Systems Mindset

Systemic investing involves more than just introducing new frameworks and metrics to an otherwise traditional investment process—it requires a fundamental change in the way we see and think about societal issues and how to address them. So the starting point for embarking on the systemic investing journey requires us to adopt a systems view of the world.

Essence

Systemic investing involves more than just introducing new frameworks and metrics to an otherwise traditional investment process—it requires a more fundamental redesign of capital deployment, one anchored in a systems view of the world: a set of attitudes, beliefs, and dispositions that are anchored in systems thinking and complex systems science and inform the way we think about societal issues and how to address them.

Here is what we have observed as important components of a systems mindset:

Embrace complexity: Trying to change systems means working in contexts of uncertainty and emergence. In such contexts, the value of linear project plans, fixed investment strategies, and clearly defined deliverables is limited. Instead, it is more important to build the capacity to adapt strategies and practices over time, as a system of interest evolves and macroeconomic conditions change. While endowing an investment practice with such adaptive capacity is mostly a matter of design, the most important thing is to be mentally ready for it—in other words, to be comfortable with being uncomfortable.
Commit to inclusive collaboration: Changing systems is a team sport. It requires prioritizing collaboration over competition, building long-term coalitions for change and working with other providers of capital in strategic partnerships. It also requires centering the voice of key actors in the system—especially those being impacted by the work and those typically underrepresented—to inform the development and implementation of investment strategies.
Adopt an “onion approach” to learning: Systems are changing constantly, and there are insights to be gleaned at different levels of a system: at the level of individual people, at the level of individual projects and organizations, and at the level of the system at large. Accordingly, systemic investing requires a learning and sensemaking infrastructure designed to capture insights at those different levels and convert them into actionable intelligence in a dynamic way.
Iterate, iterate, iterate: As a system of interest evolves, so must your systemic investment program. You will need to adapt investment architectures, coalitions, processes, and goals with a view to keeping them relevant and making them more effective at catalyzing transformative change.
Make the system your client: Systemic investing de-privileges capital and advocates for a system-first approach in which the needs of “the system” are given precedence over the particular needs and interests of individual investors. For instance, instead of starting with a particular asset class or financial instrument and then looking for ways to maximize impact, systemic investors should make an effort to understand a system’s transition pathway and then design investment architectures in line with what those transitions call for (more on how to do this in the following chapters).
Mitigate power imbalances: Investors are disproportionately powerful actors in society, and they have the ability to impose their vision of the future onto others. Systemic investing calls for the mitigation of these power imbalances by adopting governance structures that help democratize financial decision-making and limit unsustainable extraction of value.
Seed new narratives: If we are to build the field of systemic investing through practice, we have to “work out loud”. Operating with a systems mindset means making knowledge tangible and sharing it actively with the ecosystem, so that others can learn and be inspired to become part of the field.

Adopting a systems mindset is no small task. Mindsets are deeply ingrained in all of us, and the mindset each of us operates with has been shaped by countless influences over our lifetimes. Western culture in particular primes us for a linear, reductionist, and atomized view of the world. So for many of us, moving to a mindset that recognizes the interconnected, uncertain, and emergent nature of human and natural systems is a tall order—but far from being impossible.

Example

Regen Melbourne (RM) is a multi-stakeholder coalition dedicated to sustainable placemaking in Melbourne, Australia. Inspired by the systemic catastrophes that were the wildfires of the “Black Summer” in 2020 and the COVID-19 pandemic, RM has come to articulate Melbourne’s predicament as a “metacrisis of interconnected challenges”. RM’s view is that “systemic problems need systemic solutions”, that “single actors don’t solve systems problems”, and that in order to spark “coherent action by alliances of unusual actors”, what the moment calls for is “breaking out of siloes, increase collective ambition, and build new structures that reactivates and reorganizes [our] system.” RM’s mission statements is steeped in systems thinking and acknowledges that incremental improvements over the status quo will not bring about a prosperous, resilient, and equitable Melbourne.

Regen Melbourne | Reimagining and remaking Melbourne, together.

One tangible way in which this mindset crystallizes in practice is in the use of Doughnut Economics as the guiding framework for charting RM’s vision for Melbourne. In line with the central tenets of Doughnut Economics, the Melbourne Doughnut recognizes that the safe and just space for Greater Melbourne sits in between an ecological ceiling and a social foundation. In so doing, RM recognizes that there is no separation between humans and nature, that the city’s problems are fundamentally interconnected, and that any progress on one front must not come at the cost of another. The Melbourne Doughnut sets RM’s vision and informs its accountability framework, ensuring that systems thinking is placed at the heart of the effort.

Guidance

In general, to develop and nurture a systems mindset…

Get acquainted with the basic literature of systems thinking (see below for suggestions);
Delve into indigenous knowledge systems to understand how the original stewards of the Earth see the world and manage it for generational sustainability;
Take a walk through your neighborhood and pay attention how everyday aspects of modern life are connected with each other;
Study frameworks of inclusive collaboration, such as participatory grant-making, collective impact, and community wealth-building;
Talk to an ecologist, IT engineer, or urban planner about the systemic aspects of their job;
Read today’s top story in your favorite newspaper and ask yourself how the problem at the heart of that story has multiple drivers and how it impacts the world in myriad ways.

If you already know which societal issue you want to work on, you can train yourself in systems thinking, as a warm-up exercise to a more rigorous inquiry that follows later in the systemic investing process. To do so, ask yourself:

What do you already know about the drivers and impacts of the problem?
What are the problem’s symptoms, and what is its root cause? And what are the root causes of that root cause?
Why might previous attempts at solving this problem have failed?
Who seems to be holding power and influence in this system?
Whose voices are likely to be over- or under-represented?
What are key assumptions people seem to hold about the system? Which of these would need to be tested?
What are alternative perspectives other people might hold about the answers to the above questions? Why might these perspectives they differ from yours?

Tips

Don’t obsess with defining what exactly a “systems mindset” is. There is no universally accepted definition for it, and it will mean different things to different people.
Becoming a system thinker is a journey, not a destination. Embrace the idea that you will never be done learning and experimenting.
There are a lot of free resources on systems thinking—make use of them.

Essence

Example

Guidance

Tips

Further Reading