ReFi won’t solve the climate crisis alone!
Since 2001 I have been exploring the best ways to align our economy towards more inclusive, regenerative outcomes for society and planet. This led to the publication of my first book, Climate Capitalism, with Hunter Lovins back in 2011 where we charted a path for an economy that did well by doing good looking at emerging proof points of profitable approaches to the low carbon economy.
Even back then it was obvious to some of us that there was a path forward for every highly emitting industry from energy, transport, construction and agriculture. Yet, the pace of adoption of low to zero carbon (or even regenerative) solutions is just not fast enough. The science and anecdotal evidence is indisputable: the climate crisis can no longer be avoided because we are already in it!
Yesterday I had the great pleasure to spend much of the day in Barcelona with local and global leaders in the ReFi (regenerative finance) movement who had descended to this lovely oasis in Sarria to have a full day of discussions on the ReFi movement, where it is today, where it might be headed and how we can collectively accelerate impact. The event was sponsored by Celo, the new ReFi fund Crane Earth and EthicHub among others.
Throughout the day I could not escape the feeling that we are too insular in ReFi, that we need to engage the entire global stakeholder community and be part of the solution, not just leveraging crypto rails but extending beyond crypto.
I also began to construct a mental model of what I believe it will take for us to accelerate towards a regenerative economy fast enough to improve the likelihood of extending human prosperity for my kids and their kids (and yours!).
It is a simple model made up of complementary features:
- We must legally require companies to capture and report transparent data not just on their financial metrics about on the socio-ecological impacts of their own activities and that of their supply chains too.
While Hunter and I had hoped more than a decade ago that the economic incentives for climate innovation would be strong enough to drive rapid shifts across major polluting industries, it is now clear we need government intervention. Step one on this journey is to remove voluntary and arbitrary sustainability reporting methods with regulated reporting standards.
Why is this important? While it is true that consumers increasingly care about sustainability, it is not reasonable for them to have to filter out greenwashing from legitimate claims of sustainability by producers.
Last year the European Union approved new legislation that all member countries need to enforce the EU Corporate Sustainable Reporting Directive. The CSRD standardizes sustainability reporting for listed companies in Europe. The CSRD even applies to foreign companies who have subsidiaries in European member countries too. The CSRD is one of the first legal standards of its kind to be approved and applicable to multiple countries, across industries and should be a force for change not only in EU but to serve as a guide for other countries and regions around the world.
2. We must find ways to embed externalities into the prices of goods and services produced by global conglomerates and local companies too.
The true cost to society and planet for the lifecycle cost of producing and disposing of things we consume must be reflected in the actual costs we pay for them. This is the only way that we can accelerate the production and consumption of more sustainable (or better yet, regenerative) products and services. The CSRD can be a good first step towards this process because only when standard guidelines are applied to the capture of impact data can we then move to credible pricing schemes whereby the real cost of products can be measured and then policy can be applied to ensure those costs are reflected in the actual costs via things through tools that put a price on ecosystem services (e.g. carbon, energy, land use, biodiversity, clean air, etc).
3. We need to help accelerate funding into climate solutions and fast!
Governments, industry, private equity and even retail investors need to up their game on shifting funding into the climate arena. While estimates vary, one recent study found that we currently have a $16 trillion funding gap for sustainable infrastructure.
4. Ok, ReFi and other regenerative/impact entrepreneurs, time to do our thing!
Yes we can disrupt traditional industries and introduce entirely new systems and models that are not just incrementally better, but rather blue ocean solutions that incumbents miss.
However, this is the cognitive dissonance I have been feeling, and now feel some clarity around after reflecting on the conversations at the ReFi Gathering. I have been in the sustainable innovation and entrepreneurship community for literally 20 years. A common theme has always been this ambition of such founders to believe we can replace the broken system with better ones. The problem is we have a climate crisis to mitigate and overturn as fast as possible and we don’t have time to waste trying to replace the current capitalist model.
We need to fix capitalism through many strategies including the ones I mentioned above (regulation on sustainability/regenerative reporting standards; full cost of externalities on the price of goods and services, accelerated funding for climate solutions, etc.), while also simultaneously experimenting and scaling alternative models that achieve product/market fit.
I believe the ReFi community, and the broader regenerative/impact community outside of crypto have a great role to play here.
We should start with some of the following questions:
How can we layer in ReFi elements on Web 2 and legacy systems to help accelerate adoption and impact?
For example, PowerLedger layered crypto rails on the P2P renewable energy trading space. Klima DAO and dozens others have layered crypto rails on the digital measurement, reporting and verification (DMRV) space bringing more transparency to the space. My company, Iomob is now working to combine our two products into one to achieve this layering effect too: layer 1 in our case is a global mobility network (scooters, bikes, parking, EV charging, trains) currently built as a Web 2 platform and WheelCoin as a gamification and tokenization tool to accelerate the adoption of greener mobility choices.
It is worth noting that there are obvious ways that ReFi tools could be brought to use in bringing even more transparency not just to carbon markets, but to the entire space of digital measurement, reporting and verification of all sustainability reporting by companies and governments, including those forthcoming from companies reporting via the CSRD requirements.
How can ReFi help accelerate the pricing of externalities?
In order for externalities to be factored into the price of goods and services, some kind of economic value needs to be assigned to ecosystem services. While economists have spent decades trying to come up with models that estimate the value of ecosystems services (the most widely cited study from 1997 estimated the value of unpriced ecosystem services to our global economy to be between $16 and $54 trillion USD per year!), we have failed to actually put an economic value on natural systems in ways that impact the actual price of goods and services.
I am quite excited about this role for ReFi. Protocols are emerging that seek to tokenize ecosystem services. Celo, a carbon negative, mobile first, EVM layer 1 (and the home for our ReFi project WheelCoin), has been a launch pad for several protocols aiming to tokenize and put a price on natural resources and for encouraging regenerative agricultural practices (e.g. EthicHub). The Climate Collective was founded with the ambition of tokenizing rainforests and carbon sequestering assets. The Climate Collective is a leading force in ReFi for exploring ways to cross the divide from crypto to legacy and Web 2 ecosystems and we need more of this.
What other ways can ReFi actors accelerate change faster, perhaps outside of the current capitalist and nation state system?
I am intrigued with the ambition of the team at ReFi DAO (whom I met in person finally at the ReFi gathering). Aside from their podcast and writings and directory of ReFi projects, their most ambitious endeavor to date is to create a decentralized network of local regenerative communities empowered by interconnected by locally governed regens. Importantly, John Ellison confirmed that roughly 80% of individuals engaged in their first local nodes come from outside crypto altogether.
Conclusion
The climate crisis is here. Humanity has failed future generations by getting caught up in the linear tendencies of capitalism to focus on short term profitability at the cost of long term prosperity. While it may be too late to avoid the climate crisis as I believe we are already in it, there is still time to accelerate change to a new paradigm that leads us from exploitation to regeneration. But we will not get there by working in well intentioned silos of impact founders. We need to work together with industry, with government and regulators, with indigenous communities, other impact founders, sources of capital and each other in the ReFi community in unison if we want any hope to avert the worst of the impending climate disaster.
About the Author
Boyd Cohen is CEO and co-founder of Iomob, which is building the Internet of Mobility network and WheelCoin Move2Earn to gamify green mobility and is a contributor on ReFi to CoinDesk. Since obtaining his Ph.D. in strategy and entrepreneurship at the University of Colorado in 2001, he has spent the past two decades focused on accelerating the path to a low-carbon sustainable economy. He has published three books, multiple peer-reviewed articles and started a handful of ventures in the smart cities and sustainability arena.
