Tim MacDonald’s Post

“we must transform our energy, food, and finance systems, and restore nature in a fair and inclusive way.” We must transform finance in order to finance transformations in energy, food and our human partnership with Nature more generally. Transforming finance means taking pension trust money out of the capital markets and flowing it into enterprise directly through the innovation of social stewardship financial engineering of equity paybacks to an actuarial/fiduciary cost of money, plus opportunistic upside (for Actuarial Compliance as to income ongoing into a secure future), from enterprise cash flows prioritized by contract for suitability to the times, longevity over time and fairness all the time (for Fiduciary Faithfulness as to safety ongoing into a dignified future). This innovation of social stewardship equity paybacks creates space for a new conversation at the vanguard of public discourse about: - what technologies- for energy, food and living more generally- are suitable to the circumstances then prevailing - how long will current technology choices continue to be suitable to the circumstances as times change over time and from time to time: what new beginnings do we need to be considering, and when do we need to be considering them -what is fair about how business does business across all six vectors of fairness in enterprise: Fair Trade (fairness to suppliers) Fair Engagement (fairness to communities, of place and interest) Fair Reckoning (fairness to Nature and Society and our shared Future) Fair Working (fairness to workers, and in the workplace) Fair Dealing (fairness to customers and competitors) Fair Sharing (fairness to the savers whose savings are the original and ultimate source of the money made to flow into enterprise by its financiers, fiduciary and otherwise)

Outrage is a righteous response, to be sure, when confronting the perfidy of Incumbent actions to protect their incumbency at the core of our global energy supply ecosystem, even as lived experience proves climate science wrong in how long they told us it would take for the climate to start changing in catastrophic ways. Also, after giving ourselves space to release our rage, it is good to remember that expecting fossil fuels companies to lead the world in "transitioning away from fossil fuels", as COP28 correctly concluded that we must, is an expectation that most likely contains within itself the seeds of its own disappointment. We know (at least in concept if not yet, truly, in detail) what actions we must take. But the truth is, we do not know yet who we must call on to take those actions. We know we must rapidly redesign and reconstruct our global energy supply ecosystem, to be purpose-rebuilt for energy sufficiency complete with habitat longevity and social equity on a planetary scale in the 21st Century, and beyond, hospicing energy extraction from hydrocarbons companies as we transition away from fossil fuels. A moment's reflection will show us that this will require a new planetary enterprise with the power to take control of the ecosystem that must be redesigned, to neutralize any opposition from the Incumbency. A moment of further reflection will show us that enterprise will need to be supplied with vast quantities of equity financing to pay the costs of that redesign and reconstruction, including cancelling any power of the Incumbency to obstruct and disrupt the work. Here, it gets a little bit technical on things finance in order to see that the Capital Markets cannot supply the needed equity. Those markets are purpose-built to finance Growth through Creative Destruction. COP28 correctly concludes that we need to be "transitioning away from fossil fuels in a just, orderly and equitable manners". Transition is not Growth. Destruction is not orderly. Or equitable. Or just. We need to find another way. Pensions are that other way. Not as participants in the capital markets, but as innovators of a new social stewardship form of financial engineering of equity paybacks to an actuarial/fiduciary cost of money, plus opportunistic upside, from enterprise cash flows prioritized by contract for suitability to the times, longevity over time, and fairness all the time. When it comes to climate action, how will Pensions know what energy technologies are suitable, what are appropriate expectations for longevity and what is fair. Scientists need to tell them. We need to create within our new plenatary enterprise a new department of climate science for connecting Science and Finance for Climate Action. 

COP28 concluded that humanity needs to be "transitioning away from fossil fuels in a just, orderly and equitable manner". Transitioning away requires a simultaneous transitioning towards. Otherwise the lights will go out, and the stoves will grow cold. We need to be rapidly redesigning and reconstructing a new global energy supply ecosystem that will be purpose-rebuilt for energy sufficiency complete with habitat longevity and social equity at a planetary scale in the 21st Century, and beyond, hospicing hydrocarbons as we transition away from fossil fuels. This will require a new planetary enterprise supplied with vast quantities of equity financing. This equity cannot be supplied through the Capital Markets. Those markets are created by design to flow equity into Growth through Creative Destruction. Transition is not Growth. Destruction is not orderly. Or equitable. Or just. Pensions can supply that equity, but not as participants in the capital markets. They can supply it through the innovation of fiduciary finance through social stewardship financial engineering of equity paybacks to an actuarial/fiduciary cost of money, plus opportunistic upside, from cash flows prioritized for suitability, longevity and fairness.

"It’s clear we can’t leave our planet’s future in the hands of fossil fuel giants prioritising profit over people." Exactly right. Expecting energy extraction from hydrocarbons companies to lead humanity in "transitioning away from fossil fuels in a just, orderly and equitable manner", as COP28 correctly concluded that we must, feels like an expectation that contain within itself the seeds of its own disappointment. The Earth needs different advice from its lawyers. One innovatively lawyerly thing we might consider is the interest of workers who are working, in part, for a pension that promises them income security in a dignified retirement, and their power to bargain, pursuant to that promise, with the fiduciaries of the trusts that are created and sustained to provision that promise over whether and what those trusts can do as investors to finance the "transitioning away" that every worker needs us to be making if they want to retire into a dignified future of energy sufficiency complete with habitat longevity and social equity [in real world, real time terms: not a world rocked by mammoth hurricanes, epic floods, devastating droughts, raging wildfires and other cataclysms of a changing climate that is diminishing the habitats on earth that we humans can inhabit]). A pension is a contract, which is a creature of the law. A trust to provision a pension contract is an institution also created by the law. Using US pension trust law and policy as a proxy for pension trust law and policy more generally, our Employee Retirement Income Security Act ("ERISA") tells us that workers are entitled to see their fiduciaries exercising: "care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” The law tells us that aims of a pension trust are the investment of money (California Constitution) for income as well as safety (The Massachusetts Rule of Harvard v Amory, 1830) to assure (California Constitution) income security in a dignified retirement for workers (US Senate HELP Committee). Character is more fact than law, and includes vast size, programmatic purpose and forever time. Capacity is also more fact than law. It includes the power to use the technologies of spreadsheet math, desktop publishing and digital communication to negotiate with enterprise of any size, in any business, anywhere on the planet. See, e.g. Private Equity. So our questions as Proxies for the Earth (and workers) become: Who can and should pension fiduciaries be negotiating with on climate action? And what can and should they be negotiating for?

Workers Capital needs to discover the innovation in fiduciary finance that uses the character of the social trusts that provision workforce pensions, of vast size, programmatic purpose and forever time, to use the technologies of spreadsheet math, desktop publishing and digital communication to negotiate with enterprise of any size, in any business, anywhere on the planet, for equity payback to an actuarial/fiduciary cost of money, plus opportunistic upside, from enterprise cash flows prioritized by contract for suitability to the times, longevity over time and fairness all the times. Equity paybacks open up space for the innovation of fiduciary activism for engaging with fiduciary stewards on questions of which enterprises they can and should be negotiating with, and what terms they can and should be negotiating with. Consider, for example, this innovation of Participants Dialogues, between workers and a Dutch pension: https://lnkd.in/e_u_Rrvd This Dialogue focused on responsible stock picking. Imagine a variation on this theme, that focuses on using equity paybacks to flow the right money into the right enterprises for their use in doing the right work, for the right time, at the right cost, on the right terms, to form the right businesses for forming the right technologies for forming the right choices for forming the right economy for forming a cohesive society and keeping it ongoing into a dignified future, for workers, directly, and for all of us, consequently.

“in a planetary emergency where scientific evidence plays a secondary role to the power of private capital in the formation of policies that will determine the future of life on Earth,” This secondary role of Science to Money is true as long as we continue to allow “private capital” to include capital markets capture of fiduciary money, transmogrifying fiduciary stewards of social trusts for future dignity entrusted with discretionary authority over the investment of money for income as well as safety to assure security and dignity across the generations, into Asset Owners Allocating Assets across Asset Classes, and within classes, selecting Asset Managers peer benchmarked by Consultants for generating the highest possible purely pecuniary risk-adjusted profits extracted as gain on sale to other market participants in the capital markets, solely in the financial best interests of [maximizing fees and profits for capital markets professionals]. What can Science say to Asset Managers about purely pecuniary risk-adjusted profits? There is an innovation that will make money make more sense to our common sense by turning Asset Owners back into fiduciary stewards with the power, purpose and time to use the technologies of spreadsheet math, desktop publishing and digital communication to flow the right money into the right enterprises, for its use in doing the right work, for the right time, at the right cost and on the right terms, through negotiated agreement on equity paybacks to an actuarial/fiduciary cost of money, plus opportunistic upside, from enterprise cash flows prioritized by contract for suitability to the times, longevity over time and fairness over time, to form the right businesses for forming the right technologies for forming the right choices for forming the right economy for forming a cohesive society and keeping it ongoing into a dignified future. Fiduciary stewards need Science to speak to suitability and longevity, and common sense to speak to fairness, to help choose the right places for tens of trillions in fiduciary money to flow, on the right terms, for security ongoing into a dignified future. There is much that Science can say to Fiduciary Stewards about building a world of security and dignity.

innovations in fiduciary finance that create the innovation of fiduciary activism, on climate, and other things...

Here is a challenge. Give yourselves permission to imagine pension trust funds in the US alone joining together in a new collaboration called The 21st Century Energy Sufficiency with Habitat Longevity and Social Equity Fund to combine all their holdings in hydrocarbons companies in order to take over voting control of those companies and vote to take them out of capital markets ownership, placing them, instead, into social stewardship, where they will be directed to become, and supported in being, positive participants in a new planetary enterprise to rapidly redesign and reconstruct our global energy supply ecosystem to be purpose-rebuilt for energy sufficiency complete with habitat longevity and social equity on a planetary scale, hospicing hydrocarbons while “transitioning away from fossil fuels in a just, orderly and equitable manner”, per COP28. Imagine this redesign being designed, physically, by Scientists expert in Energy, Habitats and Society, and financially by CFAs exercising expertise in equity paybacks to an actuarial/fiduciary cost of money, plus opportunistic upside (for Actuarial Compliance as to income ongoing into a secure future), from enterprise cash flows prioritized for suitability to the times, longevity over time and fairness all the time (for Fiduciary Faithfulness as to safety ongoing into a dignified future). Imagine these Scientists and CFAs being accountable to your common sense of social equity through popular participation in Participant Dialogues with pension trust fiduciaries about care, skill, prudence and diligence for income as well as safety to assure income security ongoing into a dignified future. Within this imagining, what kind of climate future do you see?

An intriguing innovation in citizen engagement in social choosing through pension fund investing is the Participant Dialogues being pioneered by pension funds in the Netherlands, designed and delivered by Emmeline C. https://lnkd.in/e_u_Rrvd Politics is a reactive, redistributive and corrective sociology for "righting the wrongs" and protecting public health, public safety and the public's wellbeing. Money is a proactive, redistributive and formative sociology for forming the businesses that form the technologies that form the choices that form the economy that forms society and our shared future. And fiduciary money, the money society aggregates into social trusts for provisioning the social goods of Workforce Pensions and Civil Society Endowments, is already accountable under the laws of fiduciary duty, to the common sense of reasonable people. Citizens Assemblies for giving people a voice in investment decision making by pensions is a powerful social innovation for our times.

In today's email blast, Inside The Movement tells us: "Within the climate movement, we know that Big Oil is to blame" We also know from lived experience of climate action devolving repeatedly into inaction through a recurring cycle of promises made and promises broken, that casting blame is not an effective strategy for averting climate catastrophe. The circumstances now prevailing are that we need to be "transitioning away from fossil fuels in a just, orderly and equitable manner", per COP28. The simple truth that too many climate activists seem to find too hard to accept is that energy extraction from hydrocarbons companies are not going to lead in that transition away from hydrocarbons, and politicians cannot be made to make them do it, or to do it for them. We have to find another way.