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MDIA p3 FINANCIAL CAPITAL - 150420 - 160606


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MDIA ... Multi Dimension Impact Accounting ... takes into consideration the impact of everything, not just money. MDIA helps to change the decision dynamic so that social and environmental impact is taken into consideration as well as the impact on profit and financial capital. Stakeholders are increasingly aware of the negative externalities that are associated the creation of financial wealth and investors will be well advised to take note.

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MDIA p3 FINANCIAL CAPITAL - 150420 - 160606

  1. 1. MULTI DIMENSION IMPACT ACCOUNTING File: MDIA-p3-FINANCIAL-CAPITAL-150702-160606.odp Peter Burgess (c) All rights reserved MDIA FINANCIAL CAPITAL
  2. 2. CONTEXT This slideset is a Work-in-Progress and will be updated from time to time. It is part of a series that aims to enable better metrics for the complex socio-enviro-economic system that we all live in. Metrics are powerful, but they must be the right metrics. TRUE VALUE ACCOUNTING
  3. 3. The PURPOSE of all economic activity is to enable an improved Quality of Life and Standard of Living for PEOPLE. ➔ More MONEY and more STUFF has been the proxy for a better quality of life and standard of living. ➔ This has been one of the drivers of the Western style consumer economy. MULTI DIMENSION IMPACT ACCOUNTING
  4. 4. The metric for FINANCIAL CAPITAL is MONEY. But MONEY is not a good measure. The value of MONEY is determined by markets … and markets do nothing more than respond to supply and demand. Worse … nothing more than a change in sentiment will change the value of money! MULTI DIMENSION IMPACT ACCOUNTING
  5. 5. What is the origin of WEALTH? All wealth has its origin with NATURAL CAPITAL … and specifically the energy of the SUN. Over time people have converted various forms of NATURAL CAPITAL to what may be referred to as MAN BUILT CAPITAL and in turn this has become owned by PEOPLE. MULTI DIMENSION IMPACT ACCOUNTING
  6. 6. Banks and Banking Banks and banking are an important part of the economic system … but they are only the lubricant for the system, they are neither the fuel nor the engine. MULTI DIMENSION IMPACT ACCOUNTING
  7. 7. Where do bank profits come from? They are fees for services … paid by other entities in the socio-enviro- economic system that are making profits in their own sphere of activity. A strong resilient economy is one where there is a high proportion of 'real' activity and less of merely financial transactional activity. MULTI DIMENSION IMPACT ACCOUNTING
  8. 8. Central Banks and Money Central Banks now serve to 'back' the financial system in the absence of any other backing. They have unusual powers including the 'creation' of money. They cannot, however, do magic! They will be well served by better metrics that take 'everything' of importance into account. MULTI DIMENSION IMPACT ACCOUNTING
  9. 9. Capital Markets & Stock Value Something has happened over the past 50 years to enable stock prices to become more and more disconnected from balance sheet values. What this means is that a small amount of real investment can get translated into a much larger amount of financial wealth. In the bigger scheme of things this is a fiction … in other words a 'bubble'! MULTI DIMENSION IMPACT ACCOUNTING
  10. 10. Economic metrics and performance In the early days of spreadsheets in the 1980s users got a calculation warning 'circular reference unresolved' when the formulae were producing wrong results. I often think that modern economic data are giving us wrong results without sending use the warning about the entrenched problems of circular metrics! MULTI DIMENSION IMPACT ACCOUNTING
  11. 11. The singular goal of increasing financial capital is misplaced. 'Capitalism' has proved to be a powerful tool that has enabled key investments to be made for more than 200 years. It is a system that should be refined in order to optimize socio-enviro-economic performance in the 21st century. MULTI DIMENSION IMPACT ACCOUNTING
  12. 12. How to refine 'capitalism'? To refine 'capitalism', the powerful metrics of profit that provides motivation that strengthens Financial Capital should be modified so that there are metrics that give incentive to improving impact on Human Capital and Natural Capital as well. MULTI DIMENSION IMPACT ACCOUNTING
  13. 13. REMINDER This slideset is A WORK-IN-PROGRESS. It will be upgraded periodically. It is part of a series of more than 100 slidesets. Navigation to these is available here: More about the True Value Metrics initiative is at: FEEDBACK is welcome. Please email to Peter Burgess … … with a catchy phrase in the subject line so that it gets attention, and please identify the specific slideset(s) or webpage involved. TRUE VALUE ACCOUNTING
  14. 14. THANK YOU Some links and contact information: Email Peter Burgess … Peter Burgess LinkedIn profile Link to website Link to navigation to other resources: TRUE VALUE ACCOUNTING