Rathbone Greenbank Investments
Finance & the Good Society
As part of Bristol’s annual Festival of Ideas, Rathbone Greenbank sponsored a lecture by the renowned economist, author and academic, Professor Robert Shiller. Currently a Professor of Economics at Yale University, Shiller has written on a range of topics including financial markets, behavioural economics and public attitudes towards finance and markets.
The lecture was based on Shiller’s latest book, 'Finance and the Good Society'. In the book he argues, that instead of writing off the financial system as broken and unfixable, we need to reclaim it for the common good.
In the public consciousness, finance has become synonymous with grabbing wealth and is viewed as morally wrong at an intrinsic level. Countering this claim, Shiller argued that it has also played an important role in creating benefits for society; the system facilitates good actions as well as bad ones.
Instead of focusing on current practice and the controversy surrounding certain financial innovations, Shiller argued that we should consider the general concept of the financial system. At the most basic level, finance can be seen as a technology which directs human activities at a more efficient pace. From this perspective finance is about making things happen, not purely about making money.
Countering Paul Volcker’s well-known assertion that the only useful financial innovation of recent years was the invention of the cash machine, Shiller argued that there have been many innovations which, whilst complex, have tangible impacts on the ‘real world’. He then outlined several financial innovations which have occurred since the financial crisis which aim to humanise finance and benefit the majority of society rather than the elite few.
Innovations discussed by Shiller included the emergence of legislation in the US to allow companies to establish themselves as ‘benefit corporations’, with a social or environmental aim formally written in to their business model; the development of social impact bonds, which allow investors to receive returns based on the achievement of specific social or environmental goals (which Rathbone Greenbank have been involved with ) ; and the growth in the ‘crowd-sourcing’ market, which grants members of the public direct access to opportunities to finance initiatives which interest them.
Shiller concluded the lecture by outlining several examples of potential beneficial financial innovations. These included a framework for companies where shareholder dividends are disbursed directly to charitable causes, creating an alternative to conventional philanthropy; alternative means of governments financing their expenditure; and changes to global taxation systems to specifically address the issue of inequality.
Rathbone Greenbank supports the development of financial innovations such as these which deliver real benefits to wider society, further creating opportunities for ethical investors to meet both their financial and social aims.
Reported by Kate Elliot