Mindset shifts and fundamental shifts in practice required for systemic investing

There is a continuous evolution of the impact and investing spaces, to meet the increasing financing needs for the global social, economic and environmental crises. The Center for Sustainable Finance and Private Wealth produces publications and trainings that translate cutting edge research and practice into actionable steps for our private wealth audience. The latest instalment of our guides, the Investor’s Guide to Systemic Investing, written in partnership with MIT Sloan Sustainability Initiative, the TransCap Initiative, TWIST and The ImPact, empowers investors to leverage systems-thinking.

What is Systemic Investing?

The TransCap Initiative’s working definition of systemic investing is “the deployment of financial capital to transform human and natural systems with the intention of advancing environmental sustainability and social justice.” The term describes an emerging approach to deploying capital toward impact. At its core, systemic investments are those that drive systemic change and have long-term effects.

Underpinning systemic investing is the field of systems thinking, brought into conversation with impact investing. Contrary to current approaches to investing that focus on individual point solutions (e.g. replacing internal combustion engines with electric motors), the systems approach helps investors see the world’s greatest challenges as interconnected systems (e.g. dated personal transportation systems).

Systemic investing maps the system, identifies its boundaries, and establishes leverage points for targeted interventions. Keeping the system at the center of solutions requires deep cross-sectoral collaboration, emphasizing the interconnections and relationships between different parts of the systems.

There are two keys to unlocking this value.

• Leverage Points: Identify effective points in a system to intervene. The ‘trimtab’ effect can cause a small investing to have outsized effects.
• Synergistic Investments: To influence change in the system via identified leverage points, it is necessary to invest at multiple points in a synergistic manner. Systemic investing uses multiple asset classes including philanthropy and other forms of capital simultaneously to recalibrate the underlying system generating the problem.

The shift in focus from addressing individual issues to meeting the needs of the system leads to very different solutions.

Mindset Shifts Required for Systemic Investing

To draw out the value and extract the best out of systemic investing, mindset shifts and fundamental shifts in practice are required. The below details shifts in mindset and practice required for adoption of systemic investing.

Change in Investment Focus: From investing in point solutions to investing in interventions for enabling conditions.

• Change in the Role of Portfolio Construction: From traditional portfolio construction for diversification to mitigate risk, to constructing ‘strategic portfolios’ to create value through synergies.
• Change in Asset Used: From single class financial asset used to cross asset class including philanthropy, and other forms of non-financials assets like networks, reputation and influence.
• Change in Shareholder Inputs: From focus on beneficiaries and customers for solutions, to drawing on the full stakeholder network that enables and constrains solutions.

In a world of accelerating climate change and technological advancement, systemic investing utilizes the complexity of systems to add financial and eco-social value.

Financing Systems Change

To finance systems change, investors need to shift from a traditional “risk-return” orientation to their portfolio management to a “synergies-return” orientation.

Traditionally in seeking impact, investors select from a spectrum of financial tools to create a spectrum of impact outcomes. Such approaches range from sustainable investments to impact investing to seeking partial capital returns using philanthropic capital, among others. Further, investors may focus on one specific approach, such as impact investing or philanthropy.

Systemic investing calls for a more collaborative, synergistic deployment of capital. Deep systems transformation requires more than financial investments; it requires approaches that combine commercial investments, catalytic investments, philanthropy and other forms of ‘capital’ such as reputation or expertise.

In short, systemic investing requires the use of many previously distinct approaches to finance fundamental change in systems.

To start to shift your frame of reference and mindset, as an investor reflect on:

What matters to you?

• What impact/benefits do you want your wealth to have on you and your family, on your community? What is your motivation to impact?
• What is the single thing that matters to you? Why is it important?
• If you took a systemic investing approach to address it, what system would you be most interested in working on?

What is the system map of the things/issues that matters to you?

• What is the system, ecosystem, and connections for this systems change impact?
• Where are the leverage points?

How would you like to engage the system?

• What issues or problems would you aim to solve?
• What geographic area would be feasible to address?
• Which of these leverage points would you like to intervene in?

What role do you want to play? How do you want your investments to have a systemic impact?

• What assets do you currently employ in your (impact) investing, and is there overlap with your target system?”
• What capitals do I bring to bear - e.g. financial, reputational, network or knowledge?
• Who do I currently collaborate with? Who else could I collaborate with given the scale and complexity of my target system?

Training programs, such as the Investing for Systems Change program—run annually by CSP in collaboration with the MIT Sloan Sustainability Initiative—help investors embark on their systemic investing journey. The next training will take place May 21–23, 2025, in Zurich, Switzerland.

In this program, investors will learn how to:

• Master the art of systems-driven investment strategies
• Identify and leverage their unique role in driving systemic change
• Transform capital into multi-layered system solutions
• Design actionable blueprints for systemic transformation

To explore whether this program is a good fit for you, ask questions, or apply, please reach out to Vicki Maler or book a time to talk here.

If you’d like to stay informed about upcoming CSP programs, fill out this form to learn more.

To learn more about multicapital and how to develop your own multicapital approach, see CSP’s forthcoming Investor’s Guide to Multicapital Strategies and join our course at MIT Sloan on Designing Multicapital Strategies for Impact.