Behind the scenes at the lab: what is an experiment?

Using the Transformative Investment Philosophy, the lab is focused on helping organisations move away from a case-by-case focus that favours system optimisation, and instead stretch investment portfolios to contribute to systems change by targeting the rules that underpin our current systems. This will plant the seeds for change in the broader financial industry and be one of the sparks of the Second Deep Transition: a sustainability revolution. We aim to achieve our goals through the three core pillars that constitute the lab: experimentation, research and learning. In this post, we’re deep-diving into the experimentation process.

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What is an experiment? 

In short, an experiment is executed with partners from the investment industry to build practical skills, knowledge and experience in implementing transformative investment in their organisations. The experiments also aim to uncover (and even create) new investment opportunities in overlooked areas with high transformative potential. Therefore stretching the transformative potential of investment portfolios.

All experiments involve close collaboration between investors and researchers and are focused on testing, prototyping and evaluating in order to implement the transformative investment principles in a systematic and documented way aiming at changing practices and routines in the investment industry. The learnings from the experiments will feed the development of metrics, assessment frameworks, and associated tools that will aid investors in applying transformative investment in practice.

A monumental challenge which requires collaboration

“Transforming systems presents a monumental challenge that requires collaboration among diverse actors. To achieve this, we translate robust scientific insights into actionable strategies. Our approach involves experimentation, which means navigating the complexities, uncertainties, and ambiguities inherent in such endeavours by harnessing a variety of expertise. By building knowledge and changing behaviours through targeted interventions, we create a repository of insights that can be shared and utilised by others, fostering collective progress."

– Diana Velasco Malaver, Experiment Lead. 

Types of experiment 

Each partner defines the exact scope, objectives and activities of an individual experiment with the research team. The lab develops experiments with partners (investors) in four areas. 

Analysing the transformative potential of new investments

These experiments target the decision-making process of an investment decision. They can focus on specific investments or solution areas of interest (e.g. a research roadmap). As part of the experiment, the research team and investors team co-construct a Transformative Theory of Change (TToC) that assesses (1) its influence on specific Deep Transition processes and (2) the impact potential for transformation and systems change.

For example: Analyse the transformative potential of a regenerative agriculture investment in Madhya Pradesh, India.

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Monitoring the transformative impact of existing investments

These experiments are designed to monitor an existing investment or investment portfolio during and after its runtime. The research team and investors use a TToC and build metrics based on the Deep Transitions framework to monitor and evaluate the transformative impact of the investment. These types of experiments can feed into the reporting process, generate useful information for the engagement process between investors and clients, and help identify new opportunities for capital allocation that will strengthen the systems-change potential of existing investments.

For example: Develop metrics and a monitoring framework for a circular-economy fund.

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Assessing the transformative potential of portfolios

These experiments aim to assess the transformative potential of a specific investment portfolio (or a portion of it). Experiments can assess, through a co-construct TToC, synergies and trade-offs in terms of portfolio-wide systems change, stress test the effect of future shocks and megatrends on the portfolio, and assess whether the portfolio contributes to desirable future worlds. This will result in a specific impact profile that can eventually lead to the refinement of the overall investment strategy and the identification of missing investments and complementary developments needed to unlock the transformative potential of the portfolio fully.

For example: Stress-testing the investment portfolio of an institutional investor focused on sustainability.

Constructing a transformative investment bundle

This type of experiment is focused on identifying all transformative changes, public and private investments and complementary actions necessary to achieve a desired system change over a specific period of time, within a specific geography or focused on a specific metarule (e.g. refuse, reduce, reuse, repurpose and recycle). These are ambitious and complex, but they are also the most explicitly intentional and direct in creating systems change. They can lead to the establishment of new partnerships and networks, the identification of new investment opportunities, and the development of new funds. 

For example: Development of a green hydrogen economy in the Gauteng region in South Africa. 

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Catalysing broader systemic shifts

“Embarking on the journey of transformation demands bold entrepreneurs – individuals who embrace challenges without hesitation. In this pursuit, there are no predefined roadmaps for crafting the futures we envision. Instead, we patiently build paths forward, constructing demonstrators of how investments can ignite transformative change. By pioneering innovative solutions, we not only reap immediate benefits but also catalyse broader systemic shifts."

– Diana Velasco Malaver, Experiment Lead. 

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To learn more about becoming a partner, get in touch or discover more about the lab. 

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