Regenerative Investing

You have a problem. You see the looming effects of climate change and want to ensure a livable future for your children, but the money you are investing to support your children when they grow up is in mutual funds that likely support fossil fuel companies, arms manufacturers, and others directly responsible for the destruction of our climate. 

The money that you hope will give your children a future is also actively destroying that future.

There is a new push into ethical funds which are meant to avoid these pitfalls, but these funds are limited in their investment opportunities and the tools for you to audit their activities are in their infancy. This article seeks to expand perspectives on better investing.

What if you could invest in the environment, in efforts for climate justice, in carbon markets, and systemic change? What if you could invest in a future that you and your children want to live in? 

Let me introduce the concept of Regenerative Economics (Regen). The idea is to account for all the costs and values that are missed by traditional economics. That means both social effects, and externalities like carbon emissions.

If a marsh is drained to allow for a new property development, there is a loss of habitat for important species, there is a release of stored carbon and also a loss of future carbon sequestering and oxygen producing capacity by all of the plants and algae, and then there is a loss of the recreation space which is enjoyed people who live in the area. And all of this before we account for the carbon burned by the construction of the shopping centers and roads and homes that replace the original habitat. These are material and social costs that are paid by local residents, future generations, and the ecosystem as a whole. There is also an economic benefit to the developers, investors, and community members who use the services and spaces of the new development. These benefits and costs both matter, but our current economy only has methods to account for the expenses and value of the development, forgetting the value of the marsh and costs of its loss. Sometimes environmental offsets are bought to compensate, but the specificities are largely unaccounted for. Instead, those socio-ecological losses are termed “externalities” and considered outside the system. 

But, you and I both know that these losses are not external to our lives. The loss of a local wetland, or our favorite childhood hike, or the salmon runs that bring life to our local rivers all impact us and our families for generations.

What we need are new ways of expressing the very real value of these resources so that we can bring them into the system, investing in their preservation and growth. What we need is for our economies to not be at odds with our ecosystems.

Two leading projects in the Holochain Ecosystem are attempting to solve pieces of this conundrum. One, Kwaxala, is building financial tools for investing in the environments we want to preserve; and the other, IOEN (the Internet of Energy Network), is connecting global finance to the local renewables that need to be developed. Together, they represent the beginning of a movement for ethical investment and regenerative economics.

Let’s start with IOEN. 

Renewable energy is the future. If our civilization has a future, we will have to shift to more sustainable methods for meeting our energy needs. That much is clear. It’s also clear that fossil fuel companies are resistant to this change, and that large solar and wind farms can only be one part of the solution. Small scale local energy production will be a large portion of the global market. Minigrids and Microgrids are emerging as solutions that are more efficient and resilient as they don’t need the massive infrastructure of energy distribution on top of the infrastructure of production. Energy is generated, stored, traded, and used locally.

The pathway to fully clean, tradable energy is not immediate. On the way to full access to clean energy, organizations including large corporations are taking seriously the responsibility to offset their production of carbon emissions. A factory produces a lot of carbon, both from the energy it uses and the industrial processes themselves. They can get their electricity from renewable sources, but depending on where a particular factory is and when they are operating, they might not have access to renewables. Renewable energy generation is subject to location, geography, and access to resources like wind, enough sunshine, and the ability to store electricity.

But, just because they are incapable of directly using renewable energy doesn’t mean that they cannot support the use of renewables generally. Environmental Attribute Credits (EACs), including carbon credits and Renewable Energy Certificates (RECs), help create incentives to invest, support, and use renewable energy.

Currently, large renewable energy farms can sell carbon credits or RECs (depending on the system used), helping corporations offset their carbon emissions. But these are economies of scale. The accounting needed to get government issuance of these carbon credits only works at large scales (a single electrical meter is a lot easier to measure and monitor than many distributed meters). IOEN is providing a way for small scale energy producers who serve their local communities to aggregate their energy production and access global renewable certificate markets.

In order to ensure auditability and to account for distributed energy production by a collection of small holders, data is needed to track energy production. IOEN’s current work with partners in Asia is helping companies and home owners provide two types of data. First, photos of their solar arrays, preferably at the time of installation. Secondly, ongoing readings from their meter, showing the energy that they feed back to their local grid. IOEN’s partners then add satellite data which is used to confirm the installation of solar panels at the sites claimed. All of this data becomes available to regulators who can cross reference each source, ensuring that the meter readings match the expected generation range for the panels. 

Aggregating the data of many individual producers allows IOEN to meet the scale requirements to work with government regulators, procuring and then selling the certificates to corporations. As each individual energy producer’s contributions to this larger pool is tracked, they are able to then be compensated directly in relation to the amount of energy they produced.

Key to IOEN’s value in the market is the ability for clients to store the data (meter data, photographs etc.) in private networks hosted on Holochain which provides auditors with assurance that the certificates minted are validated and true. This creates transparency and integrity in the certificate. IOEN’s blockchain solutions that sit on top of that data then allow secondary markets to emerge, along with fractionalised investment opportunities in these renewable assets, creating liquidity. Because transactions are all tracked on the blockchain, and linked to secure data in Holochain, different organizations involved in the assets all can be paid seamlessly and transparently through fractionalised payments. Already small businesses, communities, and large corporations are seeing the value in this approach for a number of energy-related environmental assets.

Kwaxala is an indigenous forest regeneration cooperative taking a different approach to nature protection that goes far beyond carbon credits.

Rather than focusing on energy production, they are concerned with the preservation and stewardship of what we already have. Remember that marsh? We agreed that it has a value. And the question is: how can we invest in that value? Kwaxala is making that a possibility. Most land used for logging, oil drilling and fracking, and other resource extraction is government owned and often in contradiction with recognised Indigenous land rights in the area. Companies own or buy the permits and right to extract resources from that land, without buying the land itself. Kwaxala is working to buy those same rights, but rather than using them for extraction, they are securing the right to protect and regenerate the ecosystems threatened by extraction. This legal guarantee of preservation, in an area previously at genuine threat of extraction, is then used to generate carbon offsets each year which can be sold to corporations meeting their net zero commitments.

Kwaxala offsets not only represent sequestered carbon, but also a wider range of monetized ecoservices such as biodiversity protection and ecosystem preservation alongside positive social outcomes such as Indigenous equity and reconciliation. This enables them to command a premium market price per tonne. Additionally, by enabling capital investment directly into the organization holding the right to regenerate, they provide a new way for investment funds to flow into the asset value of the protected natural ecosystem, generating much needed upfront capital to establish these protected areas and counterbalance the extractive economic pressure to destroy the area.

But how do we ensure that the land is well taken care of? Here Kwaxala is using overlapping datasets to build a picture of the ecosystem and its health. Working with Indigenous land stewards, who are also the principal shareholders in Kwaxala itself, they are developing the metrics needed to monitor and support the wellbeing of the particular ecosystems. For some situations, that might be the water and air quality; for others, it might be the presence of indicator species; for many, it will be the conglomeration of multiple data points, collaborating to tell a story. This rich dataset then provides detailed provenance for both the particular offsets generated by the protected ecosystems and for the long term investments in the ecosystems themselves so that there is detailed visibility into the health and stewardship of the ecosystem.

To collect, manage, and maintain this data — and to share it with community members, government regulators, and investors — they are investigating the development of a distributed platform, built on Holochain. Building on Holochain in this case ensures that control of the data isn’t managed solely by the organization claiming to be protecting the ecosystem, but is rather distributed between all stakeholders. With data provenance baked in, it is also easy to track exactly what agent adds any particular piece of data. This combination of verification and distributed storage of overlapping datasets allows for a high degree of trust to be developed, and holds the organization itself accountable.

In his book The Ministry for the Future, Kim Stanley Robinson introduces the idea of going long on the climate — basically, investing in our futures. As popular opinion shifts to focus on the climate crisis, we can expect the economic value of climate mitigation strategies to rise. One of the biggest issues to date in the space is a lack of reliable investment opportunities. With the capacities for data provenance that Holochain provides, investors can have more transparent access to the assets they are investing in.

There isn’t a one size fits all approach here. In comparison to the global replication of industry, climate mitigation is about economies of specificity, because ecosystems are specific to their place and relationships.

Holochain is designed so individual applications can be customized to their particular context, while still being compatible with each other. This gives the flexibility needed for hyper-specific economies to interact with the global market in accountable ways. Add to this innovative accounting methods being developed on the framework and we start to see the potential for a new regenerative economics to be developed. Based not on extraction, but rather the regenerative value of all ecosystem activities. 

The projects outlined above are only first steps towards solving your original problem. You want a way to invest in a future for yourself and your children. A future not only rich in a financial sense, but also an experiential one. Quality of life hinges on the environment and the wellbeing of our society. 

There won’t be any single bulletproof investing strategy, but it’s going to take a multiplicity of tactics to address climate change. Looking at these pilots, we feel that the best way to diversify and to be an early investor in the regenerative economy is to go out and build it. We are looking for more projects innovating in this space. It’s going to take new business structures, financial tools, and community initiatives to shift the landscape and to build a thriving economy. But let’s thrive together, building on real tangible things, building on relationships with the nature we cherish.

Originally published on the Holochain Blog by Rosalind Marino on June 28, 2024.