6.2.2 Purpose of finance

Finance itself is neither good nor bad. Its impact depends on how it is designed and used. 

Regenerative finance connects people and money to long-term projects that meet needs such as housing, clean energy, public health, food, and ecological restoration. It often features:

• wide access – affordable finance for individuals, communities, cooperatives, and public institutions who need it, not just the wealthy;

• social and ecological goals – aiming to meet human needs and restore ecosystems rather than maximising short-term profit.

• rules based on care and accountability – financial relationships guided by ethics, long-term commitment, and community benefit.

A community land trust (Section 4.2.2) is one example. These organisations raise funds to buy land, remove it from the private market, and provide affordable homes to buy or rent with long-term rental security. Surpluses are reinvested locally. Housing is treated as a public good, supporting resilience and wellbeing over time.

ESG: aligning finance with values?

Environmental, Social and Governance (ESG) investing considers social and environmental issues in financial decisions. Along with supporting finance to be more regenerative, investors also see it as a way to manage risks that could affect profits, such as climate change, poor business leadership, or unsafe workplaces.

Critics note that some ESG-labelled funds still back fossil fuels or harmful companies, often relying on vague scoring systems. Even with good intentions, ESG can focus more on appearance than impact, becoming greenwashing without strong rules. Still, its growth shows public demand for finance that reflects shared values. With clear standards and accountability, ESG could help shift capital toward more equitable and sustainable outcomes.

Today, extractive finance is common. It aims to maximise profits, removing resources or wealth from people and/or ecosystems without giving back enough to support the long-term health of systems over time. Extractive finance typically shows the opposite traits of regenerative finance:

• limited access – concentrated among those with wealth and power, excluding many communities;

• profit-first goals – financing is given based mainly on potential for profits, rather than social or ecological impact. Basic needs like housing or water are financed only if profitable, often through privatisation and pricing that limits access;

• short-term gain – incentives encourage quick extraction of value without responsibility for long-term harms like pollution, economic inequality or community displacement.

In housing, extraction can mean investors buying properties for speculation or converting homes to expensive short-term rentals for business travelers or tourists. Rent-seeking is another form of extraction, earning money simply by controlling access to something needed. A landlord may raise rents because housing is scarce; a firm may charge high transaction fees without creating value. Rent-seeking shifts wealth upward to those who already have assets and wealth, and blocks others from meeting basic needs.

Extraction is not always obvious. A ‘green’ investment fund may still finance fossil fuel expansion, or a private equity firm may buy elder-care homes, cut staff, and raise fees. Such actions undermine long-term social and ecological wellbeing.

Values are shared beliefs about what matters in life (Section 1.3.2). They shape laws, institutions, and systems, influencing what is financed and how success is measured. Valuation, by contrast, is the process of assigning a money price to compare options. But not everything important can be priced, and many valuation methods overlook what matters most.

Three common valuation tools show the gap between values and valuation:

• cost-benefit analysis: adds up monetary costs and benefits, but often ignores non-market values like biodiversity or cultural meaning. For example, in Spain’s Doñana wetlands, local authorities have considered legalising intensive strawberry farming. The profits from farming were easy to count. But the wetlands’ role in storing carbon, filtering water, and supporting rare species are not. A financial gain on paper can be a serious ecological loss.

• discounting: values future costs and benefits less than present ones, based on the idea that money now is worth more than money later, partly because money can be invested now to earn a profit later. Discounting can undervalue long-term social and environmental costs and gains, such as global warming, clean air or flood protection. This distorts financial comparisons. For example, a forest might provide clean air and flood protection for generations, but these benefits may appear less valuable, or not be counted at all, compared to the short-term profits from logging or selling the land.

• return on investment (ROI) and payback period: ROI compares how much profit is made compared to the money invested in a project. The payback period measures how quickly the money spent on an investment is earned back through the money it generates. Both of these tools favour projects with quick, high returns, making long-term or shared-benefit projects less attractive.

These tools often suit extractive finance, rewarding fast, measurable returns while overlooking equity, care, and planetary health, the goals central to regenerative finance.

Regeneration means restoring ecosystems, repairing communities, and protecting the wellbeing of future generations. It requires giving back at least as much as is taken. Profit-based finance, however, is built on extraction, taking more than is returned.

Finance always has two perspectives: for providers, it is an asset expected to produce profits; for recipients, it is often a liability, creating obligations to repay. These positions can pull in different directions. A borrower may aim for social or ecological outcomes, while an investor prioritises profit, undermining the project’s regenerative potential (Section 3.3.5).

Some argue that market-based finance can be reformed through better rules, strong public institutions, and clear standards to guide it toward regenerative goals. Others believe we need complementary tools like public banks, commons-based finance, or community lending, designed without profit as the main aim. A growing number question whether profit itself is compatible with regeneration, calling for systems based on reciprocity, care, and shared value.

To judge whether finance supports a regenerative economy, we can return to three guiding questions:

• Who has access to finance?

• What goals are being financed?

• What rules shape financial relationships?

The answers are complex, but asking these questions helps us think critically about finance and how it must change to serve people and the planet

Concept: Systems

Skills: Thinking skills (transfer)

Time: 30-40 minutes for each option

Type: Individual, pairs, group?

Option 1: Who and what has access to finance, and under what conditions?

Below are four short scenarios about how finance is being used. For each one:

1. Decide whether the example is closer to regenerative or extractive finance.

2. Use the three guiding questions to explain your answer:

   • Who has access to the finance?

   • What goals are being financed?

   • What rules shape the financial relationships?

Work in pairs or groups. After discussing all four, choose one to present to the class with a short explanation.

Scenario A: Fast Fashion Factory

A clothing brand receives a large private loan from an investment bank to expand its production. It contracts new factories in a low-income country, where labour laws are weak. The factories pay workers below a living wage, and the clothes are sold cheaply to increase short-term profits.

Scenario B: Indigenous Farming Cooperative

An Indigenous farming collective applies for funding through a regional public development bank. The loan supports a programme to restore traditional farming practices and native crops. Any surplus food is sold locally at affordable prices, and profits are reinvested in soil health and community training.

Scenario C: Digital Textbook App

A venture capital firm invests in a new educational app that offers free textbooks. But the app collects user data, sells advertising, and prioritises content that generates the most clicks. Users with no internet access or older phones cannot use the service.

Scenario D: Local Library Retrofit

A town council borrows money from a national green fund to upgrade a public library with better insulation, solar panels, and community spaces. The savings from lower energy use are used to extend library hours and offer free workshops.

Option 2: Valuing what matters

Work in small groups. Choose a project your community might need, such as:

• A public park

• A community health centre

• A housing co-op

• A local bus route

• A school garden

1. List five or more kinds of value the project would create. Think about:

   • Social value (e.g. safety, connection, health)

   • Ecological value (e.g. clean air, habitat, climate protection)

   • Financial value (e.g. jobs, saved costs)

2. Circle which values can easily be measured in money, and which cannot.

3. What might happen if only the financial value is counted? How would the decision change if all values were included?

4. Create a poster to capture your ideas. Include:

   • A title for your project

   • Your list of values

   • Two sentences explaining why some values matter, even if they’re hard to price

Prepare to share your poster with the class or display it in the room, perhaps with a gallery walk.

Ideas for longer activities and projects are listed in Subtopic 6.5

Jess, T., Blom, P., Dixson-Declève, S. (2023). From financing change to changing finance. Club of Rome. https://www.clubofrome.org/wp-content/uploads/2023/10/Changing_Finance_2023-3.pdf

Portman, J. (2024). What is the value in an empty home? A perspective from Action on Empty Homes and the Global Empty Homes Network. City, 28(5–6), 1079–1090. https://doi.org/10.1080/13604813.2024.2390754

Symons, A. (2023, June 23). Spanish strawberry farming near fragile wetlands sparks water controversy. Euronews. https://www.euronews.com/green/2023/06/23/spanish-strawberry-growers-deny-using-illegal-irrigation-sparks-controversy

Coming soon!