ABOUT

INITIATIVES

The Beyond Bretton Woods initiative proposes to create a multi-disciplinary international taskforce to design transformative, plug-and-play type financial solutions and disruptive policy recommendations to address both structural finance fault lines as well as crisis challenges affecting the international monetary order and society at large.

Global Ethical Charter

This workstream will introduce a code of values which will guide the role of the financial system within society. What are the foundational beliefs and values? What should be the ethical underpinning of a monetary framework? What does it mean to be fair and just, and how can this be transcribed into the financial architecture? A new system should reflect the concepts of justice, fairness, balance, ethics, premised on a common understanding of those concepts. The current Bretton Woods framework is deficient in its failure to give deference to these values. The deliverable is an ethical charter to be released by the United Nations.

Chapters to the New Economic Paradigm

Beyond Bretton Woods requires an understanding of the interconnectedness and complexity of the global economy. This requires analytical review which recognizes that the economic system is inherently intricate and interlinked through financial markets, global supply chains, social networks and a shared ecological foundation. Complex interactions at the individual level give rise to unstable properties at the macro level. 

Such a system is subject to crises and cascading failures, which can emerge from a variety of sources including financial fault lines, natural disasters, geo-political tension, cyber-attacks and pandemics. These risks are amplified by several overarching trends: the intensification of inequality, financial leverage and the remnants of non-traditional monetary policies, the rise of digitalisation, market and wealth concentration and environmental emergencies such as climate change and biodiversity loss. These are not only boosting the frequency and intensity of certain shocks, but enabling their impacts to cascade from system to system.

An important aspect of economic resilience is examining the consequences of the concentration of vital production and financial capacities and Shock-Proof the International Production Systems. Most students of resilience – in engineering and in economics – have not fully integrated their thinking with a sophisticated understanding of corporate and market structures, or the effects of concentrations of financial and political power within our political economies. 

As a result, there is little to no understanding of the role played by the radical changes in competition policy and trade policy in recent decades, especially in the face of decades of unbridled M&A activity. Beyond Bretton Woods will address this and swiftly develop a set of principles and rules policymakers can use to deconcentrate in a way that is radical but not wrenching to shock-proof all vital human-made systems. Strategic and geopolitical considerations are now essential factors to consider in the design of such systems.

Governance and Function of Central Banks

This workstream will attempt to define financial stability in the context of planetary stability. Maintaining planetary health, human wellbeing and financial stability are interdependent. Humanity has already crossed four of the nine scientifically determined planetary boundaries. Unless the financial system is modified, we will undermine the wellbeing of future generations, and unravel the economy. To change finance there is a need to change the rules of the game so that the sector is centered on maintaining healthy planetary boundaries.  

BBW will collaborate with the Global Commons Alliance which is building a planetary dashboard to inform all key financial decision-making. It will put our planet’s ecological systems at the center of the table.  

The workstream has three components: 

  • Change the rules of the game: finance flows are governed by regulations that drive the price of risk. Increasing the capital requirements for bank lending to activities such as new expansion and exploration of fossil fuels or increased deforestation could change the economics of decision-making, helping to shift capital towards positive activities.  

  • A pre-emptive “climate resolution fund” to prevent the next crisis: financial institutions are incentivized to avoid losses, even when that means maintaining revenues from activities that might cause greater systemic risks. Not recognizing this means banks are increasing transition risks by “resisting transition.” A global “climate resolution fund” that takes on legacy debt to fossil fuels and other hard-to-abate sectors could be a new Bretton Woods institution. Instead of being incentivized to optimize repayment, the institution would enable governments to optimize an accelerated and just transition, prioritizing environmental and social factors.  

  • A financial regulatory system that adopts the precautionary approach: rather than waiting for data to prove that society and markets are in a crisis, regulators should adopt the philosophy and mandate of the precautionary principle. This principle should be applied both to internal institutional risks, but to external impacts caused by the financial institution’s portfolio. To assist the regulatory system, a network of joint commissions could combine economic judgment, scientific insight, and social impact assessments to inform balanced interventions. 

Regenerative Finance

This workstream will unite diverse stakeholders globally to co-create improvements to the Non-Bank Financial Institutions’ (NBFI) investment governance, practices, and structures. The goal is to reduce NBFIs’ contributions to systemic risks in society and systematic risks in investment portfolios and the markets. It builds on progress in ESG, impact investing, and the responsible investment movement, but recognizes that when it comes to mainstream finance at scale, interventions have been primarily focused on portfolio company operations, products, and services, rather than the financial incentives and investment structures themselves. Tools and resources produced from this workstream will include:

1) metrics and guidance to measure and manage investors’ contributions to systemic social and environmental risks, as well as how these risks can impact investors

2) policy and procedure templates for investors to use in their internal governance frameworks that enable them to address systemic and systematic risks

3) a community of practice of investors who are adopting financial analysis methodologies to account for systematic risks in their investment decision-making

4) research on regenerative investment structures, their benefits and risks, and how to implement them. 

Innovative Monetary Policies Linked to the 2015 Paris Treaty

This workstream will define the eco-system of innovative monetary design models, in search of alternative anchor currency-based solutions. The approach will encompass and borrow building blocks from both the crypto-currency world and non-traditional monetary policy frameworks to develop a new currency. The major innovation will be to include the limited carbon reserve as a supply steering tool to avoid a 1.5 degrees Celsius temperature increase. It will, in an initial phase, propose the use of existing multi-lateral institutions to implement the design framework within the context of accelerating and magnifying the Nationally Determined Contributions within the 2015 Paris Treaty accord.

New Multilateral Institutions to be Established

This workstream will take the lead from efforts undertaken by the International Panel on Climate Finance (IPCF) project, steered by Steve Waygood from Aviva.

The IPCF would be a capital market-focused equivalent to the Intergovernmental Panel on Climate Change (IPCC), which focuses on climate-change science. It would provide market-based analysis on the impact of climate policy. Observations would be secured from the various market disclosures by companies and investment analysts from different sectors and regions. The report, which would appear annually, would serve as a market test of policy effectiveness. It would facilitate the oversight of article 2.1c of the Paris Agreement, which calls for the “consistency of finance flows with a pathway towards low greenhouse gas emissions and climate-resilient development.”

Transformative Debt Restructurings

Developing countries have increased their debt ratios, reversing a decline seen at the beginning of the century. Enticed by low interest rates, high infrastructure needs, limited tangible results in collecting more fiscal revenue combined with legacy IT systems for managing public finances have brought several countries to the brink of credit default. Previously, developing countries borrowed mainly from Paris Club official creditor nations and financial institutions, alongside multilateral institutions. The latter, including Bretton Woods type entities, have now assumed a lower profile. The vacuum has been claimed by more demanding Eurobond private investors and China, all or not in connection with the Road and Belt initiative.  This work stream will primarily design innovative debt restructuring outcomes including features such as Nationally Determined Contribution (NDC) efforts within the Paris Treaty, benefit-in-kind returns which will leave oil and gas reserves untouched or new contractual provisions, which will offer vulnerable countries more breathing space in case of a climate calamity hit or another health pandemic.