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📅 Join the next one.‘Innovative Finance’ and impact investment promise to ‘do well by doing good’ – but we must ask: who defines the ‘good’ and who captures the ‘well’? Too often, these instruments allow capital to appear virtuous while preserving the very power imbalances that create the problems they claim to solve.
Having explored issues of extraction through aid, trade, philanthropy, illicit financial flows, and debt, this dialogue examined the “solutions” being offered: impact investment, blended finance, social impact bonds, and digital finance. But many argue that impact investment and “innovative finance” often function as what scholar Anke Schwittay calls “the moral economy of development” – allowing capital to appear virtuous while preserving fundamental power imbalances. The microfinance industry’s evolution from poverty alleviation to debt creation offers a cautionary tale of how good intentions become extractive when profit motives align with social problems. Yet the impact investment market has grown to over $1.164 trillion globally, with Social Impact Bonds promoted as solutions to public service delivery and ESG investing facing criticism as “greenwashing.”
As traditional development finance fails, these mechanisms are increasingly promoted as transformation – but do they represent genuine change or sophisticated rebranding of extractive relationships? This discussion with Frederic Hache (Green Finance Observatory) and Patricia Miranda (LATINDADD), moderated by Peter Lipman asked the question “is there really anything innovative about innovative finance? are “innovative” financial mechanisms actually new, or just old ideas repackaged?”
As participants struggled to define “innovative finance,” the confusion itself became telling. Some hoped it meant “less extractive than mainstream tools.” Others suggested it was all a veneer, calling it “same basic ideas, under a different name,” highlighting that “in practice it’s often a way to depoliticise complex policy questions.”
You can watch the recording here and be sure to register for the next conversation on the debt-trap architecture on November 18th here. All registered will received the recording link.
Frederic Hache, bringing the unique perspective of a former derivatives designer, began by asking the fundamental question: “How innovative are these instruments really?” His answer was unequivocal – they’re not. Using the example of biodiversity offsetting, marketed as cutting-edge climate finance, Hache revealed it has “existed for four decades” with “a track record of mostly failure now repackaging failure with better marketing.” He highlighted the basics of how offsetting can be achieved:
The absurdity isn’t theoretical. With 40 years of data showing lack of success, biodiversity offsetting represents something more insidious than just another failed policy according to Hache. It’s a deliberate distraction. Hache suggests these mechanisms are “worse than nothing” because they create the illusion of action while enabling continued destruction. They reduce public pressure for real change by allowing corporations to claim environmental responsibility while fundamentally altering nothing about their destructive practices.
Hache deconstructed the oft-repeated claim that addressing biodiversity loss requires $700 billion in new financing that governments cannot provide:
“The alleged 700 billion annual funding gap could be closed by redirecting only a fraction of the existing subsidies to harmful activities, which are 1700 billion annually.”
Walter Wehrmeyer reinforced this in the chat, noting that ending fossil fuel subsidies alone would “bring in” $6 trillion annually. The money exists – what’s missing is the political will to redirect it. The “funding gap” narrative serves a specific purpose: it justifies bringing in private capital with its profit requirements, thereby ensuring that conservation becomes conditional on financial returns rather than ecological necessity.
When Peter Lipman pressed for examples of genuinely innovative finance that might be less “structurally appalling,” the speakers struggled to identify any. The pattern became clear:
The only innovation Hache could identify: The sophistication of the marketing. These aren’t new instruments; they’re old failures with better PowerPoints.
Patricia Miranda shifted the conversation from abstract financial instruments to their concrete impacts on human lives. Her statistics painted a picture of systematic extraction masquerading as development assistance:
But numbers alone don’t capture the full picture. As Miranda explained, debt creates a vicious cycle of dependency. When countries face debt crises, they must turn to the IMF, which imposes conditionalities including fiscal austerity. These measures force governments to cut social spending, privatise public assets, and open their economies to further extraction—all while taking on new debt to service old debt. It’s what participants called solving “the debt crisis with more debt”—a solution that deepens the very problem it claims to address.
The most fundamental issue Miranda identified wasn’t technical but political: the structure of global financial governance itself:
“We need a change in the global debt rules, but in a place where it’s one country, one vote, which is the United Nations, and not in the current one… where it’s one dollar, one vote like in the International Monetary Fund.”
This governance structure ensures that creditor nations—those who benefit from the current system—maintain veto power over any meaningful reform. The recent Seville Commitment from the Fourth International Conference on Financing for Development exemplified this perfectly: acknowledging a $4 trillion SDG financing gap while preserving the very structures that created it.
One of the dialogue’s most hopeful yet frustrating revelations came from survey data Hache cited:
“80% of people worldwide want change and are willing to change the way they work and live to address climate change… The surveys, however, show that people tend to think that they are a minority.”
This presents a maddening paradox: the political will for transformation already exists in the population, but people don’t realise they’re the majority. The system maintains itself not through actual minority support but through the perception of minority support.
The dialogue surfaced a productive tension between experienced activists and emerging voices. Godelieve van Heteren challenged the room suggesting “we need to be more fierce with ourselves, and especially people with grey hair in this room, because we’ve been here since the 70s… we don’t seem to be moving beyond the point of ever clearer diagnoses.” Samantha Waki responded from a perspective of Africa’s youth majority saying “We are well meaning, and we are politically naive, and we don’t see it as a barrier. This is where the change is happening, and this is where the innovation will come from.”
This exchange revealed a critical insight: perhaps the “political naivety” that Hache identified in junior financiers promoting these schemes could be redirected toward genuine transformation. As Will Wade noted in chat, “Naivety is surely a crucial component of being able to imagine beyond and break free of received (power) structures.”
While the dialogue thoroughly deconstructed false solutions, it also identified genuine alternatives already available:
Beyond specific mechanisms, the dialogue identified deeper structural changes needed:
The dialogue’s most challenging moments came when participants confronted their own complicity and comfort. Godelieve van Heteren’s challenge resonated: “How do we move out of the comfort… even the comfort of saying, ‘Well, you know, we have nice reports, nice committees, nice whatever.'” Frederic Hache offered a framework for understanding political change:
“My understanding of politics is that it’s endless arm wrestling between different forces… if we organise and become vocal, then change happens. And of course, we see that some governments don’t like that, and now making it harder to organise, and that’s precisely because it works.”
Samantha Waki brought the discussion back to democratic fundamentals: “Political will is dependent on the people… How are you paying attention to what they’re doing? How are you scaling it? How are you magnifying it? How are you creating that movement?” She pointed to the U.S. election as an example of how grassroots engagement—even when misdirected—can shift political realities. The challenge is redirecting that same energy toward genuine transformation rather than false populism.
Patricia Miranda echoed this, emphasising that in Latin America, sustained organising has achieved concrete victories, even if incremental. The key is persistence and solidarity across movements and borders.
The chat and audience contributions deepened the discussion, expanding questions that deserve continued exploration, adding critical nuance and valuable resources not captured in the spoken dialogue.
The conversations continue. The question is: will we move from diagnosis to cure? Join the upcoming dialogues in this Senterej Series on November 18th and November 20th.
The dialogue definitively answered its central question: No, innovative finance is not innovative. These mechanisms are decades-old ideas, many with proven track records of failure, repackaged with contemporary branding. Biodiversity credits are 40-year-old offsetting schemes. Debt swaps date to 1987. Carbon markets have failed for two decades. The only innovation is in the marketing—the sophistication with which old wines are sold in new bottles.
But this revelation leads to a more disturbing question: if these aren’t innovations, why the persistent claim that they are? The answer is that calling them “innovative” serves multiple purposes:
The real solutions aren’t innovative either—and that’s the point. Progressive taxation, debt cancellation, ending harmful subsidies, regulatory caps on destruction: these are old, proven ideas. They don’t need innovation; they need implementation.
The money exists—$1.7 trillion in harmful subsidies, $6 trillion in fossil fuel subsidies, the capacity to issue SDRs. The popular will exists—80% want change. The mechanisms exist—they’re just not new or financially sophisticated.
What’s missing is the bridge between popular will and political power. We need to recognise these as “moments of plasticity”—times when systems can be reshaped. But this requires moving beyond “privileged angst” toward organised action.
The Ethiopian chess metaphor of Senterej remains apt: we’re in that phase where traditional rules no longer apply. The question isn’t whether change is possible, but whether we’ll organise effectively enough to determine what comes next. As multiple participants emphasised: organising works, which is precisely why it’s being made harder.
The path forward isn’t through more innovative financial instruments but through the decidedly non-innovative work of political organising, solidarity building, and systematic challenge to power structures. The innovation we need isn’t financial—it’s political, social, and fundamentally about power.
Innovative Finance is not a tool to shift power but an illusion for the succession of the status quo.
Peter Lipman (Moderator)
Peter is the former founding chair of Transition Network and Common Cause Foundation and previously chaired the UK government’s Department for Energy and Climate Change’s Community Energy Contact Group. After careers as a teacher, co-operative worker, intellectual property lawyer, and external affairs director at Sustrans, he established Anthropocene Actions, a community interest company promoting fair, loving, and ecologically regenerative societies.
Frederic Hache
Director and Co-founder, Green Finance Observatory
After 12 years in investment banking, Frederic headed the policy analysis team at NGO Finance Watch for six years. He now directs the Green Finance Observatory, a think tank analysing market-based environmental solutions from carbon markets to biodiversity offsetting. He teaches sustainable finance at Sciences-Po Paris and brings unique insider-outsider perspective to critiquing financial greenwashing.
Patricia Miranda
Global Advocacy Director, Latin American Network for Economic and Social Justice (LATINDADD)
Patricia coordinates work on debt justice, financing, IFI reform and the “new financial architecture.” She is a regular civil society voice in UN FfD spaces and G-processes, linking debt sustainability to broader questions of fiscal space and equity. Her work demonstrates how innovative finance often reproduces colonial dynamics in new forms.