ReFi, standing for Regenerative Finance, is a transformative movement and field of finance seeking to create economic systems, practices, and strategies that support regenerative and restorative outcomes in social, environmental, and economic systems. ReFi's core principles involve the reorientation of financial & economic systems away from extractive, exploitative, and degenerative practices, towards sustainable, inclusive, and regenerative models which accounts for externalities and promotes the holistic wellbeing of people and planet.
While standing for Regenerative Finance—a term with history stemming from the field of Regenerative Economics—the “ReFi” abbreviation has origins stemming from the DeFi (Decentralized Finance) movement, and it is often used specifically in reference to the application of Web3, Distributed Ledger Technology (DLT), AI (Artificial Intelligence), dMRV (digital Measurement, Reporting, & Verification) and other advanced technologies in supporting the visions and practice of Regenerative Finance.
The Global Backdrop
For the past 12 thousand years, humanity has perfected an economic system based on extraction. Now, we face a critical juncture. Climate change, water scarcity, biodiversity loss, rampant inequality, and an ever-growing void of trust in current governments, institutions, and corporations. In a world grappling with these multifaceted crises, where do we go from here? How can we realign human activity with the well-being of people, the planet, and the entire biosphere?
The Regenerative Paradigm
Regeneration grows resource capacity over the long term
The distinctions between extractive, sustainable, and regenerative systems are crucial to the concept of ReFi. These categories represent different stages in the evolution of economic and financial systems in response to environmental and social challenges.
Extractive systems focus on the removal of resources for immediate economic gain, typically disregarding the long-term impacts on ecosystems and communities. These systems often distribute profits inequitably and downplay the intrinsic value of living ecosystems. Sustainable systems, on the other hand, seek to maintain the status quo by balancing resource use with their rate of renewal. Sustainability focuses on mitigating harm and minimising the negative impacts of economic activities, however, it doesn't necessarily improve the capacity or restore what has been degraded. Regenerative systems go a step further by actively growing a systems resource capacity over the long term. Regenerative systems are able to continuously renew themselves, sustainably building resource capacity while adapting to changing conditions.
Regeneration is Holistic
Concepts surrounding regeneration have existed and evolved over many decades. Amazing work such as John Fullerton's Eight Principles of Regenerative Economics, Dr. Leah Gibbon's Regenerative Community Development Framework, and much more, has shown how principles of regeneration can be applied across social, environmental, and economic systems. The progression from extractive to sustainable to regenerative models reflects an increasing recognition of the interconnectedness of economic, social, and environmental systems. Each step forward represents a deeper commitment to ensuring the long-term viability of our planet and all its inhabitants.
Regeneration builds wealth across diverse forms of capital.
Our modern capitalist economy has become incredibly proficient at maximising for a single variable - GDP growth. This relentless imperative comes at the expense of our individual and collective wellbeing, as well as that of the entire biosphere. Frameworks such AppleSeed Permaculture's 8 Forms of Capital or the MetaImpact Framework's 10 Types of Capital build a model for understanding a more holistic view of the meaning of wealth and capital.
The ReFi Paradigm
In its most basic form, ReFi represents a belief that our current economic and financial system needs to fundamentally change if we are going to address the systemic issues we face. This new system needs to be decentralised, equitable, and regenerative, as opposed to centralised, unjust, and extractive.
Web3 Relation
Web3, Decentralised Ledger Technology (DLT), and Decentralised Finance (DeFi) form the technological underpinnings of ReFi. These technologies embody traits such as transparency, decentralisation, user control, resistance to censorship, accessibility, and interoperability, which are all critical for building open, fair, and democratised financial systems. If built with the right intention, these technologies can serve as a foundational pillar for systems that prioritise fairly distributed, sustainable, and equitable prosperity. ReFi, based on open code and secure ledgers, offers an alternative to traditional financial systems. These "ReFi rails" can be programmed to reward key actors equitably and redirect resources to those who need them most, while also providing public accountability.
In Practice
At a more practical level, ReFi can be described as Web3-powered ecological and social impact. In other words, taking the Web3 solutions available to it—blockchain, cryptocurrency, smart contracts, and decentralised autonomous organisations (DAOs)—and using them to build financial and tech solutions that enable positive real-world impact.
Some examples include:
- Digital measurement, reporting, and verification (dMRV) of ecological credits
- Low-interest micro-lending platforms
- Circular economy projects
- Ecological credit marketplaces
- Climate data oracles
- Universal basic income schemes
- Social impact verification
- Innovative public goods funding mechanisms (quadratic, retroactive, et al)
These solutions are the beginnings of the foundation for the alternative financial system that underpins ReFi’s existence. And while not always fully regenerative in scope, ReFi solutions are bound together by the need for fundamental change.
Key Characteristics
Digging deeper, ReFi has some notable characteristics that build upon the above definition:
- Prioritises a systems thinking approach to ecological and social impact by appreciating nature’s and society’s interconnectedness.
- Espouses a culture of proactivity over reactivity.
- Values collaboration over competition.
- Provides a bridge to a regenerative system.
- Integrates modern technologies such as artificial intelligence (AI), Internet of Things (IoT), and mobile payment services.
Comparison with Traditional Finance
The principles and practices of ReFi provide a stark contrast to those of Traditional Finance (TradFi). While both models share the aim of facilitating economic transactions and growth, their methodologies, guiding philosophies, and ultimate objectives often diverge significantly.
Traditional Finance is characterised by centralization and opacity, where a few entities or "controllers" dominate decision-making and understanding of financial systems. However, ReFi fosters transparency and decentralisation, empowering individuals and promoting broad financial participation. At its core, the objectives of traditional finance and ReFi differ significantly. While traditional systems mainly serve capital through wealth accumulation and resource consumption, ReFi aims to serve both people and the planet. In a regenerative financial system, economic activity benefits all living participants in the system. Profits are more fairly distributed, and the value of living ecosystems is recognized and incorporated into economic calculations.
What ReFi Aims to Achieve
At a more granular level, ReFi aims to:
- Fund Public Goods
- Address income inequality and economic injustice.
- Provide a decentralised alternative to the opaque, inefficient voluntary carbon market and MRV process.
- Issue new currencies backed by the value of ecological assets.
- Reform the way land is valued based on its ecological value.
- Bridge the financing gap for climate change mitigation, adaptation, and loss and damage (currently estimated in the trillions of dollars).
- Aggregate funds for lending to small-scale regenerative projects that larger institutions typically ignore.
- Provide regenerative investment instruments that balance regeneration and return.
- Incentivise healthy habits such as diet, exercise, mindfulness, and “inner regeneration”.
Final Word
The Regenerative Finance (ReFi) movement proposes a new paradigm. One that seeks not just to minimise harm, but actively contribute to the health of our ecosystems and society with innovative financial mechanisms being a core driving force. ReFi marks a paradigm shift from conventional, extractive economic models. Historically, these models have prioritised the extraction of natural resources for financial gain, often disregarding social and environmental consequences which are approaching critical tipping points. By contrast, ReFi practitioners, or “Regens”, aspire to establish non-extractive economic systems which instead place value on living systems, biodiversity, resilience, and holistic capital. These systems place ecological benefits and the well-being of the planet and its people at their core.
