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Systemic Investing tackles interconnected local and global challenges by shifting the investment focus from point-solutions towards systems transformation
The Center for Sustainable Finance and Private Wealth, part of the Initiative in Sustainable Finance at the University of Zurich, has published an Investor’s Guide to Systemic Investing. The guide recommends understanding and using system dynamics to identify leverage points where targeted investments can catalyze significant change.
The challenges of our time are interconnected, requiring solutions that address the underlying systems rather than isolated problem points. Conventional investing approaches are often limited in their ability to effectively address pressing ecological and social issues, and the economic risks and opportunities they present.
Drawn together in a community effort, the Center for Sustainable Finance and Private Wealth, the Sustainability Initiative at MIT Sloan, the TransCap Initiative, The ImPact, and TWIST, created this seminal guide empowering investors to explore systems thinking, and transform the current approach to impact investing.
Systems thinking shifts the focus from targeting specific outcomes through "point solutions" to transforming the underlying systems that generate those outcomes.
“To identify key leverage points and maximize the impact of investments, we need to understand system dynamics and utilize them to create sustainable financial and eco-social value”, Dr. Falko Paetzold, founder and managing director of the Center for Sustainable Finance and Private Wealth, explains.
He and his co-authors draw on concepts from Systems theory to reduce complexity while maintaining predictive significance. He adds: “Systemic investing is the evolution of impact investing. Identifying key levers to transform entire systems, will yield strong portfolios with outsized impact in areas that are important to wealth holders.”
“Systemic investing is the evolution of impact investing by shifting the focus from point-solutions towards transforming entire systems.” – Dr. Falko Paetzold
Following this approach, wealth holders and investors can define a space for action and identify levers for sustainable change and impact. Acknowledging that every systemic investment project is unique and in progress, the guide includes case studies highlighting the myriads of systems that can be transformed: From very local and specific systems, to more general and interconnected systems.
To reduce the overwhelm that complex systemic approaches can impose on even seasoned practitioners, the guide offers a step-by-step approach towards systemic thinking and investing for wealth holders and investors.
Defining system boundaries: Setting system boundaries is key to handling complexity. This is usually done along geographic, issue, or sector lines. By design some boundaries will change over time.
Recognizing one's potential role in wider network: Based on the outcome of the first two steps, wealth holders determine how they can best contribute to transforming the system.
Testing a portfolio strategy that leverages synergies across asset classes: Beginning with small steps, investors can choose to support backbone organizations or look for potential up- or downstream investments to create synergies. Working with a Systemic Investing advisory firm can be a great accelerator during this stage.
The guide combines academic rigour and understanding of Systems theory with a practical, step by step approach to concrete implementation. It provides an introduction to Systems theory and comprises academic literature, interviews, and field work, drawing on experience in all areas and phases of Systemic impact investing.
Training programs, such as the Investing for Systems Change program run annually by the Center for Sustainable Finance and Private Wealth in collaboration with the MIT Sloan Sustainability Initiative, can help investors begin their systemic investing journey.
The next training will take place May 21–23, 2025 in Zurich, Switzerland.
Registration is currently available at this link.
Drawn together in a community effort with the key networks in systemic investing in private wealth, the Center for Sustainable Finance and Private Wealth, the Sustainability Initiative at MIT Sloan, the TransCap Initiative, The ImPact, and TWIST, created this seminal guide empowering investors to explore systems thinking, and transforming the current approach to impact investing.
Dr. Rory Tews, Lead Author
Rory is a trained sociologist and seasoned expert in innovative finance, having pioneered the development of Impact-Linked Finance. His work is defined by a commitment to leveraging finance and technology to drive systemic transformation.
Dr. Jason Jay, Director, MIT Sloan Sustainability Initiative
Jason is a Senior Lecturer at the MIT Sloan School of Management and Sustainability Initiative at MIT Sloan. He teaches courses on leadership, strategy and innovation for sustainable business and works to advance the theory and practice of systemic investing.
Dr. Kirsten Andersen, Director of Research, Center for Sustainable Finance and Private Wealth, Americas
Kirsten is an economic sociologist by training, focusing on how values and identity show up in investment decisions. Her work at CSP brings academic rigor to impact in practice.
Dr. Falko Paetzold, Founder and CEO, Center for Sustainable Finance and Private Wealth
Falko founded and leads CSP with the purpose of deeply integrating academic and applied research with training programs that empower wealth holders to transform finance into a force for good, globally.
Link to paper: https://www.csp.uzh.ch/dam/jcr:cdbfc1f7-4c21-480c-8526-9b741aed93d2/CSP-InvestorsGuide-SystemicInvesting-A4-RGB-Digital-Singles.pdf
Link to Center for Sustainable Finance and Private Wealth (CSP):
https://www.csp.uzh.ch/en.html
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