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Five ways changing finance can finance sustainable change


Closing five vital gaps can rebalance finance in service of a diverse and thriving network of entrepreneurial climate innovators.


In brief

  • Impact entrepreneurs and innovative financial institutions are signaling the business model innovations needed to help put the world on a 1.5°C pathway.
  • With the right conditions, they and other changemakers could be going further, faster, to realize the full transformative potential of sustainable business.
  • Entrepreneurs call for cross-sector collaboration to shift mindsets and rebalance the financial system in service of a diverse ecosystem of climate solutions.    

The future is already here,” says the famous quote from Walter Gibson, “It’s just not evenly distributed.” Judging from analysis by Project Drawdown, a world-leading resource for climate solutions, this aphorism is true of better answers to the climate emergency. That analysis suggests it’s possible to achieve drawdown — the point at which atmospheric greenhouse gas levels stop climbing and start to steadily decline — as early as the mid-2040s by scaling solutions already in hand.1

Amid fatalism at one extreme and distant promises of salvation at the other, it’s important to keep reminding ourselves of this, because the time for action is now. And the good news is there’s plenty of inspiration to be found, both among the innovators featured in a new report from EY and Ashoka, and the wider impact entrepreneurship ecosystem that the global EY organization supports through the EY Ripples program.



Accentuating the positive

 

Too often, the need for climate action is defined in negative terms — of the dystopian future that must be avoided — rather than exploring and actively designing for a positive vision of the future we want. That’s why this new report  — What could finance do today to help climate innovators bridge gaps to a sustainable future? (pdf) — deliberately takes a different tack.

 

It profiles nine changemakers — including from the financial sector — who are reframing the future here and now. From forest conservation and advancing circular supply chains, to ethical banking and driving investment in nature-based solutions, they’re innovating new products, services and business models with long-term value creation for people, society and the planet at their core.

 

“Better answers to the interconnected challenges of climate change and social inequality already exist, they just need to be scaled.” says Sriram Kuchimanchi, Founder and CEO of Smarter Dharma, one of those nine featured enterprises.

 

“We’re grateful to EY and Ashoka teams for shining a light on how the financial system can better support this; also for EY Ripples workshops, run off the back of this research, to brainstorm ideas that can help us achieve scale faster.”


Better answers to the interconnected challenges of climate change and social inequality already exist, they just need to be scaled.

Rebalancing finance in service of changemakers of all sizes

As impressive as their achievements are, in-depth interviews with their leaders crystalize a number of important gaps that not only act as anchors on impact enterprises’ capacity to scale, but also the ability to realize the systems-level change and sustainability gains the world needs in the race to net zero and beyond.

Every year over the next decade, the world will need to mobilize trillions of dollars to transform business, decarbonize the economy and enhance climate resilience. At COP26, financial institutions with more than US$130 trillion in assets under management committed to supporting the world achieving a state of net zero by 2050.2 Making sure that a fair share of that capital flows to entrepreneurial innovation is vital and not just in terms of impact enterprises capacity to achieve scale faster.


At COP26, financial institutions with more than
in assets under management committed to supporting the world achieving a state of net zero by 2050.

Sustainability is everybody’s business and the healthy circulation of capital to small and mid-sized enterprises at local and regional scale, not just to large corporations, is critical. Their agility, ingenuity, and deep understanding of people and place is key to accelerating the spread of culturally relevant climate innovations. Closing the following gaps offers five ways to create far more favorable conditions for those innovations to flourish and achieve their full transformative potential:



Rebalancing finance in service of sustainable innovation requires increased collaboration between financial institutions, large corporations and governments. 


Calling for urgent cross-sector collaboration

 

None of these interventions should be made in isolation, nor in one-size-fits-all fashion. As entrepreneurs’ calls to action imply, rebalancing finance in service of sustainable innovation requires increased collaboration between financial institutions, large corporations and governments — not only to re-establish a different set of guiding principles, but also to continually sense and respond to the actions, behaviors and relationship dynamics they spawn.

 

It won’t be easy, but the prize is worth the effort. It’s a key step toward accelerating the advent of a livable, sustainable future — one in which we can meet the needs of current and future generations within the means of a flourishing planet; where long-term business success flows from solving the problems of people and planet, and better answers to the climate crisis are more equitably available to all.



Summary

With the world needing to mobilize trillions of dollars to transform business, decarbonize the economy and enhance climate resilience, the financial system has a critical role to play in realizing a sustainable future. A new report from EY and Ashoka highlights the importance of closing five critical gaps to rebalance finance in service of a diverse and thriving network of entrepreneurial climate innovators.


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