth.”

Therefore, we need to change the system.

Green growth is often pointed to as a solution to achieving sustainability while still prioritising growth. Yet, Stegeman drew attention to the fact that although it’s appealing, it has been debunked. It’s true that some countries show decoupling of carbon emissions from growth, but it's not happening fast enough, and resource use and biodiversity loss remain unaddressed.

Stegeman then turned to the concept of post-growth, speaking about a post-growth strategy and post-growth pathways. An approach that would involve phasing out certain sectors while allowing others to flourish.

“You have some sectors that really have to be phased out and others that need to flourish and to blossom”

This is a strategy that Stegeman believes will be beneficial in the long term. Stegeman highlighted the need to connect to real economic outcomes. Every investment activity must be connected to something in the real economy that we understand. This would mean no banking on the future and taking ecological limits into account.  

This was picked up during the discussion by Anabel Marín, from the Institute of Development Studies, who highlighted that when discussing post-growth or degrowth narratives, it is key to consider how this affects different areas of the world, including low to middle income countries. Stegeman wrapped up the session by stressing the need to transform certain sectors, not just phase them out. You can watch the full keynote and Q&A here.

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By Jess Madrigal-Fletcher and Natalie Laurence