Alternative Finance, Sustainability and Fungible Forms of Capital for a Well-Being Economy
Alternative Finance und Nachhaltigkeit
By Dr. T.H Culhane thculhane@usf.edu thculhane@gmail.com Video lecture available here: https://www.youtube.com/watch?v=yxyKaVrJKm4&t=43s
"So! YOU've got a product or a service that you feel could change the world for the better -- a new nutritious food, a better drug, even a nutriceutical that both nourishes and heals!
Great!
Now… How do you get it to the market? How do you get it into the hands and mouths of the people who need it most? How do you get it to SCALE!?
Today we're going to talk about ALTERNATIVE FINANCE, but as the song goes it's not "all about the money, money, money...". What we want to do is explore "what, after all, IS money? And what do we mean by “finance” in general, to say nothing of “Alternative Finance”. And through this discussion I hope you will see that there are many, many ways to get your life saving or world changing product to the people who need it most."
Today I'm going to introduce you to a handful of thinkers from economics, anthropology, ecology, and systems science who all arrive, from different directions, at essentially the same conclusion: that money is a means, not an end; that economies exist to serve people and the living world; and that true wealth is measured not simply in financial capital but in the flourishing of the systems that sustain us.
Purpose creates value. Value attracts capital. Capital enables finance. And finance should complete the purpose without destroying the systems that made it possible.
Let's start by defining what the word "finance" actually means! Who has an idea?
When you hear the word finance, what comes to mind? Money? Banks? Investment? Debt? Those are, of course, the modern associations.
But the word finance is much richer. It actually comes from the Old French finance, meaning an ending, settlement, or payment of a debt. That, in turn, comes from the Latin finis, meaning end, boundary, or limit.
So at its root, finance is about bringing something to completion and paying our debts.
Think about that for a moment.
Finish a project.
Finalize an agreement.
Find the resources to accomplish something (these words are related only in English, but the association is thought-provoking).
Reach the end (finis) of a process.
Pay back what we owe. Replace what we took.
Originally, finance wasn't primarily about making money. It was about providing the means to bring an undertaking to its intended conclusion and cleaning up after ourselves so others could repeat the journey.
This actually goes hand in hand with the very definition of sustainability:
“In 1987, the United Nations Brundtland Commission defined sustainability as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
A more modern definition says “Sustainability is the ability to maintain or support a process continuously over time without harming the environment or using up natural resources”.
That raises an interesting question for any class:
If finance exists to help us complete things without finishing off the resources that sustained the initiative, what exactly is it helping us complete today?
Is it:
the production of useful goods?
the construction of homes and infrastructure?
the education of children?
the restoration of ecosystems?
or simply the accumulation of more money?
As I hope you will see, the original meaning of finance points somewhere deeper: finance is the means by which we bring an endeavor to its completion and pay our debts. That’s the only way to make a profit by definition, since profit is revenue minus costs. And If that's true, then before we ask 'How do we finance something?' we should first ask 'What are we trying to accomplish?'" and “can we do it without passing the costs and unintended consequences of our actions on to somebody else?”
Finance, we believe today, should be a servant of purpose, not the purpose itself.
Everything else we discuss today follows from that single idea.
Money is a tool for completing human and ecological goals—not the goal we are meant to complete.
This goes back to a point that the leaders of the Medellin, Colombia business incubator "Ruta N" tell our international students every year when we visit over spring break. They say, "to run a successful and sustainable business, we don't think about creating a product, we think instead about satisfying a need."
They say, "products come and go, but there are always needs to be fulfilled, so if you meet human or social or environmental needs, your business will always be relevant."
This kind of "Purpose Driven" business model is flourishing around the world, especially with the creation of ISO 37000 -- a standard from the International Standards Organization (ISO) for good governance -- and in particular ISO 37011, an upcoming international standard that provides guidance on purpose-driven organizations (PDOs) that extends the governance principles of ISO 37000. It helps governing bodies move beyond short-term profit to embed a net-positive societal and environmental impact into their core strategies, policies, and decision-making processes.
Businesses guided by ISO 37011 approach finance from a very different angle than those who only operate for short-term profit.
This kind of purpose driven behavior and the governance we need to get there forms the basis of a new book written by International Marketing gurus Victoria Hurth, Ben Renshaw and Lorenzo Fioramonti called, “Beyond Profit: Purpose-Driven Leadership for a Wellbeing Economy”.
The concept is also embedded in a movement started here in Austria by the Viennese economist Christian Felber in his best-seller “Die Gemeinwohl Okonomie – meaning “the Well-Being Economy”, a book whose popularity resulted in the creation of the ECOnGOOD label, a standard that takes social, ethical and environmental factors into account and ensures customers that the products they purchase or use aren’t just doing them good, and aren’t just doing no harm to others, but are actually good for society and our environments.
What such purpose driven business models do is invite a whole different world of investment for those who are seeking to finance the implementation of their visions. It widens the space for finance by changing the RETURNS on investment from what Hurth et al call “Logic 1” Business as Usual models that focus on maximizing the short-term profits of shareholders, through Logic 2 – a more comprehensive way of looking at business that tries to minimize harm to others by considering and trying to eliminate so-called “negative externalities” – i.e. the social, health and environmental harms that are not usually included on the cost ledger of a businesses “balance sheet” -- and on to Logic 3 which includes the voices and needs of all stakeholders who might be affected by the entire value chain, from “wells to wheels”, from “source to tap” from cradle to grave.
When we widen the solution space to think of finance as fulfilling a mission, completing the vision, we see that there are many many more ways to raise the necessary capital to bring a need-fullfilling product to market because we attract investors who want or expect different kinds of returns than merely more money.
So who will you go to for YOUR fundraising?
At one end of the spectrum are traditional bank loans. Banks generally seek relatively modest but predictable financial returns through interest payments. Their primary concern is not usually your vision but simply your ability to repay the loan with varying levels of interest. Their risk is that you default; your risk is that debt must be repaid whether your business succeeds or fails. For that reason, banks typically require collateral, steady cash flow, and a proven business model. They tend to finance certainty rather than possibility. The lower the risk, the lower the interest rate can be, the higher the risk, the higher the interest. Credit cards are a good case of bank loans that don’t particularly care how you spend the money because they know they are going to win big on the interest the longer you take to repay.
But if we are really going to understand alternative finance—particularly for those of us interested in health, sustainability and justice—we should consider a historic turning point in the financial world: Microfinance
One of the greatest revolutions in alternative finance came from asking a remarkably simple question: What if the poor are not poor because they lack ideas, but because they lack access to capital?
That question transformed development economics when Bangladeshi economist Muhammad Yunus founded the Grameen Bank in the 1970s. Instead of requiring land, buildings or other collateral, Grameen made very small loans—often only enough to buy a sewing machine, a goat, tools or inventory—to entrepreneurs who had skills and determination but no conventional assets. Rather than relying on financial collateral, the bank relied on social capital: relationships, trust, peer support and accountability within local communities. Repayment rates proved remarkably high, demonstrating that the greatest barrier to entrepreneurship was often not ability, but access.
Microfinance changed the history of alternative finance because it challenged one of banking's oldest assumptions—that wealth must already exist before it can be financed. Instead, Yunus showed that carefully designed finance could help create wealth, dignity and opportunity. In many ways, modern impact investing, community finance and financial inclusion initiatives all trace part of their intellectual heritage to this breakthrough.
Today we are seeing the next generation of this idea. Organizations such as CCCash, developed by Katrin Pütz and her collaborators, build on the same insight but extend it into the world of the circular economy, renewable energy and climate resilience. Rather than seeing underserved communities merely as borrowers, CCCash explores ways of recognizing forms of value—including cleaner cooking and the local, regional and global health benefits it generates, improved public health, avoided emissions, ecological restoration, and stronger local economies, circular resource flows, community participation and productive assets—and translating that value into financial opportunity. It is an example of alternative finance evolving from simply lending money to recognizing forms of capital that conventional markets often overlook.
When I first learned about Grameen Bank years ago, I thought the revolution was lending to people without collateral. After working with innovators like Katrin Pütz on CCCash, I now think the deeper revolution is learning to recognize forms of value that conventional finance cannot yet see.
Banks like Yunus’s “Grameen Bank” for microfinance and other alternative financial institutions don't only lend money—they also help businesses unlock money they have already earned in some form but haven't yet received.
This concept of often hidden or locked up wealth is described eloquently by Hernando de Soto in his book “The Mystery of Capital” and the idea that there is wealth everywhere to be found and capitalized on has certainly trickled into more prosaic forms of financing.
To give a mundane example:
Suppose you've sold €100,000 worth of products to a supermarket, but the supermarket won't pay for another 90 days. On paper you're profitable, but your liquidity is terrible – you may not have enough cash to buy ingredients for your next production run. Rather than taking out another loan, with alternative financing you can actually use your unpaid invoices themselves as assets.
This is where alternative financial tools such as invoice trading, factoring, and supply chain finance come in. They all transform future cash flows into present liquidity. In invoice trading, investors purchase individual invoices at a slight discount. In factoring, a finance company purchases many invoices as an ongoing service. In supply chain finance, a large buyer's strong credit rating allows a bank to pay smaller suppliers almost immediately, with the buyer reimbursing the bank later. In each case, no new wealth has been created—only the timing of cash has changed.
This is an important insight for entrepreneurs. A business can be profitable and still fail simply because it runs out of cash while waiting to be paid. Alternative finance is often less about creating money than about improving liquidity by recognizing that future payments are themselves valuable assets. With these instruments there is little risk because you already have a contract that guarantees your clients will pay you, it is all a matter of when. So you basically pay someone else a small fee for them to wait for your invoices to be paid and they give you the cash you need immediately.
As you can see, there are so many creative ways to think about financing once we understand that what is really circulating is different ways of mitigating various risks. The more confident people are that they aren’t going to lose anything by supporting your work and can actually gain something, the more supporters you will have.
That’s really the whole game – building confidence in others so they are interested in helping you complete your vision without putting themselves in trouble and with the promise that they will experience benefits from your work.
Finance is fundamentally about recognizing value that already exists, even when it doesn’t appear in a bank account. We recognize the value already embodied in an unpaid promise. And this subtends my broader point in all my work, which will invite you to consider all the different forms of capital there really are beyond monetary capital – we are going to see that there is value to be found everywhere, once you learn how to look for it. Alternative finance gives us more ways to see and more tools to uncover or define otherwise hidden wealth.
Notice what's happening in this case. Nothing new has been manufactured. The invoice itself has become a form of capital that can be transformed into immediate liquidity. We'll soon see that this ability to transform one form of value into another—a concept economists call fungibility—lies at the heart of alternative finance.
Moving a little further along the risk to reward spectrum we find angel investors and venture capitalists. Here the risks become much higher, but so do the expected financial rewards. Many of the companies they support will fail completely, so they hope that one extraordinary success—a "unicorn"—will more than compensate for the losses. Their motivation is often rapid growth, scalability, and eventually a profitable exit through acquisition or a public offering. Entrepreneurs receive not only capital but frequently mentorship, industry contacts, and strategic advice, though often at the cost of giving up ownership and some control over the direction of the company.
Beyond these are forms of finance that begin to broaden our understanding of what an investor expects in return.
ALTERNATIVE FINANCE
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┌───────────────────────────────┼───────────────────────────────┐
│ │ │
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COMMUNITY-BASED INVESTMENT COMMONS & PUBLIC
FINANCE FINANCE FINANCE
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• Credit Unions • Green Bonds • Public Banks
• Cooperative Banks • Community Bonds • Public Development Banks
• ROSCAs • Social Impact Bonds • Participatory Budgeting
• Mutual Credit • Venture Philanthropy • Sovereign Wealth Funds
• Time Banking • Patient Capital • Community Wealth Building
• Local Currency • ESG Investing • Municipal Finance
• LETS • Impact Investing • Land Value Capture
• Community Shares • Crowdfunding • Commons Trusts
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REGENERATIVE FINANCE
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┌──────────────┬───────────────┼──────────────┬──────────────┐
│ │ │ │
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Circular Finance Carbon Finance Islamic Finance Digital Finance
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• Repair Funds • Carbon Credits • Murabaha • Blockchain
• Reuse Markets • Ecosystem • Musharaka • DAOs
• Product-as- Services • Mudaraba • Tokenization
a-Service • Biodiversity • Sukuk • DeFi
• Industrial Credits • Zakat • Quadratic Funding
Symbiosis • Blue Carbon • Waqf • Digital Local Currencies
Impact investors deliberately seek ventures that generate measurable environmental and social benefits alongside financial sustainability, and many are willing to accept lower monetary returns in exchange for greater societal impact rather than a share of your company or control over your product.
Crowdfunding opens yet another pathway by allowing hundreds or even thousands of ordinary people to contribute relatively small amounts because they believe in an idea, want early access to a product, or simply want to help bring a meaningful innovation into the world.
In philanthropy, grants, foundations, community finance, and cooperative ownership, the expected return may not be financial at all. It may be healthier communities, restored ecosystems, local employment, scientific knowledge, educational opportunity, or simply the satisfaction of helping bring about positive change. These are all considered to be investments that return OTHER FORMS OF CAPITAL, which we will consider in a moment.
Notice how each source of finance is really asking a different question. Banks ask, "Will you repay me?" Venture capitalists ask, "Can this become enormously profitable?" Angel investors often ask, "Do I believe in this entrepreneur?" Crowdfunding asks, "Can you inspire enough people to join your mission?" Philanthropic organizations ask, "Will this create lasting public benefit?" And impact investors ask, "Can this improve the world while remaining financially viable?"
Once we recognize this diversity of motives, we begin to see that every investor is seeking a different combination of risk and reward. Some seek maximum financial returns and accept correspondingly high financial risks. Others seek stable, predictable income with minimal risk. Still others willingly trade some financial return for healthier communities, cleaner environments, stronger local economies, or progress toward the United Nations Sustainable Development Goals or UN SDGs. In other words, what changes is not merely the source of finance—it is the very definition of return on investment.
So, by this point, we have encountered quite a spectrum of alternative finance. Some approaches, like invoice trading or supply-chain finance, improve liquidity by unlocking the value of existing assets. Others, such as microfinance, unlock human potential by recognizing social capital where traditional banks see only risk. Angel investors and venture capital finance innovation in pursuit of financial growth. Impact investors, community finance organizations, cooperatives, philanthropic foundations, development banks and public innovation agencies increasingly finance ventures because they expect environmental and social returns alongside financial sustainability. Revenue-based finance allows entrepreneurs to grow without surrendering ownership, while crowdfunding invites ordinary citizens to become part of the journey. The remarkable thing is that each of these approaches expands not merely where money comes from, but what counts as value and what counts as a worthwhile return.
We should, at this point, consider the 17 UN SDGs, in case you aren’t familiar with them.
In 2015, all 193 member states of the United Nations adopted what are known as the Sustainable Development Goals, or SDGs—seventeen interconnected goals intended to guide humanity toward a more prosperous, equitable and sustainable future by 2030. They range from ending poverty and hunger, to improving health and education, achieving gender equality, ensuring clean water and affordable energy, promoting decent work and responsible consumption, protecting biodiversity on land and below water, addressing climate change, strengthening institutions, and fostering partnerships across nations.
The important thing for us is not to memorize all seventeen goals. Rather, it is to recognize that they represent a shared global definition of the kinds of outcomes society increasingly values. They remind us that success cannot be measured by financial profit alone. A business that restores wetlands, improves public health, reduces waste, creates meaningful employment, or strengthens resilient communities may be creating enormous value even if those benefits never appear directly on its balance sheet.
This changes the conversation about finance. Once investors begin asking not only, "How much money will this make?" but also, "Which Sustainable Development Goals does this advance?" entirely new forms of investment become possible. Governments, foundations, development banks, impact investors, corporations pursuing ESG objectives, and even ordinary citizens through crowdfunding may all choose to finance the same project—but for different reasons and with different expectations of what constitutes a successful return.
In many ways, the SDGs invite us to redefine Return on Investment as Return on Impact. Financial returns remain important—they help keep an organization alive—but they become one indicator among many rather than the only one that matters.
So… With the SDGs in mind we might ask: How do we know whether a project is actually making the world better? Better according to whom? Fortunately, the international community has spent decades wrestling with that very question and came up with a consensus. Of course, not every government, investor or corporation gives equal priority to the SDGs. Some have recently rejected and even denounced the SDGs so they can continue to maximize shareholder value without paying all the true costs of doing business. Nevertheless, they remain the closest thing the international community has to a shared framework for defining human and ecological progress. These days the vast majority of people on the planet are seeking alternative ways to do business, not “business as usual”, but business as it should or could be done to make the world ever-better.
That realization takes us directly to an even bigger question. If investors now value different kinds of returns, perhaps capital itself is more diverse than we usually imagine.
And to widen that space, we also need to consider what “Capital” is.
Most people hear the word capital and immediately think of money. But money is only one form of capital, and often not even the most important one.
The word capital comes from the Latin caput, meaning "head." It referred to the principal or chief resource from which other things could be generated. In other words, capital is anything that can produce value.
One of the most useful frameworks for understanding this comes from the Eight Forms of Capital, originally developed within the permaculture movement by Ethan Roland and later expanded by Gregory Landua. It reminds us that wealth is much broader than financial assets.
Let's look at them briefly.
Let's start with the obvious one. Financial Capital – sure -- money, investments, credit, grants and other financial instruments.
But have you given much thought to:
Living (Natural) Capital – fertile soils, forests, biodiversity, clean water, pollinators and healthy ecosystems that provide the very foundation for ALL economic activity.
Material Capital – buildings, machines, tools, infrastructure, raw materials and manufactured goods.
Intellectual Capital – knowledge, patents, research, designs, innovations, data and accumulated expertise.
This is often the kind of capital you trade financial capital for when you invest in your education, knowing or hoping that when you graduate you can translate it back into money.
Experiential Capital – practical skills, craftsmanship, know-how and the lessons learned through actually doing things.
School can give you this as well.
Social Capital – relationships, networks, trust, goodwill and the willingness of people to cooperate.
This is definitely something we all go to school for – and for many the “good old boys network” provided by so-called “elite schools” has almost guaranteed access to financial capital.
Then there is:
Cultural Capital – shared values, traditions, languages, stories, norms and identities that help communities work together.
The presence or absence of intact cultural capital often explains why some groups continue to prosper while others languish.
Spiritual Capital – purpose, meaning, ethics, inspiration, vision and the deep motivations that give people the courage to persist when projects become difficult.
Now here's the fascinating part.
These forms of capital are fungible.
"Fungible" simply means that one thing can be exchanged for—or transformed into—another.
We're used to hearing that one dollar is interchangeable with another dollar. Or Euro, or Peso or Real or Dinar, Yuan or Yen… That's financial fungibility.
But the idea is much bigger.
A trusted friendship can become financial capital when someone agrees to invest in your idea.
Knowledge can become material capital when it leads to the invention of a new manufacturing process.
Healthy ecosystems become financial capital every time fertile soils produce crops or wetlands prevent costly flooding.
Financial capital can purchase equipment, creating material capital.
Material capital, used wisely, can generate intellectual capital through experimentation.
A compelling mission can attract volunteers, transforming spiritual capital into social capital, and social capital into financial capital through crowdfunding or philanthropy.
But there is one thing they all have in common: every form of capital ultimately depends upon living systems that are not fungible. We have to keep that in mind when we create and market our products, being sure to recycle their production and consumption residuals so that the Logic 1 processes of “extractive capitalism” don’t destroy the natural capital foundation that makes everything else possible.
Beyond that, once we become what we call “Nexus Thinkers” who see how water, food, energy and ecosystems, when treated in a regenerative way, can endlessly upcycle new products in a vortical or upwardly spiraling value adding economy – an economy that goes beyond even the circular economy – we see how alternative financing can unlock abundance health and wealth that once seemed impossible and truly create a well-being economy for all beings.
Think about Wikipedia. It was not built because someone started with billions of dollars. It began with intellectual capital, social capital and a shared sense of purpose. Financial capital followed.
Or consider open-source software like Linux. Communities first contributed knowledge, time and trust. Those intangible forms of capital eventually created technologies worth billions of dollars.
This is one of the central insights of alternative finance.
When entrepreneurs say, "We don't have enough money," they may be asking the wrong question.
A better question is:
"What forms of capital do we already possess, and how can we transform them into the forms we need?"
A startup with no money but abundant trust, expertise, passion and community support may be far wealthier than an established company with millions in the bank but no purpose, no loyal customers and no public trust. That's where "branding" comes in. A brand is a form of capital.
Once we begin to see capital this way, finance itself becomes much more creative.
Instead of asking only, "Where can I get the money?"
we begin asking,
"How can I mobilize all of the forms of capital available to bring this purpose to completion?"
And that, I would argue, is the real meaning of finance.
The insight from Ruta N is deceptively simple:
"Don't build a product. Fulfill a need."
Products are transient. Technologies change. Markets shift. But fundamental human needs—food, shelter, health, belonging, education, mobility, dignity, purpose—persist across generations.
You who are building intellectual, social, experiential and cultural capital through your studies of science and technology, pharmacy and food innovations or sustainable business or the Water/Energy/Food/Ecosystem Nexus and Systems Thinking are poised to find the “transduction” of one form of capital into another and to get the projects you develop to meet human and environmental needs financed much easier than those who only consider monetary collateral to be of value. You see a much wider “solution space” than those who think only of “the numbers”.
Organizations that anchor themselves in those enduring needs are far more adaptable than organizations anchored to a particular product or technology.
That leads naturally to finance.
If the purpose of finance is, etymologically, to bring an undertaking to its completion (finis), then the next question becomes:
What undertaking?
If the undertaking is merely maximizing quarterly returns, finance behaves one way.
If the undertaking is meeting enduring human and ecological needs, finance behaves very differently.
This is precisely the direction that International Organization for Standardization has been encouraging through ISO 37000, which emphasizes governance that creates long-term value for organizations and society. The emerging guidance in ISO 37011 builds on that foundation by encouraging governing bodies to embed organizational purpose—and positive societal and environmental impact—into strategy and decision-making rather than treating it as a peripheral corporate social responsibility (CSR) initiative.
Viewed together, the progression looks something like this:
This also helps explain why so many sustainability conversations seem to "miss the point." We often ask:
"How do we make this product greener?"
when perhaps we should be asking:
"What human or environmental need is this product trying to satisfy, and is there a better way to satisfy that need?"
That subtle shift opens the door to innovation.
People don't actually need automobiles.
They need mobility.
People don't need light bulbs.
They need illumination.
People don't need fertilizers.
They need fertile soils and abundant food.
People don't need air conditioners.
They need thermal comfort.
People don’t need drugs.
They need health
People don’t need “food and beverages” actually --
We need sustenance.
And yes, it can and should be delicious! Why not?
Finally: People don't need money.
They need the ability to accomplish meaningful things.
Once we define the need correctly, countless solutions become possible, many of which are actually more sustainable than the incumbent product.
Let me restate that – thinking of needs rather than products also opens up spaces for solutions that are BETTER than the incumbent, better than the stuff currently on the market – not just more sustainable, not just healthier, but tastier, more effective, more efficient, more attractive, more FUN…
On every parameter we discover QUALITY re-emerging from a world that has regrettably been obsessed with merely producing and selling MORE and BIGGER and FASTER and CHEAPER – not really for you but for the producer. Yes, we must consider from a well-being economy perspective that much of what is in the market isn’t really there to benefit the consumer but merely to be consumed.
This is why so many of our foods and our pharmaceuticals aren’t nutritious or long-term health improving but act more like addictive drugs to be endlessly consumed and whose profits depend on us never feeling fully satisfied. We all know this, and Logic 1 investors know it too. As a result, entrepreneurs are often pushed toward business models that rely on recurring consumption—and, in the most profitable cases, habitual or even addictive consumption. Tobacco is the clearest example, but many processed foods and beverages are also engineered around 'bliss point' recipes that create “cravings” and that encourage people to keep coming back. Once demand becomes habitual, future revenue becomes more predictable, making these businesses especially attractive to investors, even when the resulting profits come at the expense of public health and environmental sustainability
And that is a key point about alternative finance, because we all know that PROFIT is supposed to be defined as REVENUE minus COSTS… But when many businesses pass on the costs to society – through dirty and dangerous and unhealthy environmental conditions, and through low-wage labor and bad working conditions, they aren’t paying all of their costs and hence can’t be said to truly be making a profit. One could argue that many are simply in the business of exploiting. And that extractive mindset – that doesn’t provide much motivation for a superior product.
This was a point that the anthropologist David Graeber made in his article “Of Flying Cars and the Declining Rate of Profit” when he said that the current economic system actually rewards stagnation rather than innovation.
The LOGIC 1 investment strategy is “maximize profit for the shareholders in the quickest time horizon AT ANY COST NOT BORNE BY YOU– and that usually means passing on those costs on to the consumer, no producing products that endure or that can satisfy customer needs for as long as possible.
When raising money for such a narrow goal what you are usually demonstrating to potential investors is how quickly you can increase revenue and, unfortunately, how effectively you can EXTERNALIZE the costs. That means passing the costs on to others so you don’t have to pay them.
Alternative Finance often involves making a BETTER business case that appeals to people with resources who care about the three most identified dimensions of sustainable business: Planet, People and Profit.
Such investors or allies will consider what are usually called the “three pillars of sustainability”: Environment, Society and Economy, and the ones who are truly educated in what we call Systems Thinking are most likely not to see them as isolated “pillars” anymore, or even as players in a Ven Diagram that can be somehow optimized through tradeoffs.
The Logic 2 approach, seeking to internalize some of the costs of doing business, as long as they don’t disturb overall profitability, and seeking to slow down exploitation so that some social and ecological systems have time to recover, assumes tradeoffs are possible – sacrifice some of the environment or allow some social disruption in the name of economic growth, but don’t do it at a rate or in a way that kills the goose that lays the golden eggs, so to speak.
This tradeoff approach is often reinforced in business school’s when considering the so-called “Three Pillars of Smart Investing: Risk, Returns, and Liquidity”, where Risk is usually narrowly defined as a possible loss of money, but rarely risk to social systems or life support systems. They almost never consider environmental risk or climate risk. The logic is to seek returns that accrue as quick monetary revenue. Liquidity is seen as how quickly one can turn assets into cash without incurring any extra costs in time or exchange losses. These tradeoffs are often taught as “the magic triangle of investing”, and risk is defined as “the chances an asset will lose value” in a solution space where “value” is usually only considered from a “cash value” perspective.
https://meine-renditeimmobilie.de/en/magic-triangle-of-investment/
A variant of this triangle, as taught in most business schools, is the triangle describing Risk, Profit and Solvency:
https://my.liuc.it/MatSup/2006/F83162/Lesson%203.pdf
In this way of looking at business, Profitability is your return, Liquidity is still how easily you can transform your assets into cash for instant exchange, and solvency represents risk. You are considered “insolvent” when your debts are greater than your assets.
Again, we can turn to the anthropologist David Graeber, whose book “Debt: The First Five Thousand Years” tells us that debt did not begin with banks or money. He says that human societies were built on relationships of reciprocity and mutual obligation, and suggests that our greatest debts may ultimately be owed not just to lenders, but to one another, to future generations, and to the living systems that sustain us. From this perspective, one of the greatest risks a business can face is the prospect of having to “pay back” the consequences of the value chain that made their product possible. Sustainability oriented business practice needs to be transparent about all those costs.
As one business website explains it, “Risk is “The Price of Potential Rewards” stating, “Risk is the possibility that your investment will lose value or not perform as expected. It’s the uncertainty that comes with putting your money to work in the markets”.
If the markets don’t have much regulation and if they allow negative effects to be externalized without consequence, then it has usually been easier to convince traditional investors to put in money. To keep risk averse investors from worrying about regulations hampering profitibility, most business-as-usual proposals have only consider liquidity in terms of money. Nonetheless, as public perception shifts toward a deeper understanding of the massive benefits of sustainability practices, we find that we are better off being completely transparent about things like Scope 1, 2 and 3 carbon emmissions and pollution, and other social and environmental harms our business might cause. In fact, according to https://transparency.eu/ “New research shows transparency does not negatively affect business competitiveness”.
Recognizing this, even in a simplified landscape that only considers financial returns, modern business schools teach that,
“Understanding the risk-return-liquidity triangle isn’t about finding the “perfect” investment — it’s about finding the right balance for your specific situation. The most successful investors are those who:
1. Honestly assess their risk tolerance and stick to it during market volatility
2. Set realistic return expectations based on historical data and time horizons
3. Maintain adequate liquidity for emergencies while maximizing long-term growth”
With scientific awareness of the long-term consequences of our actions and their impact on business, transparency – the HONEST assessment of risk – works in your favor.
What happens when the risks now include climate change – entire wine and fruit growing regions losing grapes or Marillen because the seasons are no longer predictable, because there are extended and unforeseen periods of extreme heat, or vital pest killing frosts are no longer occurring as predicted by the once reliable Farmer’s Almanac? What happens when historical data no longer fits current environmental conditions? What happens when market volatility and social and environmental volatility collide?
Business classes will tell you,
“The magic triangle of investing teaches us that successful investing isn’t about eliminating trade-offs — it’s about making conscious, informed choices about which trade-offs align with your financial goals and life circumstances. Master this balance, and you’ll be well on your way to long-term financial success.”
(https://medium.com/@shivaputramfd/the-three-pillars-of-smart-investing-risk-returns-and-liquidity-d7c88805e9a8)
In some business classes, risk is transformed into “Diversification”, revealing a principle we also study in ecology – that there is resilience in diversity. Of course this is common sense and revealed in the folk saying “don’t put all of your eggs in one basket”. The difference today is that we are developing a better understanding of what those eggs could be.
Many courses emphasize that
“The magic triangle of investment balances profitability (profit), security (risk), and liquidity (control/availability). You cannot maximize all three at the same time. Improving one factor always forces a compromise on the other two.”
What we humans WISH we could do, was control the availability of assets so that we can easily speculate what the returns will be, and eliminate liabilities so that risk is reduced to zero. When you don’t have to put a face on the people working in the sweatshops or the fields, and you don’t have to picture the devastation of a clear cut rainforest or a toxic waste dump, it becomes much easier to “hide your dirty laundry” or “sweep the damage you cause under the rug”, so to speak.
Using purely so-called and abstract “financial metrics” of the world turns investment into a numbers game that gives the illusion of control.
The problem with all of these ways of looking at the world is that they are gross simplifications of the real world. In the 21st century “life circumstances” are becoming more and more unpredictable. And in a real sense they always were. But when we abstract everything by reducing reality to numbers it can create the comfortable illusion of control. It seems convenient and elegant: Everything is defined by a price and can be represented on a spreadsheet and traded through simple math. Buy low, sell high, right?
And it is seductive – how convenient to see the world in terms of simple assets and liabilities, and to think that what everything has in common is a monetary value that radically simplifies trade.
But this worldview begs the question, “who sets the price? Who determines what value something has? According to which logic? According to whose logic? And over what time horizon? Business schools teach the “time value of money” (TVM) Should we consider only net present value (NPV) of a product, determined often by cultural norms? Or do we weight our expectations of returns based on the predicted “Future Value” (FV). And can we reliably predict what values things will have in the future?
A lot of what we do in sustainability studies is acknowledge the complexity of things and encourage students to consider how pulling on one thread of the tapestry of life affects the whole weave. We look at the parameters of these “magic triangles” and ask, “what happens when we emphasize one or another part of the whole”?
When viewed as two dimensional triangles on a plane we lose sight of how complex the interactions really are.
Another problem is that those 2 dimensional mental models tend to get repeated in all other areas of study. Because we created simple models for economic tradeoffs, we then tend to export this worldview and create misleading diagrams suggesting tradeoffs between environmental, social and economic needs:
Sustainability 2023, 15(4), 3403; https://doi.org/10.3390/su15043403
Sustainable business schools talk about “3 pillars of sustainability” as a kind of dogma, and produce diagrams, like this one on a website for corporate social responsibility (CSR) that immediately suggest equal weights for each domain. The idea that they are equally important pillars creates the illusion that we might still be able to support our overarching goal of long term profitability even if we eliminate one of them.
https://techqualitypedia.com/sustainability-3-pillars/amp/
Biologists and sociologists know better… they know that, yes, we CAN have environmental sustainability without any economy at all – this was the condition for human beings for hundreds of thousands of years before the advent of civilization and economic life. We can also conceive of social sustainability without any monetary economy – the existence of barter based societies even today shows us this. But economic sustainability cannot exist without a healthy environment or social sphere. The economy is a small piece of the human story nested within a society that is in turn but a small piece of the overall ecosystem that sustains all life.
With this in mind, our schools of sustainable business will often replace the pillars with a so-called “Venn Diagram”, still representing the areas as equal sized pillars, but with the overlap showing how to improve conditions from what we consider “equitable” (where economic and social sustainability are emphasized), or what we consider viable (where economic and environmental sustainability are emphasized) or what we consider bearable (when social and environmental sustainability get our attention) to what we consider “SUSTAINABLE” (where all three “pillars” are considered equally).
The problem with all of these diagramatic simplifications, as Korzybski reminded us generations ago, is that “the map is not the territory”. Particularly two dimensional maps. They inevitably lead to gross distortions.
Instead, our school and many others, now teach the so called “pillars” as nested phenomenon where economic costs and benefits are actually a small part of societal costs and benefits which, in turn must be nested within Environmental Costs and Benefits.
For example, here is a diagram from Derrick Tan of Singapore Management University. It shows us that even the overlapping model, which suggests the “three pillars” are independent, separate and negotiable” is inadequate because, in reality, and despite what we may hear from the utopian tech bros with their Mars rocket ambitions, “there is no planet B”.
In the NESTED MODEL the “Greater Good expands beyond Economy, Society and Environment because everything is co-dependent and our environments and societies are considered NON-NEGOTIABLE.
https://seesustainability.co.uk/blog/f/what-is-a-%E2%80%98carbon-footprint%E2%80%99-and-why-should-i-care
There are other important triangle “pillar” models that were useful in their day but are being reconceived in light of our understanding of the underlying complexities that living systems create.
One that I teach at the University of South Florida’s Patel College of Global Sustainability is “Navigating the Food/Energy/Water Nexus” – a nexus is a node in a network, a place where things come together.
The intent of the model, as with all mental models, particularly those in economics and ecologics, which seek to simplify our understanding of our home planet and its systems (Eco comes from the Greek Oikos, meaning “home” by the way), is to find and use diagrams that approximate the real world, yet allow feedback so we can reinsert complexities that are necessary for surviving or thriving in an increasingly volatile world. They were all made to help students and researchers appreciate the interconnectedness of all things and to understand the tradeoffs that emerge when you try to optimize any given parameter, whether it is maximizing profit or food production. We use them to show that all the items under consideration are so interrelated that you can’t maximize one without affecting and even sacrificing the others.
This gets to the concept of "Pareto Optimality" if you are familiar with that.
The problems is that all of these models are incomplete and even if they weren’t they all run into the so-called “three body problem” in orbital mechanics, wherein you can’t predict where one thing will be with reference to another once you are dealing with more than two parameters. The effects of movement in one direction can create chaotic conditions with regard to the others.
Some have tried to overlap 3 other dimensions on each of the primary ones – here we see a dynamic framework that adds Policy, Management and Technology to the mix and helps us see the interactions that these force us to consider when thinking about the products we are creating – your new pharmaceutical or food item requires energy to produce, consumes water, maybe even pollutes it; cleaning up the water or recycling it requires energy, etc. and all of these processes require specific technologies that must be financed, management that must be paid for and policy that is going to cost you time and money to implement.
It gets complex very quickly – and they you have to overlap the triangles of Environment, Society and Economy and considerations of “Risk, Return and Liquidity” – you can see why, in the interests of giving people some measure of predictability, most schools operated in distinct silos and kept their models separate from one another.
https://www.sdewes.org/jsdewes/pid8.0355
But here we are teaching SUSTAINABLE business models, and that means embracing the complexity and working in an interdisciplinary fashion. So simple triads are out.
To give you an embodied feeling of the three body problem and other conceptual difficulties facing tradeoffs, we invite you to try an exercise in motion where you try to optimize your position relative to two other people in the room as you all move about.
The exercise comes from Oliver Huffman’s session at the Econgood Conference in Amberg Germany entitled, “Systems Thinking: The Nature of Complexity and How to Solve Complex Problems (for the Common Good)”
It involves three movements:
1) Stay as close to one person in the room as possible as they move about – but everybody picks a different person.
2) Form a triangle with two other people and try to keep all the sides equal length as you move around the room.
3) Stay as close as possible to one person while staying as far away as possible from another.
These exercises can be used to represent the tradeoffs we find in these areas when trying, for example, to maximize returns on investment (get as close to profit as possible) while minimizing risk (stay as far away as possible from liability)
As you dance around the room, you won’t just see, but you will get a real FEELING for how tricky it gets to optimize any one position.
In the case of the simplified Food, Energy and Water Nexus, the European commission scientists recently added “Ecosystems” to the mix, making it the Water/Energy/Food/Ecosystem Nexus and now the diagrams describing it are much more complex:
Even the Magic Triangle of Business can’t really be considered a triangle since it adds a fourth dimension of “Who” – your target group, the “customers”, and we are seeing that this group can no longer in any way be consider homogeneous or predictable. As so called “consumer awareness” of the Food/Energy/Water/Ecosystem Nexus grows and your potential customers themselves desire to be part of the sustainability solution rather than contributors to problems in health and well-being and the preservation of our natural ecosystems, the “who” becomes a moving target in another multt-body problem you must consider when explaining your ideas to potential funders and helping get them financed to fruition.
Your awareness of the Capitals that are out there to get your project moved to market and completion also demands an awareness of, as the Singapore Management University points out, what is negotiable and what is NON-NEGOTIABLE.
So while the different forms of Capital we derive from our Natural and Social Worlds are definitely FUNGIBLE, the systems that produce them are not. They are non-negotiable. The systems that produce what we call “Capital” themselves must not be exploited, depleted or destroyed. Like the golden goose in the parable, they must not be sacrificed in pursuit of the golden eggs.
Alternative finance therefore doesn’t just concern so-called financial returns. In the world of sustainability finance we talk about ESG Integration -- including Environmental, Social and Governance considerations in all finance decision. In their document, “Sustainable Finance: ESG in der Praxis von FinanzberaterInnen” Austrian Sustainability Finance Consultant Andreas Dolezal from the group Sustainable Entrepreneur.at and Morethanjust Compliance.at tells us, https://www.wko.at/oe/information-consulting/finanzdienstleister/sustainable-finance-esg-in-der-praxis.pdf
ESG Integration involves “Adding non-financial ESG data directly into standard financial forecasts and asset valuations.
Sustainable Finance is therefore “Aligning lending and capital allocation with ecological and social goals.”
This puts us firmly in the territory of Victoria Hurth’s Logic 2, and carries the risk of Greenwashing: “The risk where firms fake or exaggerate their green credentials to attract capital”
So Logic 3 sustainability accounting, which seems not just to do less harm, but to do more GOOD, encourages alternative financiers to consider an ever wider dimension of risk and to consider certain harms NON-NEGOTIABLE. What are the chances that our products or services entire supply chain, if we used full cost accounting and considered the true costs to environments and societies, would create costs which, if internalized, would outpace revenue? If it does, it should not be financed.
Remember: Finance originally meant “to finish”, but not to “finish off”, not to drive to extinction. The “completion” it implied was the realization of a dream, the achieving of some greater purpose in a purpose driven economy.
This is what the economist E.F. Schumacher meant when he wrote “Small is Beautiful: Economics as if People Mattered”. All people. And in our sustainability studies, using Logic 3, we look at finance as a way of achieving a well-being economy for ALL beings. As if all creatures, great and small, mattered.
This is why today’s lectures on finance can begin somewhere unexpected:
Finance is not fundamentally about money. Business is not fundamentally about products. Governance is not fundamentally about control.
Finance exists to enable purpose. Business exists to satisfy needs. Governance exists to ensure that both remain aligned with the long-term flourishing of people and the living systems upon which they depend.
That creates a coherent intellectual arc:
Purpose → Needs → Value Creation → Capital Transformation → Finance → Governance → Sustainability → A Flourishing Vortical Uplfiting Economy and Ecology
Rather than treating finance as the starting point, finance becomes the mechanism that allows purpose to become reality. In that framing, money is no longer the destination—it is one of the tools that helps society finish the work that truly matters.
And alternative finance?
Alternative finance begins by seeing value where conventional finance sees none. When you put on your “nexus goggles” you too will begin to see all sorts of possibilities for financing your vision and bringing it to the world. I suspect that no matter how successful you become at getting financed, you’ll always feel you’re never finished. So let’s get started!
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