Today’s global economy has become increasingly financialised. Driven in part by short-term investment mandates focused solely on the value of financial capital, this trend has in turn undervalued people and nature, exacerbating systemic global issues from climate change and biodiversity loss to socioeconomic inequality and geopolitical conflict. The disconnect between the value of financial capital relative to real-world human, social, and natural capital results in a growing disconnect between financial markets and the real economy. Results can be witnessed in record-high equity valuations – particularly in US markets – and global debt levels, even as our natural habitat deteriorates, the climate changes, and inequality grows. Earth and humanity’s balance sheet are not in balance. What happened, and how can we fix it?
Reform is urgently needed, but practical steps are required with appropriate time and resources allocated by global actors, including government and the private sector. This paper – a collaboration between Earth4All, the Predistribution Initiative (PDI), Beyond Bretton Woods (BBW), and Africa Investor (Ai) – charts an evolutionary path, focusing especially on the role that capital markets investors can play in building a more regenerative and inclusive economy that supports the long-term wellbeing of people and nature. It is intended to be a working blueprint, to be refined further with various market actors, policymakers and regulators, and their stakeholders.
