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Producing the ecological economy: A study in developing fiduciary principles supporting the application of flow-fund consistent investment criteria for sovereign wealth funds

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  • Farrell, Katharine N.
  • Löw Beer, David

Abstract

In the current financial climate, there is an opportunity for surplus capital to incentivize ecological economic production. Markets and financial products created in response to this surplus include investments in the maintenance of biologically viable natural systems and the development of sustainability transformation technologies. In this paper we critically examine their potential for supporting conservation and socio-ecological transformation. Using Nicholas Georgescu-Roegen's flow-fund theory, we take sovereign wealth fund (SWF) investments as a case in point and ask: according to what principles might it be possible to ensure that SWF investments are directed toward producing new economic processes compatible with the transformation to an ecological economy? Employing the flow-fund theory concepts of economic Anschauung and process-funds, we specify a flow-fund fiduciary responsibility associated with ensuring that an economic process is designed so that its final cause, or purpose, can be realized sustainably and sustained over time. We illustrate the generalizability of these fiduciary criteria by applying them to the two very different potential target investments: mangrove forest recuperation and conservation and the roll-out of the electric vehicle transport sector. We conclude with reflections on the general applicability of this approach and recommendations for further research.

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  • Farrell, Katharine N. & Löw Beer, David, 2019. "Producing the ecological economy: A study in developing fiduciary principles supporting the application of flow-fund consistent investment criteria for sovereign wealth funds," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    • Handle: RePEc:eee:ecolec:v:165:y:2019:i:c:6
    DOI: 10.1016/j.ecolecon.2019.106391
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    2. F.H.J. Polzin & M.W.J.L. Sanders, 2019. "How to fill the ‘financing gap’ for the transition to low-carbon energy in Europe?," Working Papers 19-18, Utrecht School of Economics.
    3. Polzin, Friedemann & Sanders, Mark, 2020. "How to finance the transition to low-carbon energy in Europe?," Energy Policy, Elsevier, vol. 147(C).

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    More about this item

    Keywords

    Social and responsible investment; Political economy; Fiduciary Terms; Georgescu-Roegen; Flow-fund theory; Mangroves; Electric Vehicles;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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