Centre for Sustainable Finance and Private Wealth (Singapore) ◈
Juliana Koh1 / Kirsten Andersen2 ◈
There has been a continuous evolution of the impact investing space tao meet the increasing financing needs for the global, social, economic and environmental crises. The latest installment of the Center for Sustainable Finance and Private Wealth (CSP)’s guides, the Investor’s Guide to Systemic Investing, empowers investors to explore systems-thinking, transforming the current approach to impact investing.
What is Systemic Investing?
Systemic Investing broadly refers to applying systems change principles to impact or sustainable investment practices. It acknowledges the complexity of humanity’s challenges and aims to create portfolios that are a combination of synergistic investments capable of generating multiple solutions to resolve various levers of a problem. This approach deploys capital holistically to transform entire systems rather than target isolated outcomes, fundamentally changing how investors allocate capital to address complex global problems.
How Does Systemic Investing Create Outsized Impact from Small Investments?
- Transforming an entire system: Systemic investing represents a fundamental shift in how investors think about capital allocation, from targeting isolated outcomes to transforming entire systems.
- Enhance value through synergy: Systemic investing shifts impact investing from siloed point-based outcome solutions (like electric motors) to constructing a strategic portfolio approach that addresses interconnected challenges (like outdated transportation systems). and creates value through synergies.
- Leverage the “trimtab: effect: Investors start by mapping out the system, identifying leverage points, and investing in these for a “trimtab” effect, which leverages relatively small amounts of capital, strategically, to encourage broader shifts in the overall system.
This article will explore the foundational principles of systemic investing and outline actionable steps investors can take to integrate this approach into their portfolio construction. To move beyond impact investing and adopt a systemic investing approach, four main steps are necessary.
Step 1: Introduce Systems Thinking
The first key element to systemic investing is adopting a systems thinking approach. Before jumping into different financing instruments or asset classes, it is important for investors to change the mindset they have about sustainable investing. This involves ‘systems thinking’ – looking beyond individual investments and understanding the broader system in which they operate.
To start, think about humanity’s challenges that interest you, and use your initial intuition and knowledge to develop a system that articulates the problems underlying those challenges. It is important to acknowledge that we would never have full knowledge of anything in this world, and therefore, would need to gradually refine your understanding of the system that makes up these challenges. Systemic investing is therefore not about knowledge gathering alone, but more importantly, about how we organise that knowledge for ourselves.
One framework that will enable us to deepen our systems thinking ability is Donella Meadow’s work on leverage points. Leverage points are opportunities where a targeted investment can catalyse the greatest change in the calibration of that system. In Meadow’s Leverage Points model, the obvious, accessible leverage points (like physical events) are those with least leverage. Meanwhile, transforming deep-seated mental model delivers the most powerful systemic change. This framework helps us to deepen our understanding of a system and identify the best points to intervene. (Figure 1)
Figure 1: Meadows’ Leverage Points
Step 2: Set Systems Boundaries
While systems thinking encourages viewing the world as interconnected, systemic investing requires defining clear system boundaries to ensure actionable and effective investment strategies. For instance, we might see challenges of food insecurity, chronic disease, climate change, inequality and biodiversity as all interconnected. But resources are scarce, and investing is a practical activity. We cannot be all things to all people–everything, everywhere, all at once.
System boundary setting is key to frame and direct the field for working on solutions. Ultimately, to balance the tension between the holistic perspective required of systems thinking and the pragmatic action that comes from investing.
In the first empirical study of systemic investing, Alban Yau noted that investors with an intention for systems change would draw their boundaries in three dimensions.
- Geography (e.g. national / regional / international)
- Issues (e.g. SDG 1 – No Poverty / SDG 2 – Zero Hunger)
- Sector (e.g. food / health).
Tara Health Foundation, for instance, used a geographic boundary of the United States, and a sectoral boundary of reproductive health services to focus their attention on access to contraception, maternal health and abortion
Getting to a workable system boundary is important, if not easy, requiring careful reflection on one’s purpose and vision, as well as understanding the realities of the system itself.
Step 3: Understand What Forms A System
Before jumping into making investments, investors must develop a comprehensive system understanding. In addition to setting boundaries, investors must map the different elements and actors within their specified system, identifying opportunities for effective intervention. Given the complexity inherent within systems, it should come as no surprise that understanding them is not always straightforward.
One method that may be useful for investors is the ‘Just Get Started’ technique:
- Spew all elements and relationships investors know about a system
- Gather other opinions and ideas from those with insider knowledge, to complement your gaps
- Validate the knowledge gathered through modelling to prepare for practice, and
- Utilise refined ideas in action to test and ascertain results.
The ’Just Get Started’ technique is iterative. Taking the time to understand and map a system will inform a systemic investing strategy by allowing investors to understand a system, position themselves within that system, collaborate with others, and finally, focus their attention within that system.
Step 4: Collaboration Is The Key To Successful Systemic Portfolio Construction and Transformation
In the deep cross sectoral collaboration necessary for systemic investing, different actors bring different resources. Systemic investing looks at systems with multiple lenses, including ones that consider the problems worth solving; where our capital can have greatest impact; what makes us come alive; or what can yield more resources, knowledge, relationships, and reputation to enable the work to continue. The synergistic deployment of resources brings a sustainable shift in the system.
To fund systemic change, investors adopt a portfolio approach that leverages synergies across asset classes, intervening in key leverage points across the system. The core of systemic investing is shifting focus from outcomes of individual point solutions to cross-asset synergist impact.
Depending upon the desired transformation, a funding plan that encompasses the full spectrum of capital–from commercial investments to impact investments, catalytical capital, and philanthropic concessionary capital may be fitting. Investors can seek opportunities where portfolio investments mutually reinforce their impact, such as funding complementary innovations within a sector.
Concluding Remarks
Systemic investing represents a paradigm shift in capital deployment, moving beyond traditional risk-return frameworks to focus on long-term system transformation. By introducing systems thinking, setting clear boundaries, deeply understanding the select system, and embracing cross-sector collaboration, investors can construct portfolios that not only generate financial returns but also drive meaningful and lasting change. As the field of systemic investing evolves, it presents an opportunity for investors to be pioneers in reshaping the financial landscape toward a more sustainable and equitable future.
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.
1Juliana Koh is the Head of Research, at the Centre for Sustainable Finance and Private Wealth (Singapore)
2Kirsten Andersen is the Director of Applied Research, at the Centre for Sustainable Finance and Private Wealth (North America)
