Impact Investing

Impact investing, a term that dates from 2008, is a form of investing that aims to generate positive social or environmental outcomes along with financial returns. It is based on the idea that investors can use their capital to address some of the planet’s most pressing challenges. There has been a steady progression from making donations (philanthropy), to avoiding negative impacts (socially-responsible investing), and now to proactive intention for positive impact (impact investing). Impact investing is being viewed as a new asset class; it has grown dramatically and is now estimated to be more than $1.1 trillion in market size.

Mostly, impact businesses and impact investing have followed the same strategies and models as for-profit businesses and investing. And why not? The for-profit sector has been extremely successful (by financial measures). However, it was soon discovered that the effects that these impact businesses were trying to achieve were eluding them, and/or, were creating negative side-effects. This led to the search for a different way to create impact where system-wide effects could be understood and managed.

Systems Investing

Systems investing is a developing practice that can be seen as an evolution of the impact investing movement. Systems investing goes beyond the individual or sectoral level, and aims to influence the systemic drivers and root causes of challenges such as climate change or inequality, and to address systemic effects. It does so by looking at a system as an interconnected whole, and by incorporating systems-thinking as a core strategy.

Systems investing requires a collaborative approach that involves multiple stakeholders, sectors, and levels of intervention. There is no one-size-fits-all approach or formula, but rather a diversity of approaches and experiences. Some of the most interesting approaches mimic Nature’s multi-factorial effects by putting diverse solutions into one portfolio in order to generate a specific emergent effect; or, by putting similar solutions spread across different regions into one portfolio in order to achieve scale.

With its collaborative and systemic approaches, systems investing moves investing practice closer to achieving systemic outcomes with fewer negative side-effects. Regenerative investing takes it a step further by introducing a paradigm shift that brings the investing practice into full  alignment with  living-systems. 

Regenerative Investing : A New Investing Paradigm

Today, regenerative investing is understood primarily as investing into regenerative businesses; however, there are several significant efforts underway to go beyond this narrow approach into a deeper understanding of the investor’s role.  

At RII, we define Regenerative Investing as an investing practice that sees the investor, the investee and their socio-economic-ecological context as an integrated system, and supports the restoring, reviving and strengthening of the system’s ability to regenerate. Our regenerative investing framework provides guidelines to investors and businesses for being in alignment with living-systems principles. The framework takes the key pattern of living-systems, metabolism (as described on the Regenerative Business page), and translates it into 3 pillars: potential, citizenship and capabilities. 

Bringing the investor into the same integrated whole as the investee and their context, and aligning them with living-systems principles is nothing short of a paradigm shift in both business and investing practice.

Regenerative Investing may be better understood with an analogy.

Consider holistic medicine: a form of healing that considers the whole person – body, mind, spirit, and emotions – in its health and wellness model. This means that the holistic doctor does not focus only on the symptoms of the patient, but also on the underlying drivers and the interactions between them. The holistic doctor may use various methods, such as lifestyle changes, natural remedies, or conventional medicines, with the goal to support the body’s natural healing capacity.

Holistic medicine and regenerative investing display similar patterns of regeneration: 

• They are based on the idea of supporting the restoration and enhancing of human and natural systems’ ability to heal themselves, and to thrive.

• They utilise the principles of Nature and models based on them, emphasising the balance and harmony of all parts

• They are not only concerned with the immediate outcomes, but also with the underlying drivers and the interactions between them. They seek to understand and work with the underlying patterns behind the symptoms.

• They understand that the balancing of assertive and integrative tendencies is a core capability in living-systems, and incorporate it into their practice.

• They are not one-size-fits-all solutions, but rather customised approaches that take into account the context and the needs of each situation.

The Role of the Investor

The investor community has a large role to play as we move forward in implementing impact solutions. This community is not merely deploying funds but is also actively influencing the direction, quality and spirit of implementation. 

The result of an impact project should not just be project success (financial and non-financial) but also an integrated, thriving, regenerative system. 

Regenerative Investing, by enabling the conditions for regeneration, and addressing the necessary paradigm shift in business, has the required basis to increase the probability of success for impact projects, while also reducing negative side-effects and supporting a healthy planet. 

Regenerative Investing for the Climate : a 'Use Case'

Of the many factors that make up the current polycrisis, the most urgent is probably the climate. We offer regenerative investing as a necessary tool to assist in addressing this urgency.

Please read details on the page "Regenerative Investing for the Climate".