Reform of the financial investment chain is essential if capitalism is to contribute to social progress and to help address both inequality and the great strategic issues of our century: rapid population growth, accelerating urbanisation and the food/water/energy nexus - all of which will be impacted by climate change.
A reasonable person might assume that the world's investment chain, the oil in the engine of capitalist growth, would be focused on addressing these challenges. But is it?
In recent years the world's top twenty banks have paid fines totalling $235 billion for bad behaviour and, post 2008, privately held bank debt has been socialised into sovereign and citizen debt. Despite great progress in responsible investment, financial services firms show little sign that their behaviour has truly reformed. In the public perception the world of financial services, and the investment chain of which it is part, show every sign of having been designed for the players rather than the clients. We are experiencing the principal/agent intermediation described by Adam Smith when he cautioned that "profusion must prevail".
Regulation is part of the answer, but this will most likely remain behind the curve in terms of coping with financial innovation by industry participants with vast resources at their disposal. The starting point must, then, be the application of personal integrity, responsibility and accountability.
A financial services 'Hippocratic Oath' (backed up with robust penalties for misdemeanours) would place the interests of clients and stakeholders at its core. It should include a commitment to do 'no harm' and to tackle externalities, thereby helping to raise the bar and change the raison d'être of those working in the sector.
The purpose of the financial sector should not be the enrichment of its participants but the efficient and effective allocation of capital to meet the needs of clients and beneficiaries, and the economic health and well-being of the world and its citizens. Sadly, this is not what we see around us. It is time for a change.