Regenerative finance: the frontier of living future

Finance today is often seen as a double-edged sword. It powers innovation, drives businesses, and fuels global economic growth, but it has also been criticised for prioritising short-term profits over long-term sustainability. Climate change, social inequality, and environmental degradation are unintended consequences of a financial system that externalises rather than internalises costs. In response, a new paradigm is emerging: Regenerative Finance (ReFi), described as "finance beyond sustainability" and rooted in John Fullerton's work in regenerative economics. The core idea of regenerative finance is to reimagine the financial system as a living organism. ReFi refers to financial practices that not only support sustainability but also restore and regenerate natural ecosystems and social structures.

FROM SUSTAINABILITY TO REGENERATION: According to the World Economic Forum (WEF), "sustainability is out, regeneration is in." Sustainability aims to reduce harm, while regeneration seeks to create a net-positive impact. The report cites evidence that regenerative businesses often outperform sustainability-focused businesses in both financial performance and social impact. The idea of "regeneration" implies renewal, restoration, and growth, which are central to ReFi. It focuses on financial decisions and practices that support economic prosperity and the rebuilding of the environment and society. As Protokol highlights, the ReFi movement is guided by two main principles: generating long-term value for all stakeholders and conserving and restoring natural resources.

MOVING BEYOND TRADITIONAL FINANCE: The difference between traditional finance and regenerative finance is clear. Traditional finance focuses on maximising profit for investors, with companies aiming for higher earnings per share, greater returns, and stronger quarterly performance. While this model has created growth and wealth, it has often harmed the environment and society. Environmental destruction, unchecked carbon emissions, and widening inequality are symptoms of a system that ignores non-financial costs. Regenerative finance reverses this approach. Instead of treating environmental and social impacts as externalities, ReFi includes them in decision-making. Investments are judged not only on financial performance but also on their ability to regenerate ecosystems, reduce carbon footprints, and empower local communities. Profit still matters, but it is balanced with purpose. Regenerative finance also aligns with the circular economy model, which focuses on reducing waste and reusing resources. In a circular economy, materials are cycled back into production, reducing harm and conserving resources. ReFi supports businesses and projects that use circular practices, aiming for ecological healing and economic growth together.

A NEW LENS OF MEASUREMENT: A key difference between the two systems is how success is measured. Traditional finance uses metrics like earnings, dividends, and stock prices. ReFi, however, uses a multi-capital approach that measures financial returns, environmental benefits, and social impact. For example, a renewable energy project under ReFi is judged by its cash flow, the carbon it offsets, and the jobs it creates in local communities. This broader view helps align financial activity with global goals such as the Paris Climate Agreement and the United Nations' Sustainable Development Goals.

THE CARBON CREDIT CONNECTION: A key feature of regenerative finance is its innovative use of carbon credits, which are often seen as compliance tools in traditional finance. ReFi uses carbon credits differently by tokenising them on blockchain platforms, ensuring transparency and traceability, and linking them to real-world assets. Whether through reforestation of degraded lands, adoption of regenerative agriculture, or protection of mangroves, carbon credits under ReFi incentivise positive ecological action rather than just compensating for damage. This model also opens participation. Small-scale farmers or community groups using sustainable methods can generate carbon credits and sell them directly in global markets. In this way, ReFi creates income streams for marginalised communities while promoting environmental regeneration.

DEMOCRATISING ACCESS THROUGH DECENTRALISATION: Access to finance has traditionally been concentrated among banks, institutional investors, and accredited individuals. For millions of people worldwide, particularly in developing countries, traditional financial systems remain inaccessible. ReFi changes this by building on blockchain and decentralised finance (DeFi). These technologies enable an open, transparent, and inclusive financial ecosystem where participation is not limited by geography or institutional gatekeeping. With just a smartphone and internet connection, individuals and communities can engage in regenerative economic activities, issue or trade digital assets like carbon credits, and access capital for sustainability projects. This decentralisation is not just technological-it is philosophical. It reimagines finance as a common, in which wealth maximisation and distribution are tied to ecological and social well-being.

CHALLENGES AND THE ROAD AHEAD: Despite the promises, regenerative finance faces some challenges, including complex measurement of ecological impact, evolving regulations, a fragmented carbon market, and a persistent digital divide. As climate risks intensify and social inequalities grow, the need for regenerative finance as an alternative model becomes more urgent. Practical recommendations include incorporating finance into biodiversity, social livelihoods, and circularity, and providing guidance on digital assets for environmental credits. Banks and NBFIs can play a key role by adopting embedded and blended finance models for environmentally friendly products and projects, and by promoting sustainable loans with preferential rates. Investors and fintech companies should help redesign benefit-sharing mechanisms and support an inclusive financial infrastructure. Regenerative finance is more than financial innovation; it represents ecological and cultural transformation that contributes to the regeneration of people and the planet.

Aminul Haque Russel is a PhD fellow, Jagannath University and Assistant Professor, DIIT. Sanjoy Pal is a Researcher, Banker and Visiting Faculty of an institute affiliated with National University, Bangladesh. pal.sanjoy25@gmail.com