How Can Impact Investors Enable Systems Change? Exploring the Theory and Practice of an Emerging Field

Abstract

Contemporary challenges, such as climate change and inequality, are complex and systemic. There has been an increasing awareness of “systems change” in the impact investing community, recognizing the limitation of the traditional approach (investing in a single company or technology) to create meaningful impact in entrenched socio-technical systems. However, a big gap between awareness and action still exists, as the concept of “systems change” or “systems thinking” remains too abstract for most impact investors to adopt in their day-to-day operations. The objective of this study is to address this gap by investigating pioneering case studies in an emerging field of investing with explicit consideration of system change. Through comparing multiple cases, developing an in-depth empirical study, and building a simulation model, this thesis sheds some light on the theory and practice of this emerging field. The results highlight how impact investors have great potential to help enable systems change by operationalizing systems theories, building collectives with stakeholders, and developing a strategic portfolio to influence the system dynamics instead of an isolated innovation or intervention.