Finance for the Greater Good

As I have traveled across the country writing and speaking for the past decade, my recurring theme has been the idea of Responsible Finance.

Or call it Enlightened Finance. Finance based on the core principle of Stewardship. Finance as a contributor to positive social outcomes. Finance as a means to greater ends, rather than an end unto itself.  The language may vary, but the point is that Finance should serve a higher purpose.

Financial capitalism is the dominant socio-economic system in the world today. Underpinning it is a metaphorical contract between society and financial institutions. A social compact. It isn’t explicit. It isn’t static. It evolves over time to represent society’s evolving expectations of the role the financial services industry, and indeed the entire financial system, should play.

At the simplest level, Finance matches people who have money (investors) with people who need capital (corporations, governments, not-for-profit organizations) while managing the many risks involved and,  hopefully, enhancing our collective standard of living.

But Yale Economist and Nobel Laureate Robert Shiller articulates a more expansive vision of finance’s role in society when he writes:

“Finance, suitably configured for the future, can be the strongest force for promoting the well-being and fulfillment of an expanding global population – for achieving the greater goals of the good of society.”

“The goals served by finance originate with us. They reflect our interests in careers, hopes for our families, ambitions for our businesses, aspirations for our culture, and ideals for our society.”

“Finance is not about ‘making money’ per se. It is a functional science in that it exists to support other goals – those of society. The better aligned a society’s financial institutions are with its goals and ideals, the stronger and more successful the society will be.”

Better alignment between Finance and the goals of society is the foundation upon which the future of the financial industry must be built. Particularly in a world where, as Shiller puts it, “financial institutions and financial variables are as much a source of direction and an ordering principle in our lives as the rising and setting sun, the seasons, and the tides.”

The threat of a systemic meltdown in our global financial system has receded since the financial crisis of 2008.

But society faces other potential train-wrecks-in-slow-motion which could seriously and negatively affect the quality of our lives and those of our children and grandchildren. Like climate change. Or dangerously high levels of government debt. Or income inequality. Or population growth coupled with resource scarcity.

The financial services sector – including asset management firms, retail, private, commercial and investment banks, wealth management firms, mutual funds, insurance companies, hedge funds and private equity investors – all can and must play a critical role in preventing these problems from becoming full scale crises.

The purpose of this blog is to talk about how we as an industry and a part of society can help ensure that Finance truly does serve the greater good.