Finance for a future of sustainable prosperity

Journal Paper by Aled Jones, Nick Taylor, Sarah Hafner and Joanna Kitchen
Area | May 2020

Summary

Global society currently faces many challenges including climate change and rising inequality. This paper presents the results of a thematic coding analysis of a workshop comprised of senior accountants and actuaries who were asked to consider how a future of sustainable prosperity can be enabled by the finance sector.

We found that mindset, skills, external drivers and decision boundaries were key themes that create barriers to change. Importantly, a reframing of the professions is required to underpin the changes required. The accountants and actuaries who took part believe that this represents a revolution from the way they currently operate with regard to regulation, exams, decision-making and their engagement with clients. They need to be more open to qualitative approaches to advice and focus on value creation, as well as re-constructing what is understood through value, rather than profit extraction.

Introduction

Prevailing agreement in economic and financial geography is that, to understand our political, cultural and environmental economies, unpacking the specific logic and practices behind the ‘financialization’ phenomenon is necessary (Christophers, 2015; Knox-Hayes, 2013; Ouma et al., 2018; Dörry 2016). Of particular concern are current financial sector practices acting as a barrier to sustainability (Shrivastava et al., 2019; Hafner et al., 2020). The short-termist and profit-seeking nature of the finance sector are seen to worsen environmental and social externalities. Tackling the sustainability challenges of modern society through the finance sector requires a more adequate understanding of financial systems (Martin & Pollard, 2017) and a better representation and management of the risks associated with the current pathway of economic development.

Two professions –accountancy and actuary – are at the front line of managing risks in the finance sector. Accountants prepare and analyse the financial records of all transactions for an organisation, while actuaries analyse the financial consequences of risks to which organisations are exposed. Therefore, it can be argued that these two professions are key to understanding if, and how, the finance sector needs to change to underpin, rather than undermine, a future of sustainable prosperity.

This paper summarises the key findings of a workshop with senior finance experts from the actuarial and accounting practices. It explores how their expertise can enable a future of sustainable prosperity, and what the barriers are to this.