Four people gathered at the Institution of Civil Engineers (UK) for three hours on 7th January 2009 to co-create a simple way of visualizing how the current financial system could be tweaked to fund needed action to help combat climate change effects and causes.

The brainchild of Ian Greenwood, with supporting analyses and input from Jamie Walton, Ian assembled information from the UK Treasury, the Bank of England and other authorities to formulate options for restructuring the funding of sustainable energy production and energy conservation/usage in buildings. Concurrently, he conceived how both commercial property and householders could benefit from the proceeds of a range of new taxes that re routed conventional commercial banking money flows along new channels to help offset the tax needed for the restructure.

Following probing questioning from Beverley Daley, a Value Exchange Systems (VES) diagram was developed with facilitation from David Meggitt. A first cut at the current situation was co-created by first identifying two broad groupings of participant as follows:

The banking ecosystem, consisting of commercial, banks, the money market, the UK Treasury, the Bank of England

A UK development ecosystem, consisting of a) designers, builders / installers, product manufacturers, raw material suppliers and customers for insulation products b) more general investment by Government in infrastructure and services provided by a network of other contributors

We identified some key transactions that flowed between the participants by asking a simple question, “What are the deliverables that a Participant creates and launches to be received by another Participant?” The following diagram was prepared to show how these flows fit together. The Participants are shown as ovals and the transactions as lines with a description of the deliverable on the line. The activities needed to create, launch and receive the deliverables are contained within the ovals. These activities include the formal procedures and processes required for that purpose. The receipt of rules enforced by regulation and legislation is omitted for clarity.

The following VES diagrams are provided as examples only and subject to continual refinement.

The transactions, shown as solid lines, are associated with contracted and expected agreements, albeit, at a low level of detail at this stage.

We then asked ourselves whether this represented the real way in which the overall “system” worked. Had we acknowledged the informal networks that oil the wheels of the machine? Recognizing this omission, we then added a representative sample of informal flows of information that normally fell outside the auditable standard processes, shown as dotted lines in the diagram following.

The next step was to consider new possibilities, termed scenarios, in which the quantity of interest paid by customers to commercial banks for loans was reduced and a portion diverted via a Credit Money Banking Adjustment (CMBA) which is passed straight to the Treasury. Similarly, an Environmental Tax on Imports (ET) raised from customers is redirected to the Treasury using the existing VAT system but clearly indicated on receipts to fund further activities in the development grouping that will help combat climate change (ET%).

We then added these new flows to the VES diagram, below, and in so doing identified a new group that we wished to add:

Overseas programmes beneficiaries,

The tentative suggestion flagged up here depends upon whether banks are able to fulfill their new roles in return for leaving the principal payments untouched and flowing to the programmes. A funding stream is definitely needed to accomplish climate mitigation and adaptation for the poorer producer nations.






We now have a first cut / draft of the value exchange system for the existing situation and one for a possible future scenario. Subsequent work, as below, would show the sequence in which the activities and deliverables took place. Additionally, for those who prefer lists and tables to diagrams, spreadsheets are available which also show additional detail needed for analysis of costs, risks, perceived values et al.

The current diagrams can be used as a “Discovery Dialogue” with interested parties prior to establishing a project to move to the next stages. This can be formulated to develop a “Discovery Map” of a desired arrangement, leading to a “Business Model,”Strategy Blueprint,“Business Process Prototypes, and Deployment.”

Further questions can now be raised. Where is the energy or passion in this ecosystem and how is it raised or lowered? Is greed a shared passion? Is enabling a sustainable cause a motivation? How does that affect behaviour of the whole or part of the ecosystem? How is synchronous leadership cultivated? Techniques that complement the VES approach can be used. For example, we can begin to visualise the possibilities of energy flow quite easily: see here.

Additional notes from Ian Greenwood

1. Revenue must be directed as part of the system towards insulating the “hard to treat” buildings - it is no good having:
• difficulties/time lag in applying for adequate funds/subsidy
• long delays or stop-start of funding,
• immense staff or bureaucracy costs

2. The message from STEERglobal is that an equal dollar return must be made to the producer nation for their sustainability & energy efficiency. This can be achieved via an Environmental Tax on Imports (ETI) or ET. Credit money re-directed - the Credit Money Banking Adjustment – (CMBA) at the level of the base rate can then enable offsetting of ETI Tax. Such an adjustment would be about 50% of so-called “free” commercial bank money.

The key point about CMBA is that it diverts a portion of the large amount of so called FREE MONEY that currently accrues to Banking and Finance. This FREE MONEY has significantly contributed to the CREDIT CRUNCH through build up over preceeding years. With a target 5% base rate, CMBA would divert about half and be adjustable.

3. Additionally, now that the other proposal, the Credit Money Banking Adjustment (CMBA) has been devised, the revenue can flow from where it has been inflationary (or held back in the credit crunch) to where it is necessary to achieve energy and resource sustainability, directly to projects investing in a sustainable future. Allowing these investments in a balanced way across the world would also create more stable finances and benefits socially, environmentally and politically. Confidence can then return.

4. Notes on conversation Ian/David 21-04-2009v2: Possibly change red arrow to black from customer to Commercial bank. In due course maybe suggest that in return for retaining the principal on “free” money, C.banks administer the system at no extra charge: i.e. the diversion to the treasury can be an un-necessary task. The banks in receiving the principal merely return some of it direct to the customer – i.e it is healthy to SHOW the interest on the statements, but maybe not necessary to collect part or all of the principal/interest. No doubt there are further “takes” on this. IG

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    Thank you, John. As you know, the value network approach here is a simple way of formulating and achieving engagement to tackle wicked problems (and much simpler ones, of course). I regard it as a pick up and go alternative to the very rich pictorial context maps you achieve at Group Partners. 


    Delighted to see that some transparency is in the offing for Nigeria. Greece next?



  • I have just finished converting the world's first known economic model into a value network, which I'll be sharing in the "God or Mammon" series of blogs.

    Lesson learned: it would be better to change the description of Money Market to Money Market Makers. This then identifies with real people and role plays - an essential requirement with the value exchange system (VES) method.

  • Note for technical enthusiasts. The format of the above diagrams is compatible with an adaptive systems / living systems approach to viewing how organisations and their interconnections really work. (as business ecosystems etc). It moves away from systems dynamics representations with stocks and flows and is more appropriate for handling in a simple way the dynamics of complex interactions that take place, particularly where it is clearly wrong to consider knowledge as a "stock."
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