Giving Compass' Take:

• System change investing is when investment companies direct social investments and returns toward root causes that address systemic problems and promote sustainability.

• Are you ready to engage in the Sustainable/Responsible Investing (SRI) market? Where can you begin? 

• Learn about collaborative funding on systems change.

System Change Investing (SCI) provides a significant opportunity for investment companies to increase assets under management, enhance investment returns and position themselves as global leaders in the rapidly growing $23 trillion Sustainable/Responsible Investing (SRI) market.

The new paradigm approach shifts the focus of investing from company change and symptoms to system change and root causes. This enables SCI to provide the highest possible sustainability benefits and capture a substantial share of the SRI market.

Over the past 20 years, SRI and corporate sustainability have become mainstream. Nearly all large companies and financial institutions have implemented sustainability strategies. The main driver of this is the growing financial relevance of environmental and social issues. Companies are not separate from the larger environmental and social systems that contain and sustain them.

As the human population and economy expand in the finite Earth system, negative corporate impacts return more quickly to harm companies, often in the form of market rejection, lawsuits and reputation damage. Companies have increasingly strong financial incentives to reduce negative environmental and social impacts.

New investment and corporate sustainability approaches are needed to reverse environmental and social degradation and achieve the United Nations Sustainable Development Goals (SDGs).

Economic and political systems were developed from a reductionistic perspective that does not adequately address many relevant factors, such as the negative environmental and social impacts of economic activity.

SRI successfully encouraged companies to implement sustainability strategies. The same proven approach can be used to engage the corporate and financial sectors in system change. SCI involves rating companies on system change performance, and then using the ratings to develop investment funds.

Read the full article about system change investing by Frank Dixon at GreenBiz.