Value creation is a complex, multifaceted landscape of tested and potential meaning.
- For some, it means turning a given amount of money into more money.
- For others, it means creating non-financial value through smart, innovative enterprise.
- Then there is the macrocritical question: How much value can a given society create?
- And on what foundational resource base?
In any negotiation, each party brings their own specific sense of value, and aims to work toward their own intended valuable outcome. Whether value creation in their exchange is zero-sum or mutual and compounding may determine whether they are positioned to create sustainable value—especially for others not present in the negotiation.
Who, specifically, holds a stake in what is being decided is a critical question. We now know industrial systems tend to generate stakes—for better or worse—for very large numbers of people, and for the health and resilience of natural systems that sustain life.
Environmental and climate science trace conditioning factors that determine these stakes. We cannot honestly say value is being created in a scenario where financial gains are tied directly to widespread destruction of valuable natural systems that cannot be rebuilt or replaced.
‘Integrated & holistic’
This wider understanding of value creation, as an integrated and holistic endeavor to which everyone in society contributes, will be critical for the coming clean finance transition.
- Do energy systems provide comfort and quality of life, while enhancing human capability—without costly ripple effects that undermine value creation across all of society?
- Do food systems produce sufficient nutrition for all people, sustainably and without pushing beyond planetary boundaries?
- Do banking and finance make room for everyone, including the least affluent people and communities?
- Do international lending practices account for vulnerability of people, communities, and countries, and reward investors and institutions that support improved overall human wellbeing and systemic resilience?
There is, embedded in the idea of investment, a recognition that one connects oneself to the fate of an endeavor and its ability to create value. Without the integrated and holistic understanding of value creation, an increasing number of investments will produce an overall reduction in value, harming those invested—through market risk, transition risk, and climate-related liabilities.
Beyond zero-sum thinking
Eventually, it cannot be financially rewarding to invest in activities that undermine nature and climate resilience and the wider health and wellbeing of people and societies.
- New modes of value creation, new business models, new metrics, and newly optimized enabling policies, will emerge to fend off these unsustainable costs.
- Banking operations and business models will evolve to capture this opportunity.
- Investors and industries that build credibility as direct contributors to wider value creation and the building of resilience across whole economies, will find favor in markets, in long-term portfolio allocations, and in public incentives.
- The very idea of what constitutes industriousness, efficiency, and enterprise value, will evolve, so that fewer and fewer segments of the overall economy will be able to justify any investment in polluting practices.
The mid 21st century—from 2030 through 2070—will see new business strategies coming together around this integrated and holistic understanding of value creation. This decade will see multiple great disruptions. If managed smoothly, they will generate immediate benefits to industry and society; if dominant market players work to block progress or deny the benefits of transformation to the widest possible population, the adjustment will cost them far more.
If we go beyond zero sum thinking toward collaboration for mutual gains, we can mitigate risk, reduce harm and cost, and accelerate the shift to sustainable practice. The clean economy will center on strategies that go beyond zero sum thinking. The operative question will be: what can our collective efforts deliver—for each of us, and for all those that have not historically been considered?
Liberate Data 