Nov 20, 2023

Building a Trust Infrastructure for the Transition Economy

A Q&A with Joe Madden, CEO of Fiùtur

As we mobilize capital towards the issues at the heart of the climate and nature crises, maintaining transparency into key environmental, social, and capital market inputs is critical for ensuring high levels of trust between stakeholders and fostering the momentum necessary to make significant progress.

That’s where organizations like Fiùtur come in. Launched earlier this year as a spin-off of the environmental infrastructure firm Xpansiv, Fiùtur’s mission is to provide trustworthy information for optimal capital allocation. Those are just seven words in a single statement, but they are at the core of the challenge that humanity faces in the economy transition, which encompasses the improvement of energy, food, and circular systems to ensure more sustainable outcomes.

We recently sat down with Fiùtur’s CEO, Joe Madden, to learn how this trust infrastructure enables economy participants to obtain fit-for-purpose, actionable information by interacting through digitized governance roles for the purpose of financing the economy transition. We also discussed the invitation to participate collectively in the development of this open trust architecture.

Tell us about what your vision for Fiútur and what this new organization aims to achieve.

Up until now, economic production inputs like fuel, electricity, materials, and agriculture have all been accounted for physically, with little to no consideration for any factors beyond the physical specifications of the goods delivered. This is no longer the case. The ledger has flipped, and things that were once abundant over the course of human history such as a stable climate, ample biodiversity, and a predictable water supply are now becoming increasingly scarce across every region of our planet.

This is forcing a fundamental reconciliation in financial markets. Intangible factors associated with physical production and the benefits derived from forests, oceans, and other natural capital assets are increasingly being expressed in the form of assets and liabilities.

The challenge is that, unlike a barrel of crude oil or a bushel of corn, these factors and their manifestation in offsets and credits are data constructs. They are never physically delivered, and financial markets do not have the infrastructure to validate these attributes across systems. This is evidenced by the myriad challenges associated with greenwashing in finance and integrity questions on voluntary carbon. These challenges fundamentally relate to trust in these claims. While we are seeing a multitude of regulatory efforts to address these issues, the infrastructure to comply does not currently exist. As a result, the capital required to finance the transition is not mobilizing fast enough.

Our hope is that Fiùtur provides a catalyst to address this information gap, unleashing the power of markets to allocate capital in a way that delivers a world worthy of future generations.

Fiútur just released a whitepaper with wide input from industry stakeholders on a trust infrastructure for the transition economy. May you please provide a brief overview of the whitepaper?

The Fiùtur team and our directors, advisors, partners, and broader community members represent several hundred years of experience across finance, commodity markets, environmental markets, technology, data, policy, regulation, market design, and product design. We have drawn on this collective knowledge base to outline a common, scalable, and systemic approach to configure, generate, and distribute the information necessary to accelerate capital deployment in the economy transition.

There are two key components outlined in the paper.

The first is the Standard Market Asset & Registry Template (SMART). SMART utilizes open architecture to programmatically encode governance and commercial terms across transparent, enforced, and automated digital Measurement, Reporting, and Verification (dMRV) protocols. The SMART governance framework enables SMART Programs to allow multiple, independent parties including data providers, technical protocol owners, workflow technologies providers, insurers, and auditors to interact within a common agreement to generate SMART Outcomes. SMART Outcomes are digitized, provable claims about real-world events which can be generated for an almost unlimited number of factors. The objective is to encourage the creation of diverse, industry-specific SMART Programs to be identified, developed, and delivered by market participants based on demand for standardized, provable information.

The second is the Linear Integrated Numeric Knowledge (LINK) System. LINK is an extensible suite of numeric identifiers correlated to different stages in the economy transition lifecycle, from early capital formation to end-of-life reporting, which enables SMART Outcomes to be referenced across the capital and asset lifecycle.

Combined, SMART and LINK represent a quantum leap in interoperability, allowing a common approach to codify and deliver critical information to economy transition participants.

As mentioned in the paper, Fiútur will be releasing new principles for the governance of transition claims at the end of the year. What factors have led to the need for these principles, and how will Fiútur’s proposed approach accelerate the economy transition?

The SMART Governance Principles we’ve developed are an extension of the several hundred years of experience that I mentioned previously. If I’m being honest, I’d go a bit further and say that we have been involved with design and implementation of systems, products, and protocols that represent many billions in capital and assets and have contributed to many global firsts in this space. We have collectively learned a lot in the process.

Another way of saying that is we’ve made an awful lot of mistakes that don’t need to be repeated. We’ve tried to codify our collective lessons into a set of common principles that apply to the creation and substantiation of any claim in conjunction with the technological capabilities that now exist. The intention here is to provide a foundation that will evolve over time and be adapted to increasingly precise use cases and applications as the transition accelerates and matures.

There are many interoperable transition financing solutions in development which will benefit from these governance principles. Can you highlight a few?

We are working with global financial institutions and investors to implement SMART and LINK to help them understand their existing position in the energy transition, and to systematically implement and manage their transition plans in conjunction with their clients. We are also working with those institutions to apply SMART to other areas like no-deforestation agriculture. Additionally, we are working with established leaders in finance to architect mechanisms to actually finance SMART Programs where there are clear market needs.

At the same time, we are partnering with technology-enabled greenhouse gas project developers to integrate SMART and LINK in ways that allow developers to benefit from their unique platforms, by standardizing their outputs in order to differentiate their offering and more effectively engage with capital providers and end-users.

We expect to publish the first version of our governing principles by the end of the year, with the intent to concurrently share solutions as they develop.

How will Fiútur partner with industry players like Pollination to bring its vision to life?

At its core, Fiùtur is an enabler. We have used our intellectual, human, and financial capital to develop governance and technological tools that we believe are necessary to optimize capital allocation in the economy transition. We do not pretend to be experts in all matters.

We do have a unique perspective borne of experience and we have built a digitized governance infrastructure that is flexible, adaptable, and extensible. Our partnership with Pollination as an advisory and legal provider is indicative of our approach. Fiùtur does not have the depth and experience that Pollination holds from an advisory or legal perspective in this space. Going forward, our intention is to enable Pollination to utilize the tools we’ve developed and to configure SMART Programs which generate SMART Outcomes for distribution via LINK.

We are engaging with Pollination and other firms we believe to be best-in-class partners across a variety of disciplines for every aspect of SMART and LINK. Those partners include leading technical and certification firms, data providers, auditors, insurers, and asset operators for SMART, and financial infrastructure providers, asset registry operators, infrastructure providers, reporting platforms, and network infrastructure for LINK.

What advice would you give an organization looking to begin using Fiútur’s new trust infrastructure?

We look forward to partnering with stakeholders across the ecosystem to responsibly and rapidly advance the transition economy. We’re working with leaders for the initial launch, while also onboarding and integrating new SMART and LINK partners for the post-launch period. For any financial services providers, certification firms, greenhouse gas developers, or private investors looking to learn more, please reach out.

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Fiùtur is led by world-renowned technology, finance, policy, regulation, and data experts, all working together to accelerate the energy transition through trust and transparency.