Imagine what we would pay today to reverse some of the costly ecological disasters of the past 50 years. Similarly, what if our descendants could pay to prevent decisions we’re making today that may deprive them of a prosperous future?
Giving future generations investment power in our current economy is the concept behind Intergenerational Finance™ (IGF). Like a business partnership between the future and the present, IGF™ gives today’s investors new business opportunities for valuable —
but currently not merchantable — long-term outcomes.
With a grant from the Institute for Sustainable Solutions, a group of researchers including Craig Shinn, Langdon Marsh and Hank Patton, completed a large research project on Patton’s concept of how to create a functioning intergenerational economy. They released the resulting report (pdf) in May 2012.
Their report outlines requirements to shift our economy from a focus on short-term profit to considering the entire cost and return of our actions on a scale that spans generations. Through long-term bonds and contracts with businesses and others, investors can reap the benefits of retiring “dirty” assets and investing in clean ones that benefit future generations. If the costs you’re offsetting in the future are greater than what you had to pay today, then it’s a good deal.
For instance, a city might choose to invest in setting aside land or planting trees to filter its municipal water source, an investment today that could prevent the much more costly construction of a water filtration plant tomorrow. And a utility might choose to use funds from a long-term bond to retire an old coal burning plant to avoid the risks of higher fuel and regulatory costs in the future and invest instead in energy efficiency and renewables.
A main component of IGF™ is voluntary participation to spur competitive innovations that future generations would want to invest in. Success depends on an increasing number of people realizing the potential for profit, and choosing to opt into the system.
Ultimately, the task of IGF™ is to create a viable economic system that capitalizes on the willingness to pay for services that benefit environment and society, and allow both present and future generations to flourish.
The group presented ideas for a new intergenerational economy at a conference at Portland State June 5-6, 2012.