A new idea for Investment in Deep Ecology

Deep ecology is a natural philosophy that recognizes the nature and its parts as living systems that have their own worth, independent of the services they provide for humans. It was named by and perhaps best described in the work of Norwegian philosopher Arne Næss. As a practical approach to life it involves systems thinking, to understand healthy relationships and the roles between parts of living networks.

That’s more like understanding how characters create the themes of a play than “cause and effect”. Since all ecologies develop by building and maintaining their energy using processes there are also observable boundary conditions one can use to help understand the more complex relationships. That traditional paradigm of science would examine living systems as chains of deterministic effects, the way logic and computers work. So those metaphors are less useful even if they are the dominant way of explaining things in our culture.

How money can take care of our world

The idea grew out of conversations with John Fullerton, Hazel Henderson, Leland Lehrman and Kenneth Davies, looking for new ways to define ethical investing that could be defined and implemented as the world searches for what’s wrong with money. At a conference I had asked a question about how investors could avoid the main cause of our pressing environmental impact problems.

Or present impact problems all seem to have emerged as hidden effects of expanding solutions for other things. Like resource exhaustion or CO2 or confusing complexity, our impact problems are direct effects of growth, but which are “out of sight and out of mind” up until they’re suddenly big problems. They tend to only get recognized as the scale of their hidden liabilities destabilize something else. In harming the environment being profited from it makes once reliable investments risky rather than secure too.

So IDE is an idea of how investors can switch to taking a fiduciary role toward the environment they are profiting from, before their traditional motive for ever increasing profits runs amuck. It’s just a concept, but seems like it might actually have about the right mix to be a vehicle for attracting and serving the presently rare truly enlightened investor. I’d be very interested in comments.

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If the impacts we now see as unsustainable mostly come from hidden effects of our previously reliable solutions, people need to recognize when the seemingly limitless “honey moon” period of secure high rates of return from new growth opportunities is coming to an end. To maintain high rates of returns and avoid doing damage would be the object.

The question is then one of how investors could be alert enough to change their habit of growing investments in time, so the natural consequence of pushing hidden liabilities over the hidden limits of resilience for the environment they are profiting from might be avoided. If an observant investor sees the end of that “honey moon” growth period coming, and harmful impacts about to emerge, however, the usual habit is just selling out. That only shields the profits of the seller, and neither the health of the environment nor the future earnings of the buyer.

Keynes proposed something of that kind, for the limits of growth in general. His idea was to limit new savings before an economy runs into diminishing returns, to avoid otherwise automatic overinvestment ending in financial breakdown as nature imposes physical limits. He was thinking globally, but to introduce new ideas someone would have to start, and be a catalyst for others to follow.

Switching from profiteer to fiduciary.

I think it might really work in practice as a way for investors who want to switch from the role of profiteer to the role of fiduciary, and become custodians of the interests of the environment they are profiting from. It’s also a capital and profit preservation scheme, of course, helping to prevent rates of economic profit from declining due to over-investment, that undermines natural capital.

Part of it is also trusting that real investors, as people, would only make the choice out of a true desire to take a fiduciary role in serving the intrinsic interests of their the natural world, the source of their earnings. As a deep ecology investor recognizes a natural limit to compounding investment, and chooses to spend rather than multiply their returns, it would not be exclusively to spend their earnings on themselves or for charity. It would also involve practical efforts to serve the interests of the living things and active environments being profited from.

The idea is that might become a new class of ethical investment and standard of sustainability practice, that could start small and develop, become recognized as a new kind of secure investment practice in the financial and tax codes, etc. It would let investors express their values in deep ecology while securing the environment they are profiting from and their own returns, as a reward for doing good works. Is that something worth talking about?

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The first question I got was:

“I am of course interested in the dialogue, but I’m unclear about what you are proposing. Can you come up with an example, or use the Capital Institute’s grasslands investment project, and advise how it would apply to make the investors into the fiduciaries you are calling for?”

Yes, that first description was quite brief and casual. It’s a version of Keynes idea to manage finance for a soft landing for growth, as investors stop retaining their investment earnings, stabilizing total investment while earning rates are still high.

The natural cap for investment savings is otherwise the point when the economies stop producing any net returns on investment, a condition of general economic failure. That would naturally comes about as the hidden liabilities of growing exploitation of the environment emerge.

As the point where the environment changes from providing growing opportunity to growing hidden liabilities, investors seeking to multiply their returns tend not to notice as be attracted to investments that promise high returns but have large hidden liabilities that will emerge later, like peak oil and the host of other “externalities”. Many professionals argue they will just go away if we try something daring enough, and that has been producing a much faster growth in the kind of hidden liabilities the effort was designed to avoid.

So there’s a self interest in limiting aggregate savings and not pushing that limit, to switch the purpose of investment from exploiting to nourishing the environment that it relies on. That has the positive side effect of securing the value of existing investments while maintaining stable returns on investments, instead of pushing the limits and collapsing the environment. That’s the value of changing roles at the right time.

Deep ecology has to do with acknowledging the intrinsic worth of living things, ecologies and the environment, independent of the services they provide us. Recognizing that provides an ideal attitude and simple purpose that ethical investors could use.

It could guide them in what to do at the time they decide to stop retaining their earnings and inflating their own accounts. For the Grassland’s Project I’m not sure when it would generate a return, but once it does investors could agree on when to stop using their profits for growing their investments. Then as fiduciaries of the environment, they would use the proceeds both to support themselves and do good works in the broad interests of the environment producing their earnings.

Supporting their own life needs is of course a direct cost of providing services to the environment supporting them, a cost of doing the work. Now that I think of it, that’s actually like the role any employee has toward their employer.

An employer pays its employees for all their living costs, not just the tools they use at work. That’s a necessary cost of business to get the right kind of skilled employee to come to work and provide their smart technology to operate the business.

So in a way, switching to a fiduciary role and investing for deep ecology is a role reversal for investors, switching from being the “boss” of their limited environment to being an “employee” of a larger environment, being paid for delivering services to it as the business they are employed by and provides their earnings.

The trade off in terms of personal values is with the usual motive for investing, seeking profits to multiply profits, by compounding the exploitation of environments wherever reliable returns can be found. That practice would then be what apparently changes the environment to make their returns on investments unreliable. In replacement all you get is the privilege of having some resources to use in caring for the world that has been generating your earnings.

Yes, it would take an unusual investor, but that is partly the attraction. It also offers a posture for profiting from things with no conflict of interest, that some would like a lot. Those unusual investors are around, and more might appear as the pressing need for a model for how money can take care of our world is recognized.

The model of just endlessly accumulating wealth and impacts, without looking at the environment taking the punishment… well, is kind of “old”. That would become anachronistic at some point, needing to be changed globally to fit with the good works of ethical investors using deep ecology as their guide. Is that clearer?

 

 

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