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Rewired.earth building a sustainable future - september 2021 (4) (1) (2)

Chris Skinner
Chris Skinner
Chris SkinnerAuthor, Speaker and Troublemaker at 11:FS

COP26 and sustainable futures

Rewired.earth building a sustainable future - september 2021 (4) (1) (2)

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rewired.earth
building a sustainable future
september 2021
rewired
.earth
combining the UN SDGs
with the WEF metrics
to create a universal
sustainability square
The market need
The market has become increasingly broken as investors
and consumer have changed their requirements:
Investors only sought the highest financial return for
the lowest risk. Increasingly they also want to ensure
their investments protect the planet and society.
Consumers only sought the highest quality goods, for
the lowest price. Increasingly they also want to ensure
their purchases don’t damage the planet and society.
The markets still optimise for the original
requirements. Price comparability, transparent
financial reporting, audits to ensure confidence, and
clear demand from investors and consumers enable a
level-playing field and support an effective market.
However, the metrics required to optimise product price
and best return investment are narrow in scope and have
inadvertently driven the planet towards societal and
ecological disaster.
Environmental, Social and Governance (ESG) metrics
widen this scope and drive the transformation to a
sustainable and responsible society. But, data is
currently difficult to collect, has poor coverage &
quality, provides weak market signals preventing value
pools forming, and has no agreed standard or approach.
If we wait for markets to naturally iterate towards
measuring what matters, it will be too late.
rewired.earth aims to harness the transformative power of the
markets to protect our planet and society. It brings
together collaborators from across society.
To succeed, we need to create information, equivalent in
quality to financial data, for the new requirements of
investors and consumers. There are a number of building
blocks required to build a scalable solution:
“Sustainable Framework”: We need a simple framework that
works for all participants enabling them to talk a common
language and make informed decisions.
“Sustainable Demand”: As individuals we have no way of
communicating what we care about - the market does not know
where the money is.
“Sustainable Transparency”: Currently, the more companies
look at actual sustainability including supply chain, the
worse they look compared to an organisation that hasn’t
tried. We need a framework that rewards transparency.
“Sustainable Transition” - Currently ESG data, is backward
looking and doesn’t allow a company or fund to convey what
they are hoping to achieve on their sustainability agenda
over the medium term. We need investors to be able to fund
the transition they want to see and companies to be rewarded.
“Sustainable Future” - At the moment activities focussed on
saving the planet are not valued by the market. The framework
needs to bring charities, foundations, and sustainable
behaviours into the scope of the market and the supply chain.
Sustainability Framework - A common language
Prosperity
Principles of Governance
All investments, products and services should include sustainability indicators to enable fact-based decisions for
consumers, investors, lenders, corporates and policymakers. We can do this with one framework that combines the United
Nations Sustainable Development Goals & World Economic Forum Sustainable Value Creation metrics.
The UN Sustainable Development Goals provide country level commitments, whilst the World Economic Forum provides
company level metrics. By bringing the UN Sustainable development goals together into a square, we can create a
universal reporting solution, readable across devices. The square is structured around the World Economic Forum
framework for Measuring Stakeholder Capitalism, providing four pillars: Planet, Prosperity, People and Principles of
Governance. This supports a strong connection with the Sustainability Standards Board.
However, until now neither set of metrics or targets were usable in an integrated way for market demand or supply.
Planet
People
Sustainability
Framework
Sustainable Demand - What does the world care about...
Today, the demand signals for ESG alignment are weak. The definition of ESG is nebulous and so a coherent market response
will not occur. To drive a real change of behaviour across asset allocation and in corporate boardrooms, we need to know
what investors care about and what they want their money to do.
The sustainability square enables us to capture a view from each individual (as investors, consumers, employees and
citizens) about what they care about. Individual’s priorities can be mapped to the square to create an “Sustainable
Demand” view. Once combined for all individuals, strong signals are created for markets regarding society’s urgent
priorities.
Integrating the Goals
By allowing individuals to share their
values and priorities as they invest
and purchase, we can build a repository
of demand both at the macro level, the
fund/pension level, and the product
level. Enabling us to identify key
priorities that have associated
investment available.
This will enable the generation of the
quantifiable “sustainable value pools”.
I care a lot
I care a little
I care
I care but later
$70tn assets with ESG mandates
Climate Action $63tn
Reduced Inequalities $49tn
Life on Land $47tn
... ...
Knowing that 90% of your potential investor
universe cares about “Climate Action”
underpins the creation of value pools.
These pools become available to companies
as they change their behaviour. This
creates a direct link between sustainable
behaviour & increasing shareholder return.
For the first time an effective financial
business case can drive sustainable
decisions, projects, products and services.
Knowing the market demand is only one part of the problem. We also need to fully understand the impact of our investments
and our purchases. This cannot just be at the company level that we are investing in or buying from. It has to include
the full supply chain that enables the product to be produced or for the financial return to be generated.
However, as mentioned with the current set up, the more an organisation looks the worse they seem. Importantly, in the
Sustainable Transparency Square, unless there is an understanding of the supply chain impact each square can only be red.
This means that for a square to become green the end-to-end sustainability of the business needs to be understood.
Planet Prosperity Sustainable Transparency
People Principles of
Governance
NB The Sustainable Transparency Square is both human readable (eg. if the top left hand quadrant is broadly green it is
good for the planet) and device readable (eg. depending on the position of the dots within each square a detailed
understanding of sustainability for the product, investment or service is accessible).
Embedded QR Dots in each
square (camera readable)
Quadrant (dot=yes, gap=no):
1 - Entity Impact
2 - Supply Chain Impact
3 - Supply Chain Coverage
4 - Audited
Dot Position:
Top Left – 100% coverage
Top Right – 75% coverage
Bottom Left – 50% coverage
Bottom Right - 25% coverage
Sustainable Transparency - confidently understanding your impact
Not Rated Highest Rating
Colour Scale
Sustainable Transparency - Supply chain look-through by layering squares
Retailer
Gas producer
Logistics
Utility Factory
Products and services in today’s world are highly complex, with many different components and participants within supply chains. The
market is currently focussed on a top down approach - creating models as a proxy for what is likely to be going on in a supply
chain, creating solutions to compare the outputs from different analyst companies. At the moment we are trying to assess what is
going on in a company from the outside. At best this is from a qualitative sustainability report, at worst it comes from a
modeller’s best guess. This is really just focussing on the symptoms of a broken market.
By looking at building the data bottom up we can take a different approach. Each audited entity globally already collects data that
would enable us to produce the first version of the sustainable transparency square. Indeed much of it is audited or captured by a
third party. Capturing the data from inside the company, uploading it into a platform where only the corporate and the auditor can
see the full data and then sharing apportioned data for the square to the customer base through the supply chain, would enable a
simple approach to deliver transparency.
This approach harmonises sustainable and responsible reporting across all industries, and enables the consumer to understand the
impact of all of their decisions in the same way, be it purchasing a box of cereal or choosing where to invest their pension. This
stack can then be layered further to roll up to entire companies, investment funds, countries and the world, providing a far richer
picture of our economies than simplistic GDP metrics.
As data improves we can move from entity level to product.
Ad

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Rewired.earth building a sustainable future - september 2021 (4) (1) (2)

  • 1. rewired.earth building a sustainable future september 2021 rewired .earth combining the UN SDGs with the WEF metrics to create a universal sustainability square
  • 2. The market need The market has become increasingly broken as investors and consumer have changed their requirements: Investors only sought the highest financial return for the lowest risk. Increasingly they also want to ensure their investments protect the planet and society. Consumers only sought the highest quality goods, for the lowest price. Increasingly they also want to ensure their purchases don’t damage the planet and society. The markets still optimise for the original requirements. Price comparability, transparent financial reporting, audits to ensure confidence, and clear demand from investors and consumers enable a level-playing field and support an effective market. However, the metrics required to optimise product price and best return investment are narrow in scope and have inadvertently driven the planet towards societal and ecological disaster. Environmental, Social and Governance (ESG) metrics widen this scope and drive the transformation to a sustainable and responsible society. But, data is currently difficult to collect, has poor coverage & quality, provides weak market signals preventing value pools forming, and has no agreed standard or approach. If we wait for markets to naturally iterate towards measuring what matters, it will be too late. rewired.earth aims to harness the transformative power of the markets to protect our planet and society. It brings together collaborators from across society. To succeed, we need to create information, equivalent in quality to financial data, for the new requirements of investors and consumers. There are a number of building blocks required to build a scalable solution: “Sustainable Framework”: We need a simple framework that works for all participants enabling them to talk a common language and make informed decisions. “Sustainable Demand”: As individuals we have no way of communicating what we care about - the market does not know where the money is. “Sustainable Transparency”: Currently, the more companies look at actual sustainability including supply chain, the worse they look compared to an organisation that hasn’t tried. We need a framework that rewards transparency. “Sustainable Transition” - Currently ESG data, is backward looking and doesn’t allow a company or fund to convey what they are hoping to achieve on their sustainability agenda over the medium term. We need investors to be able to fund the transition they want to see and companies to be rewarded. “Sustainable Future” - At the moment activities focussed on saving the planet are not valued by the market. The framework needs to bring charities, foundations, and sustainable behaviours into the scope of the market and the supply chain.
  • 3. Sustainability Framework - A common language Prosperity Principles of Governance All investments, products and services should include sustainability indicators to enable fact-based decisions for consumers, investors, lenders, corporates and policymakers. We can do this with one framework that combines the United Nations Sustainable Development Goals & World Economic Forum Sustainable Value Creation metrics. The UN Sustainable Development Goals provide country level commitments, whilst the World Economic Forum provides company level metrics. By bringing the UN Sustainable development goals together into a square, we can create a universal reporting solution, readable across devices. The square is structured around the World Economic Forum framework for Measuring Stakeholder Capitalism, providing four pillars: Planet, Prosperity, People and Principles of Governance. This supports a strong connection with the Sustainability Standards Board. However, until now neither set of metrics or targets were usable in an integrated way for market demand or supply. Planet People Sustainability Framework
  • 4. Sustainable Demand - What does the world care about... Today, the demand signals for ESG alignment are weak. The definition of ESG is nebulous and so a coherent market response will not occur. To drive a real change of behaviour across asset allocation and in corporate boardrooms, we need to know what investors care about and what they want their money to do. The sustainability square enables us to capture a view from each individual (as investors, consumers, employees and citizens) about what they care about. Individual’s priorities can be mapped to the square to create an “Sustainable Demand” view. Once combined for all individuals, strong signals are created for markets regarding society’s urgent priorities. Integrating the Goals By allowing individuals to share their values and priorities as they invest and purchase, we can build a repository of demand both at the macro level, the fund/pension level, and the product level. Enabling us to identify key priorities that have associated investment available. This will enable the generation of the quantifiable “sustainable value pools”. I care a lot I care a little I care I care but later $70tn assets with ESG mandates Climate Action $63tn Reduced Inequalities $49tn Life on Land $47tn ... ... Knowing that 90% of your potential investor universe cares about “Climate Action” underpins the creation of value pools. These pools become available to companies as they change their behaviour. This creates a direct link between sustainable behaviour & increasing shareholder return. For the first time an effective financial business case can drive sustainable decisions, projects, products and services.
  • 5. Knowing the market demand is only one part of the problem. We also need to fully understand the impact of our investments and our purchases. This cannot just be at the company level that we are investing in or buying from. It has to include the full supply chain that enables the product to be produced or for the financial return to be generated. However, as mentioned with the current set up, the more an organisation looks the worse they seem. Importantly, in the Sustainable Transparency Square, unless there is an understanding of the supply chain impact each square can only be red. This means that for a square to become green the end-to-end sustainability of the business needs to be understood. Planet Prosperity Sustainable Transparency People Principles of Governance NB The Sustainable Transparency Square is both human readable (eg. if the top left hand quadrant is broadly green it is good for the planet) and device readable (eg. depending on the position of the dots within each square a detailed understanding of sustainability for the product, investment or service is accessible). Embedded QR Dots in each square (camera readable) Quadrant (dot=yes, gap=no): 1 - Entity Impact 2 - Supply Chain Impact 3 - Supply Chain Coverage 4 - Audited Dot Position: Top Left – 100% coverage Top Right – 75% coverage Bottom Left – 50% coverage Bottom Right - 25% coverage Sustainable Transparency - confidently understanding your impact Not Rated Highest Rating Colour Scale
  • 6. Sustainable Transparency - Supply chain look-through by layering squares Retailer Gas producer Logistics Utility Factory Products and services in today’s world are highly complex, with many different components and participants within supply chains. The market is currently focussed on a top down approach - creating models as a proxy for what is likely to be going on in a supply chain, creating solutions to compare the outputs from different analyst companies. At the moment we are trying to assess what is going on in a company from the outside. At best this is from a qualitative sustainability report, at worst it comes from a modeller’s best guess. This is really just focussing on the symptoms of a broken market. By looking at building the data bottom up we can take a different approach. Each audited entity globally already collects data that would enable us to produce the first version of the sustainable transparency square. Indeed much of it is audited or captured by a third party. Capturing the data from inside the company, uploading it into a platform where only the corporate and the auditor can see the full data and then sharing apportioned data for the square to the customer base through the supply chain, would enable a simple approach to deliver transparency. This approach harmonises sustainable and responsible reporting across all industries, and enables the consumer to understand the impact of all of their decisions in the same way, be it purchasing a box of cereal or choosing where to invest their pension. This stack can then be layered further to roll up to entire companies, investment funds, countries and the world, providing a far richer picture of our economies than simplistic GDP metrics. As data improves we can move from entity level to product.
  • 7. Sustainable Transition - Enabling corporates with clear demand signals The lack of agreed approach in the market today means corporates currently follow paths broadly defined by rules present in any given market, their own proprietary goals, or those set for them by various stakeholders. This approach is not working efficiently - for example, corporates are setting Net Zero commitments that are partially aligned to demand signals in the market. The Sustainable Demand square enables corporates to set their sustainability targets and develop their products and services to respond to strong consumer and investor demand signals. Current Product Offering Weak Demand Signal New Product Offering Incremental and partial innovation Current Product Offering Strong Demand Signal New Product Offering Demand aligned innovation - responding to clear funding rules and acting on the changes customers want to see Net Zero Commitment
  • 8. Sustainable Transition - Progress over time and financing the transition To drive investment in the transition and provide transparency around investment objectives, the square can be used to show both the current ESG characteristics of a fund and where it will be in the future. Current Fund Characteristics Five Year Target This enables individuals to invest in companies or funds that do not currently meet their criteria but have plans in place, verified by the auditor, as to how they will move the business on to a more sustainable footing. The move to red to green across various of the sub-squares will enable different value pools to be access - creating an increase in share price. This will enable funds to prioritise financing the transition over allocating capital to an increasingly restricted investment universe of corporates that already meet defined ESG criteria.
  • 9. Sustainable Future - Expanding the range and impact of the markets Markets currently treat nature as a free and limitless good, with existing financial metrics failing to capture total impact of corporate and consumer activity. Currently: The Sustainable Transparency Square addresses this market break: cost of manufacture financial cost man-made capital labour natural & social capital Today this is not accounted for and is not considered part of the cost of manufacture, leading to inefficient and unsustainable market activity cost of manufacture financial cost man-made capital labour natural & social capital Accounting for total costs would radically transform investment and consumption, unlocking the transformative power of financial markets Forest elephants are worth $40k dead and $1.75m alive. Currently there is only a market for dead elephants! Rebalance Earth is an example of how we could create new funding streams which benefit companies, communities, shareholders and consumers. They track the lives of forest elephants daily to ensure they are alive, each day the elephants normal behaviour captures and stores significant carbon dioxide. By accounting for various species and ecosystems effectively, we can create the ability to offset a wide array of negative impacts in a verified crypto asset platform. This allows companies to benefit their shareholders whilst investing in schemes that fundamentally protect the planet and society. The market participants will actively benefit from doing the right thing. This changes the markets from being one of the most destructive forces - to being the most protective.
  • 10. What Next... Looking across the global markets today many companies are working on new products for the sustainability agenda. However, because this is a systemic market requirement - competing will actually make the problem worse. Imagine a world where accountants competed on how to present financial data - what costs or liabilities to include. Markets would become inefficient; trust would fail. That is currently what we are doing on ESG. Large companies will broadly maintain their market share whether they compete or collaborate on the sustainability agenda. However, by competing on the symptoms of a broken market they will destroy the planet, by collaborating to fix the market we stand a fighting chance of protecting the planet and society. The approach outlined above is not rocket science - it is in fact quite straightforward. Many organisations have already shown interest in the thinking and are committing resources to verify key elements of the approach. Once combined with consumer led pressure - significant change could be achieved in a relatively short period of time. Will you collaborate with the broader market to build a sustainable future for the next generations... Together we can create a rewired.earth
  • 11. thank you find out more and join us at https://rewired.earth