Recap: Deep Transitisons launches Transformative Investment Philosophy for financing sustainability transition

On 16 November, the Deep Transitions research project launched the Transformative Investment Philosophy, a comprehensive report proposing new principles, tools and metrics for financing long-term systems change and a deep transition towards sustainability. During the event authors and contributors to the investment philosophy reflected upon its relevance and introduced main components and implications. 

“The world cannot be saved one system at a time”, stated Utrecht University’s president Anton Pijpers in his speech opening the investment philosophy launch event. The report is calling on philanthropists, ESG (Environment, Social, Governance), public, impact and institutional investors to join the movement and mobilise the power of capital to accelerate multiple system change and tackle the cascading crises of climate change, biodiversity loss and growing inequality. 

We need to radically change the way we invest to avoid disaster and accelerate system change rather than system optimisation 

Addressing these crises requires tremendous levels of financial investment. However, simply ‘investing more’ will not be sufficient. According to Johan Schot, Professor of Global History and Sustainability Transitions at the Utrecht University Centre for Global Challenges (UGlobe), we must radically change the way we invest to avoid disaster and achieve what his research calls a second deep transition, a sustainability revolution. “ESG investment practices may be yielding positive results, but tend to favour system optimisation over deeper and more fundamental transformations. A new approach to investment is needed to amplify positive impact within multiple dynamic systems. Transformative Investment is an answer to this need.” Schot explains. 

Investors often lack the tools and metrics to assess transformative potential 

Transformative Investments are long-term investments that trigger profound changes in one or more socio-technical systems. Socio-technical systems are the pillars of our modern societies, such as the food, mobility and energy system. Currently, these systems are driven by unsustainable practices such as fossil fuel dependency, globalisation, linear mass production and mass consumption. A second deep transition that fundamentally shifts the underlying principles of these socio-technical systems is needed in order to achieve long-lasting sustainability and equality. Investments play an essential role in achieving this. 

Roberta Benedetti del Rio, co-chair of the Global Investors Panel, Senior Advisor to Just Climate and co-author of the investment philosophy, elaborates that, “Investment is an incredibly powerful tool. Often, investment tends to be directed towards treating a problem through short-term marginal improvements, for example, creating efficiencies in an industrial manufacturing process. However, to achieve true systemic impact and support global sustainability and justice, the transition to a production and consumption model of more durable and shared-use goods may be required. Investors need to be provided with tools and assessment practices to evaluate investments based on their long-term transformative potential.”

12 principles of Transformative Investment for guiding the investing life-cycle  

In their investment philosophy, the authors outline 12 principles of Transformative Investment which propose means for applying the system change perspective to the investment goal-setting, strategy and process development. These practical principles shall encourage and inspire public and private investors to recognise and activate their role as change agents, and accelerate their own system change work. To bring the uptake and implementation of Transformative Investment in practice to the next level, the Deep Transitions team is working on launching a Deep Transitions Lab in spring 2023. 

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