In 2015, World leaders met at the UN and signed in for the 17 Sustainable Development Goals (SDG). Nowadays, there is the technical know-how to achieve them, the political consensus to do so and scientific evidence on how to do it. In our live show, Prof. Dr Dr Stefan Brunnhuber, Member at The Club of Rome and Member of the Board of Trustees at World Academy of Art & Science, noted that the leading businesses nowadays would be able to build a system within only 18 months to achieve the SDGs for Europe. Nevertheless, one important key factor leaves lots of room for improvement: the traditional financial system. Here you will learn how it is possible to finance the SDGs.
Why financing the SDG´s is difficult
Firstly, the old financial system must be mentioned. There are banking crises, currency crises, and state failure crises that prove its instability. To make up for failures of the financial system, a lot of money must be spent only on keeping the system alive. These issues are referred to as lock-in effects. Within the last 40 years, 425 bank- or currency crises occurred. With every new crisis, the amount of debt and public spending rose, decreasing liquidity for the SDGs. Moreover, only 1/3 of the SDGs are eligible for private investors. The other 2/3 are public goods and must only be financed by the public sector. Reallocating such amounts of money with for example taxes would possibly lead to a global recession. Another factor making financing the SDG´s difficult is the black market. Illicit transactions appear to pull the money out of its supply chain and therefore away from our green future.
“The financial sector is probably the game-changer in the entire sustainability debate.” -Stefan Brunnhuber
How the system can change for the better
The same value chain that is responsible for financing the SDGs runs through pandemics, global warming, loss of biodiversity and damage control etc. If we follow the traditional pathway for financing the SDGs over one global value chain, it will take 100 years to finance them. The design of the money system stands at the centre followed by the real economy, the social world and then the environment itself. Therefore it can be said that finance drives sustainability. It should rather be the other way around, turning “weapons of mass-destructions” into “tools of massive social and ecological investments”. Then we have more possibilities of achieving SDGs. Thus, to improve the system, there must be thought differently about how the financing can work. The solution is a path that doesn´t surrogate the existing global value chain but runs parallel to it. Specifically, if it is digitalized, a parallel path can provide liquidity and purchasing power to fund SDGs. One example of a great top-down approach is central bank digital currency (CBDC). There are dozens of CBDC currently in a sandbox approach, showing that they are already running.
“You will see that in September to October this year, the Chinese yuan will have such a digital blockchain associated currency running already.” – Stefan Brunnhuber
Two bottom-up examples of parallel systems are cryptocurrencies and community currencies. Nowadays there are about three thousand community currencies worldwide. They are running on local levels but demonstrate that parallel economic systems are possible.
Where blockchain technology comes in
We don´t redistribute money at the end of the value chain but rather pre-distribute the money exactly with targeted liquidity, using smart contract blockchain algorithms, to allow direct funding and financing SDGs. That can create multiple positive feedback loops that pull the world economy from the brown fossil industry towards the green industry. Moreover, distributed ledger technology (DLT) can provide the implementation of a dual digital currency. Thus, the measures, reporting and data in the system can be increased. Datafication increases efficiency because more information is given to make appropriate decisions. On this foundation a data enriched semi-regulated marketplace with smart contracts can be implemented, providing fast additional liquidity to finance the SDGs. To enable that, blockchain technology comes in. It increases transparency, trust, and traceability. Therefore, there is no bribery, money laundry, etc. Thus, there is a better risk analysis due to more data and much more conscious consumerism. Because of blockchain, the value chain can be identified from the beginning to the end. Negative externalities can be managed easier, and a parallel digital token economy evolves, which rather reflects the future than the past.
“We are trying to ride a bike with two wheels, where the second wheel is steering towards the green future using blockchain technology, enabling us to finance SDGs.” -Stefan Brunnhuber
First changing the mindset and then the financial system
For a more sustainable economy to evolve, there first must be a change of mindset from linear thinking to parallel system thinking. Nowadays, the problem is not technology anymore. Not using this parallel system or a system with the equivalent outcome as soon as possible is going to be very expensive for the political and economic system in the western world. Thus, it is not an ethical question, but more a political and financial question. Not overcoming hunger, not restoring natural resources, and not challenging global warming will end up far too expensive for not doing anything. To become more sustainable a proper leverage is needed, which only works with the financial system onboard.
How to finance the SDG with blockchain
Learn more about the parallel system and how to finance the SDGs with blockchain and gain deeper insights into the topics mentioned in this article. Watch the full BLOCKCHANCE Online LIVE show here, where Stefan Brunnhuber, discusses financing the SDGs. BLOCKCHANCE Online LIVE is a regularly hosted live show on YouTube, where you can ask renowned experts in their field your questions and gain glimpses of our future. Stefan Brunnhuber will also be a speaker at the upcoming BLOCKCHANCE Europe 2021 conference! Get your ticket here and take a deep dive into the universe of future technologies.