The bigger picture

The Change Finance coalition is united in its belief that we need to make big changes to society to address climate breakdown and social injustice. We all agree that part of that change will have to be a major change to finance.

As a broad coalition with members working and specialising in many areas, we have a wide range of policy ideas. We worked together to pool these ideas, learn from each other and refine our policy proposals. Here, we present the list of proposals that we came up with. This is not meant to be an exhaustive list, but if we could implement some of these policies, we would take important first steps to change society and change finance.

We have grouped the ideas into 4 areas that we think are vital: reduce the reliance on finance to provide for people’s basic needs; exert democratic control over where we lend and invest; overhaul our financial institutions and promote new ones; and change the way we regulate finance.

The ideas

Reduce our dependence on finance for basic needs

Society has become far too dependent on the private financial system for the provision of our basic needs. We must find new ways and old to provide for people and planet without relying on private finance. To do so, we will need to find innovative new ways to mix public, co-operative and mutual systems of provision.

  1. Find new ways to provide for basic needs such as housing, health, education & pensions without having to use the private financial system.
  2. Reverse the privatisation and outsourcing of basic public goods and services, and cancel public-private financing initiatives where appropriate. Defend, develop and increase the role of pay-as-you-go provision for pension and health systems (rather than capital savings or insurance-based systems which pour more money into financial markets).
  3. Reduce excessive mortgage credit and strengthen social housing provision.
  4. Implement collective and defined benefit pension systems.
  5. Explore universal basic income proposals, in combination with directly providing for people’s needs.
  6. Support wealth redistribution through the tax system, in particular by increasing tax on the richest individuals and the largest corporations. Increased tax revenue will help the state provide goods and services for people, reducing their reliance on private finance.
  7. Citizens have a right to basic financial services, including digital payments with at least one state-backed provider as a backstop. Transparent, green, ethical accounts and services should be available to everyone, with unbiased advice.

Take control of how we invest and make it visible

To tackle our urgent social and environmental crisis, we must be able to direct credit and investment to where we need it most: Projects that will bring about a structural transformation of society. We need to unlock the positive potential of finance to serve people and the planet. We need policies that will take financing decisions away from financial speculators and put them under democratic control. We need policies that will make it transparent how much is being invested, where and by whom.

  1. Change where society lends and invests. Use regulation to direct lending and investments towards productive, long-term and environmentally beneficial projects and away from speculation. Use sectoral lending targets, capital adequacy rules and other forms of credit guidance, including quotas or prohibitions on finance for unproductive or environmentally harmful activities.
  2. Introduce and strengthen credit allocation quotas, both for private and public financial institutions. For example, Central Banks can alter their policies to meet social and environmental goals. Their quantitative easing (QE) could be changed to promote QE for People and to use QE to help fight climate change.
  3. Outlaw and discourage speculative, short term lending and investments, including food and commodity speculation. End the incredible waste of energy involved in very short term, speculative forms of finance such as high frequency trading and crypto-currency speculation (like bitcoin).
  4. Use climate stress testing to direct lending and investment towards long term environmentally beneficial projects.
  5. Change the mandates of public financial institutions. For example, e.g. central banks should include in their mandate the responsibility to protect the climate and environment.
  6. Lead by example, by making public and municipal investment and pension funds disinvest from harmful, speculative or unsustainable activities and invest in green and socially transformative projects.
  7. Use public guarantees to support green investments.
  8. Alter investment and lending horizons using a Financial Transactions Tax (FTT).
  9. Reduce tax avoidance through public country-by-country reporting.
  10. Continue to erode financial secrecy, especially through targeting tax haven jurisdictions.
  11. Tax carbon emissions at a level high enough to, at the very least, deliver the Paris climate goals.
  12. Restrict carbon allocations in Emissions Trading Schemes to ensure a carbon price high enough to achieve, at the very least, the Paris climate goals.
  13. Make sure that Environment Social and Governance (ESG) considerations are a part of investments’ firms’ duties towards their clients. Increase transparency by demanding ESG disclosure based on public evaluation models or taxonomies.
  14. Remove the tax bias in favour of debt.
  15. Give policymakers powers to control the total creation of debt & money by commercial banks, and explore sovereign money options.
  16. Allow states to manage international capital flows with the use of taxes or capital controls, especially for countries vulnerable to in- and out- flows of hot money.
  17. Adjust financial and national accounting methods to reflect long-term costs and benefits and social and environmental considerations.
  18. Align asset manager incentives with the long-term interests of society, including overhauling the “heads we win, tails you pay” fee system.
  19. Require full disclosure of all fees and subsidies.
  20. Make firms and public finance institutions disclose a lot more information about where their money goes e.g. where and to which sectors of the economy.
  21. Promote green and brown loan tagging.
  22. Penalise mis-selling of green finance products.
  23. Increase transparency by ensuring carbon disclosure for portfolios (similar to France’s Article 173 rule).
  24. Make the disclosure of loans to sovereign borrowers a condition for their validity.

Change financial institutions

To redirect, democratise and stabilise finance, we will require an overhaul of our institutions. We need policies to promote new and alternative financial institutions, and we need policies to transform the institutions we already have.

  1. Promote public banks, stakeholder banks, network of people’s banks, ethical banks, and small banks.
  2. Promote local, mutual and cooperative banks, pension and insurance providers and other financial institutions to give stakeholders a say in what gets financed.
  3. Promote democratically accountable multi- and bi-lateral development and investment banks, including green investment banks.
  4. Remove state aid, fiscal accounting, and other barriers to public banking.
  5. Launch citizen wealth funds where the people have a direct input into which projects are financed.
  6. Bring an end to Too-Big-To-Fail by shrinking and breaking up Systemically Important Financial Institutions (SIFIs).
  7. Separate banking activities, so that the commercial and investment activities are distinct (e.g. using a ring-fence).
  8. Reduce financial firms’ reliance on wholesale and collateralised funding.
  9. Create a publicly owned and democratically accountable utility to handle payments and money transfers.
  10. Make banks increase the share of their own equity in their balance sheet (capital adequacy rules) and reduce their total leverage (via leverage ratio rules).
  11. Ensure broad and diverse stakeholder representation on the boards of private financial firms. For example, include employee, customer, pensioner and citizen representatives and gender diversity.
  12. Enforce civil and criminal liability for senior managers of financial institutions.
  13. Restrict executive pay at systemically important firms.
  14. Bring an end to central bank independence, making them democratic, representative and accountable e.g. “Central banks should be 100% public. Their governing bodies should be composed of stakeholders from all sectors of society. Their mandate should come directly from the sovereign—in analogy that parliaments are elected directly by the citizens.”

Change the way we regulate

To change finance, we will also need to change how we regulate it. We need policies that address what is regulated, how it is regulated and whose interests regulators represent.

  1. Simplify regulation – reverse the vicious cycle of de-regulation supported by ever more rules!
  2. Force all finance out of the shadows: regulate shadow banking.
  3. Build a safe corral: ensure all financial instruments, particularly derivatives, are recorded and subject to regulation & supervision. Over-the-counter (OTC) does not mean beyond scrutiny.
  4. Make banks and financial firms apply for pre-authorisation of new services, so that we may check that they do no harm and serve society. A bit like we do with medicines.
  5. Reform the international financial architecture. Including: Promote democratic reform of the Bank of International Settlements and the Bretton Woods Organisations; Expand the G20; Create a new Bretton Woods system so that countries can manage international capital flows.
  6. Ensure that trade agreements do not restrain governments from enforcing financial regulations.
  7. Dramatically increase the democratic accountability of regulators and supervisors, especially by increasing the role of parliaments in scrutinising financial policy, regulation and supervision.
  8. Ensure financial policymakers’ mandates give priority to public goods and the public interest before the interest of market participants.
  9. Implement on-going and accountable debt audits, which involve citizens to assess the legitimacy of debt. This would lead, where necessary, to the cancellation of illegitimate debts. Enable debt relief for over-indebted countries via a UN-based multilateral or sovereign debt workout mechanism.
  10. Reduce financial firms’ lobbying power by setting limits on access to law makers, regulators and supervisors.
  11. Slow the revolving door between regulators and private firms, with longer cooling-off periods. Policymakers-turned-lobbyists (and lobbyists-turned-policymakers) should have restricted access in their former areas.
  12. Change the European Commission consultation process, including giving teeth to the Financial Services User Group (FSUG).
  13. Involve civil society in the very earliest stages of policy design, including via the creation of an agenda setting body.
  14. Build civil society capacity on banking and finance, including more networking, funding and an annual conference of civil society on finance.
  15. Regulate all consumer finance, including payday lenders, and rent-to-own lending, caps on interest rates etc. No more loan sharks!