Lost in Translation: Breaking Financial Barriers
A few months ago a friend shared this article with me discussing negative externalities. They thought that it would probably really resonate with me. I told someone that I liked it but why do they keep referring to externalities?
I will pause here to say that I do not have a financial background-at all. Some of you who have read our other blog posts are thinking to yourself, “No surprise there!”. But I often find that not having that preconceived notion of how financial systems are supposed to work enables me to ask Why? or to hesitate when something that is considered Best Practice by the experts makes me uncomfortable.
This discomfort was definitely at work when I learned that externalities is a commonly used term that financial experts use to discuss the effects of their investments on communities and climate. I pushed back a bit because this word felt too formal and too much of a mouthful (and was simply new to me). But then I learned that it would be a good shortcut to explain my concerns about how many investments do negatively impact communities and the climate. I began to incorporate externalities into my own writing and speaking about my thinking around impact investing.
Then I read Wealth Supremacy by Marjorie Kelly where she said, “...the impacts of corporations on society and the natural world are termed externalities, making the real world oddly external to what matters: abstract numbers in investment portfolios and financial statements.” It took me right back to my first encounter with this word and the discomfort that I couldn’t put my finger on at the time. Externalities is such a nice euphemism to separate these harms, costs and damages from the meat and potatoes of financial returns. It’s so much nicer to see the graph with a positive slope rather than having to face the struggling workers, the species disappearing or the extractive and exploitive means used to get those financial gains.
Many of us feel out of our depth when it comes to financial literacy. We complain that we weren’t taught about it in school. We listen to financial experts use words (or acronyms!) that aren’t used anywhere else in society and it sounds like a foreign language that we will never grasp-like IRR, ETFs, fiduciary, externalities, etc. And don’t get me started on “accredited investors”; that will need to be its own post.
I wonder if these foreign words are intentional so that the experts aren’t having to take the time to discuss nuanced decisions but instead we just will leave things up to them to decide. But even if it isn’t intentional in that way, it does create a barrier between people and their decision making ability around money. It enables society to shift away from the values of the majority to the values of those in the know. Those with the wealth can make the rules and win the game.
There are many such words that I have come to feel uncomfortable about, like concessionary. Then there are all the “new” terms that even financial experts struggle to define in a common understanding, like “impact first” or “effective impact”. So, if you don’t understand all the words or if you have discomfort around the way the system works, be bold!
The straight-forward questions that we are told are the “dumb” ones are sometimes the most important ones.
So, how does this company make their money?
Do their workers get paid fairly and get good benefits?
How are you accounting for (or not) the damage to the climate?
How much does their top management make? Wait, how much?!?
Do they anticipate having to make massive layoffs to enable this quarterly profit?
Ask questions! Don’t be intimidated! And lean into your values because you know the world that you want to contribute to and create. Remember, it's essential that our financial systems and decisions reflect the values, priorities, and needs of the real people and our planet, rather than just catering to abstract numbers and charts. Financial jargon shouldn’t be a barrier to inclusivity or understanding, but rather, a tool to foster better, more responsible, and ethical choices.
By arming ourselves with knowledge, even just a basic understanding, and demanding clarity and transparency, we can hold those in the financial world (and ourselves) accountable. We can ensure that our investments and financial decisions align with our broader goals for a sustainable and equitable world.
Finally, even if you feel overwhelmed or out of place in the world of finance, remember that your perspective is valuable. Your intuition, your gut feelings, and your values play a crucial role in ensuring that our financial systems are designed and operated ethically and responsibly. And it enables you to feel good about the impact your money is having - who or what is benefitting from your money?
Don’t underestimate your power and influence. You don’t need to be a financial expert to make an impact. All you need is a voice, curiosity, and the courage to ask the right questions. And together, by challenging the status quo, we can drive change towards a more equitable, sustainable, and humane world.