The mission of Arketa Institute for Post-Growth Finance is to normalize the conversations about ecological economics and a post-growth economy in the worlds of economics and finance.

We recently published our first paper: By Disaster or Design as our first effort to educate finance, sustainability and economics professionals about the limits of the Neoclassical Economics we all learned in school (which largely leaves out energy as an input and waste as an output).

In the place of Neoclassical Economics, we encourage all professionals to use Ecological Economics as the economic basis for our financial, political and cultural decision making. We argue that Ecological Economics is a better model because it adequately accounts for the energy and material resources that go into the production process and the waste that such processes produce.

Because we have not been adequately managing these energy and material resources, we have pushed past six of nine planetary boundaries, damaging the very life support system on which not only our economies, but our survival depends.

We introduce a degrowth path; with policies such as a four-day-work-week, universal basic income, universal basic services, reducing subsidies for oil and gas production, a just transition, anti-planned obsolescence laws, a right to repair, and other policies that can lead us to a post-growth world in which our decision making is guided by what keeps humanity within planetary boundaries and not what grows the economy – a foolish goal in the long term on a planet with finite resources.

Finance must change

Finance now makes up about 20 – 25% of the global economy and sits at the center of the economic model that calls for eternal growth on a planet with finite resources, and finite ways to deal with the waste that results from the use of those resources.

Finance must change if we are to move from an unsustainable economic model that is ultimately destroying our life support system, to a post-growth economy that operates within planetary boundaries.

The notion of sustainable investing that promised to address our environmental problems such as climate change, biodiversity loss and ecological overshoot was destined to fail because the menu of investing options to choose from are inherently unsustainable. These investing options are based on a Neoclassical Economics model. The current practice of sustainable investing is rife with greenwashing (both intentional and unintentional) because the system itself is unsustainable. Our current efforts in sustainability are little more than window dressing that cannot affect the change needed. They are akin to painting the house while it is on fire and calling that progress.

We envision a better way to conduct finance; one in which we move away from the over-financialization of our lives (think complex mortgage backed securities of the 2008 housing bubble) and returning finance to the job of meeting the physical local needs of communities to grow when appropriate, but also to help maintain our watersheds, our forests, our biodiversity and the life support system in need of restoration.

Finance as an industry will likely shrink in such a post-growth world, but we see no alternative, as continuing along the current path will only hasten the environmental and social disasters ahead of us.

We recommend five principles to guide finance to a post-growth compatible financial system:

1. A shared foundational goal: wealth as wellbeing within planetary boundaries
2. Bring finance back down to earth, invest in real economy degrowth
3. Become more transparent
4. Be more democratic
5. From “too big to fail” to “small enough to be resilient” (be smaller and more local)

Some of these principles already being put into practice by financial firms are:

• Community-Development Financial Institutions (CDFIs) who tend to be local, mission driven financial institutions often focused on underserved communities.
• Bioregional Financial Facilities (BFFs) connect pools of capital to regenerative projects and initiatives, structuring these capital flows using living systems principles and leveraging the leadership of people on the ground in those regions to manage these resources.
• Ethical banks as defined by Florian Barras that: (1) foster a sense of solidarity with their moral mission, (2) which requires having a clear moral framework and, especially, choosing an ethical framework. (3) These preconditions allow integrating inefficiency within the organizational model, which brings a space for slowness, moderation, and conviviality. (4) This space allows forging participative democracy within the organization, for stakeholders to experience autonomy within the organization itself.”
• Banks that put environmental stewardship above growth. Such banks operate with environmental and social criteria that must be met in order to advance credit. These banks may also charge different rates based on the environmental impact of a project.

The Way Forward

Our current financial and economic systems are built on the expectation of perpetual growth. Even a modest expectation of two percent growth globally means that the global economy would double in thirty-five years. That mandate for growth is incompatible with a world in which we must move back to the safe side of our planetary boundaries.

By recognizing the limits of our planet and accepting physical reality, we can better prepare for a post-growth economy. We can lay the foundations for a society that can thrive within our planetary budget and move towards an economy where growth will happen but is no longer a measure of economic success.

Some of our peers are already adopting this mindset. Examples of institutions adopting this post-growth model include Triodos Bank in the Netherlands, or Alternative Bank Schweiz based in Switzerland. Each bank looks to serve local community needs while operating within ecological limits. Other financial firms can develop their own models that prioritize serving client needs within planetary boundaries.

This will take a change in not only finance, but in politics, culture, and importantly in our own identities. The way we do business and the way we live our lives is ingrained in a growth at all costs mindset. But that “cost” is the very systems that keep us alive.

Finance can follow this new path. We believe it must.

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