PLACE FINANCIÈRE & MARCHÉS — Marchés financiers

10X6 FINANCE: IMPACT INVESTING

“I’m a capitalist and I also believe in sustainability”



Thomas Seale, independent director de Seale Advisory, intervient dans le cadre du 10x6 Finance: Impact investing.

Un témoignage issu du 10x6 Finance: Impact investing, organisé par le Paperjam Club le mercredi 27 mai en livestream. (Vidéo: Marc Blasius/Maison Moderne)

Voici le texte de l’intervention de Thomas Seale lors de ce 10x6:

“I am a free market capitalist. I also believe in sustainability. Most people think these are incompatible. I believe the opposite: markets can solve global problems.

I will give you three examples, introducing each topic with a rock song. Try to guess who it is? That is Bob Marley, 1979, Africa Unite.

Poverty

In Bangladesh money lenders had ‘enslaved’ borrowers, mainly women. Traditional banks did not provide credit. In 1972, Muhammad Yunus invented a model where credit worthy groups of women would collectively take on debt for members. Yunus’s first loan was 27USD to a group of 42 women.

Microfinance (is)… one of the most promising and cost-effective tools in the fight against global poverty. Microfinance is a purely market based phenomenon which helps the destitute escape from poverty.

That is the first environmental rock song, from Neil Young back in 1970, After the Gold Rush.

Climate Change

Most of the world is trying to reduce fossil fuels.

The EU has published a 400 page report on how to define ‘green’ (so called Taxonomy).

In free market economies, ‘negative externalities’ exist, like pollution. The most efficient way to correct these market failures is through taxation rather than regulation. A fiscally neutral, carbon tax is a far more effective solution, recommended by 27 Nobel Prize economists.

The IMF agrees: ‘To limit global warming to 2 degrees… large emitting countries… should introduce a carbon tax (of)… $75 a ton…’

Because the proposed tax is fiscally neutral, all but the most wealthy households receive a net rebate.

No need for heavy regulation of the economy, let markets work.

This is Supertramp from 1974, Crime of the Century

What is the crime of the century?

In 2000, a New Zealand economist wrote an article entitled ‘Social Policy Bonds’. In it he says ‘… government… programs suffer from a fatal flaw that almost guarantees they will be ineffectual… they reward people for undertaking activities, rather than for delivering… outcomes.’ His solution is to create a financial instrument which rewards the owner based on an achievement. For example: a local government issues a bond and will pay the bond owner 10 million EUROS if crime is reduced by 50%. Freely traded, these bonds will naturally be purchased at a low price by those who can take concrete measures to reduce crime, such as local businesses or social organisations. Something similar has been tried in the UK to lower criminal recidivism, which over 5 years led to a generally positive outcome.

I believe that the Luxembourg financial sector should consider designing a social bond to help, for example, women in fragile environments or improve literacy.

Conclusion

Over the past 200 years, capitalism has created the most significant improvement in human welfare since the invention of fire. Today, we are trying to solve social and environmental problems by imposing regulation and big government solutions. As a result, we will strangle our economies. This is not sustainable.

The ‘Invisible Hand’ of Adam Smith can be applied to solve today’s problems. Such solutions are far more effective and preserve the dynamism and power of markets.

Thank you.”