Impact and ESG investment practices are bringing very positive developments to the industry. However, certain dominant practices often favour system optimisation rather than deeper and more fundamental societal transformations. These include, for example, short-term focus, narrow interpretation of fiduciary duty, rigid asset class distinctions, backward-looking risk management, and incentives structures. To support global net-zero targets or the trajectory stipulated in the Sustainable Development Goals, we need to change the way we invest. Investments need to contribute to long-term system change. Currently, ESG investors often lack the tools and assessment practices to evaluate investments based on their transformative potential.

Investment is an incredibly powerful tool and we urgently need to scale up investment to fully fund socio-technical system change. Socio-technical systems provide basic needs, such as energy, mobility, and food. They dictate everyday behaviour, from our modes of transport to the food we consume and the values we hold. Currently, these systems are based on unsustainable practices such as fossil fuel dependency, globalisation, linear mass production and mass consumption. Transformative Investments are long-term investments that trigger profound multi-dimensional change which ultimately leads to remaking the underlying principles of one or more socio-technical systems.

Participating in this project allowed for constituents from the public, private and academic spheres to opine on what successful systems level change could look like and how to best implement it. Collaborating with this group on sharing our findings via the investment philosophy will allow others to see how they may implement systems level change in their own organisations. Our multi-asset impact investing portfolios will attempt to do just that.

Starting from where we want to be as a society and reflecting on how current innovation niches can get us there to then try and figure out what our investment strategy should look like has been an incredibly valuable exercise.