This is the first of a series of articles exploring a new investment logic for instigating and catalysing whole systems transformation for climate impact. EIT Climate-KIC is looking for companions to build the theory and turn it into practice.
What is the Transformation Capital Initiative?
The Transformation Capital Initiative (TCI) is a new open innovation programme. Its intention is to develop, demonstrate and mainstream a new investment logic (Transformation Capital) that enables asset owners to invest in systemic change.
We invite systems actors of all kinds to get involved in building this new investment logic and culture to help catalyse a truly sustainable, inclusive and just world.
The challenge for financial capital
As we enter the third decade of the 21st century, humankind faces unprecedented challenges. Towering above them all is climate change, a threat so systemic and so existential that it has the potential to eradicate our species.
To address this threat, the Intergovernmental Panel on Climate Change (IPCC) has called out the need for systemic change, specifically for the transformation of the socio-technical systems that constitute modern civilization: energy, land-use, infrastructure, industry, buildings, transport, finance, and maritime systems.
An approach that recognizes ‘socio-technical systems’ recognizes the interaction between people and technology and between environment and behaviour. It implies that the most pressing and tangible challenges of our time are not technical in nature—they are systemic. Multi-dimensional. Connected. Success will depend on learning how to weave technological advances into the fabric of society along with reinforcing cultural, institutional, social, and economic innovations.
This ‘broad-based’ model of innovation – systems innovation – is at the heart of our Deep Demonstrations initiative. Deep Demonstrations are test beds for large-scale, orchestrated change, and they offer an opportunity to get on the path of radical reconstruction and regeneration that we need to secure our future.
Financial capital is a ‘make-or-break’ lever of change as we seek to transform society in the time we have left. Yet today’s financial industry is not up to the task. It is too limited by its own paradigms, practices and structures to fuel the change the IPCC is calling for.
Systemic investing for sustainability
Clearly, there is now an urgent need to rethink the way society deploys capital. The field of ‘climate action’ needs a transformative investment logic at the intersection of systems thinking and finance practice.
EIT Climate-KIC’s Transformation Capital Initiative was set up to develop, test, deploy and mainstream such a logic, to enable investors to deploy financial capital as a lever of systemic change.
A new investment logic will:
- catalyse changes in socio-technical systems that allow us to build the more resilient and sustainable world we need
- deploy capital with a different intent and mindset, and move the theory of change behind climate finance from a project mentality to a programme mentality
- guide capital deployment in the real economy, enabling decision-makers who have a mandate—and the capital—to implement an ambitious change agenda.
Transformation Capital acknowledges that the world at large behaves as a complex adaptive system. It seeks to embed systems thinking in every stage of the investment process, for example by moving away from a ‘single-asset’ approach toward a ‘portfolio’ approach and a strategic blending paradigm.
Fundamental to Transformation Capital is the view that investment capital must play an active role in driving change and that investors must act with a strong sense of agency. Systemic investment therefore means to reimagine value in the 21st century and reconceptualize the notions of risk and return.
More about the Transformation Capital Initiative
The Transformation Capital Initiative (TCI) is an open innovation programme intending to bring the systemic logic of Transformation Capital to life.
We articulate its nascent contours as a design space—a collection of emergent elements that together build and demonstrate an investment logic that is coherent with the intent it serves. These diverse elements relate to people, methodologies, processes, and success factors.
The TCI will demonstrate the possibilities of a transformative investment logic in practice, enabling all relevant actors along an investment value chain to invest in a systemic way.
The TCI’s impact pathway— manage millions, connect billions, inspire trillions —implies that the people within the TCI must manage and advise capital but that their ultimate impact mission — to mainstream systemic investing as a new orthodoxy for deploying capital for climate action and other complex societal challenges—is only achievable if the theories and experiences they produce diffuse beyond their immediate sphere of influence.
Therefore, we will make progress along this impact pathway if we:
- articulate the intellectual underpinnings of a systemic investment logic
- develop the capabilities and operational models required to put its theory into practice, and
- establish a track record by demonstrating its opportunities and limitations in real-world settings
- succeed at field building for a new community of investment practitioners.
To pursue these goals, we structure the TCI as an open-ended multi-stakeholder innovation programme. Leveraging methods from human-centred design, we aim to build an initiative that is collaborative, exploratory, and evolutionary in nature, and open, inclusive, and diverse in character.
Call for interest and action
- If you are a challenge owner, systems thinker, innovation practitioner, investment professional, ecosystem shaper, or creative voice;
- If you have the intentions and mindset required to address some of the most tangible and pressing problems of our time; and
- If you are committed to work with a radically open, inclusive, and collaborative community of innovation practitioners
…then join our journey to develop a new investment logic for a more sustainable, just and inclusive world.
Take your first step! Get in touch by sending an email to our TransCap team.