Design Foundations For Systems Capital
Designing an investment approach that fosters systems innovation and transformation
This piece was published in August 2022 in partnership with Hatched and reflects our thinking at this time.
> PDF of the full piece <
What would it look like to design an investment approach with the primary purpose of fostering systems innovation and transformation?
In this provocation, we reimagine how capital allocation could be better attuned to the interconnected nature of the world around us, and the systems which determine our quality of life and sustain all living things.
Currently, despite the wealth of financial flows, too few resources are accessible to actors and activities that have the potential to create positive, coherent, and enduring change.
In this piece, we invite you to explore the concepts we’re grappling with and the possibilities that have ignited our desire to make this contribution.
The idea behind this work is both simple and challenging…
The simple part is the underpinning proposition.
The persistent and pressing challenges we face today are complex and systemic in nature.
This point is widely accepted and illustrated by the breadth of the Sustainable Development Goals (SDGs) and the obvious interdependence between them.
It follows that systems challenges require systemic responses, and this should include how they are resourced.
This is the basic case for systems capital — if we’re serious about systems change, our investment approaches need to match the intention and reality of that pursuit.
The challenging part is twofold.
Firstly, working through a systems lens runs counter to much of what we’re used to and demands much re-examination of our assumptions. It is certainly not an approach that lends itself to planning or optimisation.
Conceptualising systems is hard, fostering coherence between actors is hard, adapting to ‘dancing landscapes’ is hard, and that’s before attempts are made to shift them.
This is why singular or one-dimensional solutions are routinely pursued and repeated, even when they’re clearly ineffective. We trust in what we know and can more closely control.
Secondly, it requires us not only to rethink the purpose of capital, as we’ve done with ‘impact investment’, but also the fundamental mechanics of how we allocate, manage, and govern it.
Finance, as we know it, excels in the efficient allocation of capital to maximise returns, but it has not been designed nor evolved to power interconnected action.
As a result, despite the growing calls for systems change, this difficult work is nearly always attempted with mindsets and investment approaches that are ill-equipped for the task and self-limiting in their potential.
However, if we are open to reimagining how financial capital could serve us better, we open a world of possibilities.
This exploration contributes to that reimagining.
While this work is anchored in related experience and practice, we offer it as a provocation and a hypothesis.
At this stage, our thinking takes a general view of the principles, spaces, and pathways that can guide the design and implementation of systems capital approaches, which will need testing in specific contexts.
And while we have a strong belief that systems capital approaches are potentially transformative, we are also realistic about the practicalities and nature of the challenges to be addressed.
Pursuing these approaches won’t make complexity less complex or guarantee outcomes. However, they do create the potential to reframe the fundamental mismatch between conventional investment approaches and the reality of what is required to shift systems and bring about real change.
Like much of our work, we are interested in exploring how regenerative and distributive futures could work in practice and the transitions that will be required to get us there. The ideas are largely speculative. However without such pictures, we lack the means to shift paradigms and determine where and how we should experiment to evolve new thinking into practice.
Imagination enables innovation.
We encourage anyone interested in systems innovation to read the full piece and join the conversation, through whatever perspective or role that may be. This is important because systems capital approaches will involve much more than the technical aspects of investment.
We offer design principles, considerations and potential areas for exploration in a number of discrete spaces over four layers:
- Orienting principles and mindsets
- Exploring the potential for a systems capital approach
- Developing a systems capital approach
- Implementing a systems capital approach.
We also explore the attributes of capital that will be required for these approaches, and highlight the role that new technologies can play in coordinating information and value flows in ways that have previously been too difficult or costly.
> Read the full piece <
At the heart of this work, we see financial capital as energy and infrastructure that enables and incentivises people to organise, act, and create — how we pool and deploy it is a matter in which we all have a stake.
