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Systems Change: An Emerging Practice in Impact Investing

Giving Compass' Take: • Enclude studies and promotes impact investment as a vehicle for systems change to tackle interdependent issues such as climate change and inequality. • What are your guiding principles that lead your investment strategy? How can your strategy be improved and/or expanded?   • Learn how to get started impact investing. As we face unprecedented levels of inequality, persistent and widespread discrimination, and unsustainable exploitation of the earth’s resources, it is no longer a choice—it is imperative that we find ways to bend economic power in service of social justice. Any attempt to do this must acknowledge up front that the private sector, and the investors who supply its capital, bear our share of responsibility for creating the very problems we seek to solve. Are investors with positive impact goals fundamentally improving the system that produced the problems in the first place, or only treating symptoms? And how can investors identify solutions that are likely to spark long-term positive change, without triggering negative unintended consequences elsewhere in the system? These are other questions are motivating investors to understand the underlying causes to social and environmental problems and to identify holistic solutions to advance positive systems change. This report by Enclude and Open Society Foundations highlights how investors are engaging in this systems thinking, to galvanise more investors towards coordinated action. This thinking has been spurred by current and interrelated challenges. For example, climate scientists have warned us that we have only 12 years to limit the climate change catastrophe. At the same time, extreme inequality continues to grow further. Climate change and inequality are highly interdependent, with disadvantaged people facing disproportionate exposure to the adverse effects of climate change. And in a vicious cycle, the consequences of climate change on poor and vulnerable communities in turn exacerbates inequality. These challenges are accelerated (and often caused) by a failed economic system. This report demonstrates how investors can widen the scope of intentionality by looking at how problems affect one another. In this way, they can begin to avoid unintended consequences of their investments or activities while imagining new ways of achieving larger scale social change