Why Finance for Development is Learning from Biomimetics

In the face of complexity, reductionism looks to reduce, to separate, and to decontextualize. As we explore new models for funding development, measuring impact, and empowering locally-driven solutions, it is clear, though, that we must resist myopic thought patterns. Biomimetics reminds us that elements in nature can serve as templates for solving complex human problems. Financial instruments for development have begun to learn from these templates and reflect a shift away from reductionism towards a more holistic approach rooted in systems thinking.

1. Nature is brimming with systems, elements, and models that can serve as templates for solving complex human problems.

While biomimicry's implications for socio-economic issues are yet to be fully understood, we have, for example, learned about behaviors that foster resilience. Ecosystems are resilient in ways that our financial and economic systems are not yet. The quintessential complex adaptive system, an ecosystem, is resilient, in large part, due to it's ability to maintain heterogeneity. Joi Ito writes, though, that "We live in a civilization in which the primary currencies are money and power—where more often than not, the goal is to accumulate both at the expense of society at large." He goes on to say that "This is a very simple and fragile system compared to the Earth’s ecosystems, where myriads of “currencies” are exchanged among processes to create hugely complex systems of inputs and outputs with feedback systems that adapt and regulate stocks, flows, and connections."

2. Emerging financial instruments for development reflect a shift towards systems thinking.

Investors are increasingly rejecting the idea that they face a binary choice in investing for social good or for risk-adjusted returns. Over the past decade and a half, we have seen an emergence of market-based approaches that mobilize private-sector capital to generate both financial returns and social impact. Impact investing is a prominent example. Impact investing moves beyond responsible and sustainable investing and looks, not just to minimize negative externalities or benefit stakeholders, but to actively further solutions in a range of socioeconomic sectors. A relatively young field, impact investing is becoming increasingly agile but still lacks appropriate capital across the risk/return spectrum. Another interesting emergence? impact bonds - a type of results-based financing model (also known as pay-for-success). In these public-private partnerships, private investors provide capital for public projects that deliver social and environmental outcomes. Risk shifts from taxpayers to private investors - who are compensated accordingly. Originally utilized in public health, impact bonds now tie funding to measurable results to expand access to education, reduce homelessness, plant forests, and more.

3. Design has ventured beyond form and is now creating systems for human interaction.

While the private sector tests models for funding development, the role of design is at the forefront - advocating for solutions that optimize the health of the system as a whole and away from reductive approaches that lead to harmful externalities. Upon releasing the illusion that we, as a species, are separate and independent from nature, we begin to understand ourselves as participants in the systems that we look to understand - subsequently venturing into second order cybernetics. With this new perspective, the importance of more circular and regenerative systems also becomes clear.

What mechanisms sustain biological diversity and resilience? What implications might this have for our financial and economic systems? How might we define more holistic metrics and vocabularies around human flourishing? How might we make them as ubiquitous as existing financial terminology? How might we incentivize far-sighted decision-making? These are questions that I look forward to exploring.

After finishing a dual master's at Johns Hopkins University, I set out to develop a deeper understanding of market-based mechanisms for development. Over the past few months, I've had conversations with over ninety-five people across sixteen countries who are working in this space. I've written this first post to begin sharing what I am learning around impact investing, ecology, international development, and design.
Kristin Holifield