Nov 06 2019
Systems Change: An Emerging Practice in Impact Investing

Are investors with positive social and environmental impact goals fundamentally improving the very systems that produced the problems in the first place, or merely treating symptoms? How can these investors identify solutions that are likely to catalyse significant, long-term positive change, without triggering negative unintended consequences elsewhere in the targeted system?

Fuelled by such questions, impact investors are increasingly engaging in 'systems practice' to better understand the underlying causes to social and environmental problems and to identify high leverage solutions to advance positive systems change. Enclude, a Palladium company, today releases its report "Systems change: an emerging practice in impact investing", commissioned by the Open Society Foundations.

"Recognising the complexity of issues facing our world today, this emerging practice of applying systems thinking to investing for positive change is gaining traction within the impact economy," explains Enclude in their new report. "Investors want to make sure – to the extent that they are able – that their efforts are not limited to addressing the symptoms of problems in the system, but rather to chipping away at the root causes within the system."

The report details several examples where an investment with an ostensibly positive impact, in fact, risked exacerbating a market failure. One such example related to a sustainable fish farm opportunity identified by the Open Society Foundations' Economic Justice Programme (EJP). A detailed review of the food system brought to light that the fisheries were owned by men who sold their fish to female traders, in exchange for sex. Rather than abandoning the investment, the EJP was able, through its understanding of the system, to institute a more complete set of changes across the value chain.

The report builds on existing frameworks for systems practice and highlights practical examples of how various investors are applying this practice to create positive environmental and social impact

"No investor alone can achieve positive impact on a 'system'; however, every investor can move from doing good individual deals to achieving significant positive impact results by 'stretching' her aperture of commitment and putting her decisions about capital into a systems perspective," says the report.

Click here to download the Executive Summary of Systems Change: An Emerging Practice in Impact Investing.

Enclude: A Palladium Company

Enclude is a leading impact investment bank, creating solutions and mobilising capital to address the world's most pressing challenges. We strive to design innovative ways towards achieving positive systems change alongside our partners. Enclude is the Capital Advisory arm of Palladium.

Open Society Foundations

The Open Society Foundations, founded by George Soros, are the world's largest private funder of independent groups working for justice, democratic governance, and human rights. Today, Open Society supports a vast array of projects in more than 120 countries, providing hundreds of grants every year through a network of national and regional foundations and offices. It pursues social impact investments through the Soros Economic Development Fund, part of its Economic Justice Program.