Giving Compass' Take:
- Here are some guiding principles for impact investing to achieve systemic social change outcomes and approaches to address the root causes of social issues.
- How can impact investing practices help drive systems change work?
- Check out this beginner's guide to impact investing.
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In the face of complex social and environmental challenges, our best efforts often only address a symptom, rather than root causes, even as unintended consequences create new problems. For this reason, a growing number of people, across multiple sectors, are bringing a systems lens to societal change. The philanthropic sector has been increasingly implementing a systems perspective and approach, as seen in work such as Rockefeller Philanthropy Advisors’ Shifting Systems Initiative. Parallel efforts are being employed by multilateral institutions, including UNDP’s work on funding portfolios. Yet in the investment world, systems thinking is only beginning to gain traction. Investors who think about social change tend to be rooted in a linear, reductionist form of logic. One expression of this is what we call the “single-asset paradigm” of impact investing: the idea that a single technology, project, or enterprise can bring about structural change in society. The single-asset perspective can be effective in appraising individual deals and exploiting specific opportunities for both impact and financial return, but it sits at odds with what is required to seed genuine transformation.
Systemic investing is a nascent investment logic that seeks to step up to the challenge of working in complexity. Starting with seeking to understand the actors, interconnections, and dynamics in any given context, it asks what is the real nature of change that is desired and/or demanded, and then determines how financial capital might be allocated to enable such change. In this way, systemic investing invites us to reimagine and evolve how impact investment—and finance more broadly—could work. It forces us to think beyond the efficacy of any one investment—be that a project, program, asset, or venture—and recognize that if we wish to shape and shift systems, we will need to resource multiple actions in concurrent, coherent, and adaptive ways.
Systemic investing is grounded in a systems view of the world, and requires a particular mindset and way of being, expressed through the following principles:
- Adopt a systems lens.
- Be open to different understandings of success.
- Have respect for complexity.
- Deprivilege finance.
- Focus on the real economy.
Read the full article about impact investing by Jess Daggers, Alex Hannant and Jason Jay at Stanford Social Innovation Review.