Day 4 take aways: Shifting Capital to Shift Systems
This blog is one of a daily series crafted by James Oriel to capture his insights and reflections from the day. They can only hope to provide a quick peek into the rich discussions held, and we hope they offer an invitation in for those who may wish to explore further via the recordings, links and other resources provided.
Investing in big shared challenges and bold new possibilities
Watch the recordings on the festival resources and recordings page.
Building on the release of our new working draft paper, “The Path to a Preferable Future: Investing in System Innovation,” today’s sessions are all about exploring the frontier of a new field we are calling systems investing. We are trying to better understand together how to accelerate the emergence of the new roles, vehicles, frameworks and strategies required to mobilise resources capable of fueling real shifts in existing systems, or creating new and better ones.
Session 1 - Coalitions of Capital - Convening Systems Shifting Investors
As Charlie outlined in our first session, it’s clear that at this point capital calls the shots in many of our systems, deciding what has value, and therefore what merits being invested in. But gathered today were people who see the possibilities to transform these relationships, to build new types of purpose and relationships, to shift power and to help resources flow in new ways to help unearth and support exciting new systems. People, including investors, funders, entrepreneurs and intermediaries, who wanted to move away from what Charlie called “capital in command” to capital as one player in crafting better systems and a better future for all of us.
Part of that shift is what Ingrid Burkett from the Yunus Centre at Griffith University described as the fundamental “challenging [of] investment norms”. Because – and this links to our conversation on evaluation yesterday – money is a token we exchange for the things that we value. What we value isn’t static. It shifts. It’s culturally diverse. So when we say ‘money talks’ what we are often really saying is that the people with the power to decide where money goes, talk.
Usually, those people are funders, investors, philanthropists– people who don’t often do any of the work of shifting systems (directly), suggested Ben Gales from the Paul Ramsey Foundation. But what foundations and philanthropists can do in particular, he suggested, is “support the ecosystem”. Maybe that’s by financing exemplars of what might be possible in future systems. Or maybe as Simon Baldwin from SecondMuse told us, it means investors seeing “the entrepreneur as an agent of change (that) we could mobilise systems around” and backing them with the cash to develop, test and grow a new business model. There are contributions to be made by private, public, philanthropic and community capital as we reshape how resources can best be deployed to shift really stuck systems, and needs in all of these spaces to examine existing modes of operation and assumed roles.
Reflecting Ingrid’s comments on investment norms, Sabina Curatolo from Bridges Australia made clear that if we want to shift what is valued and therefore what is invested in, it becomes critically important to inspect how those decisions are made. Investing in, say, women led enterprises is a good thing, but the process that determines what or who is invested in can’t remain unexamined. That process shapes what’s seen to have value.
So it’s a reflection of the mindsets and principles of those with a say in how capital is allocated, and the systems dictating who those people are. Do they, as Ingrid quipped, see themselves as ‘shareholders’, or ‘careholders’? Do they think that they know best? Because there’s nothing stopping large funders including marginalised voices in how they determine what is valued. Or more ambitiously, shifting capital for equity deserving groups to make decisions without needing to be “included” in existing models.
Session 2 - Funding the Path to the Preferable Future: a conversation with those crafting and leading new investment models
As Charlie helped set up the framing for this session, the people in our second session are helping create new systems of investment where new purpose really sets the direction, which dictates the actions and activities required, and this in turn pulls in aligned investment to achieve these objectives. This is in a sense exactly the opposite of the “capital calls the shots” model. These convenors and investors are essentially pushing against market norms and the existing system, and claiming ‘this, over here has much more than you realise’. As Robin Hacke puts it, “resources follow coherence”, and the speakers in this session are trying to build new forms of coherence for resources to follow.
Robin Hacke’s work helping communities unlock the capital needed to thrive through the Centre for Community Investment; Jeff Cyr’s work with colleagues at Raven Indigenous Capital Partners to invest through an Indigenous culture-centred approach; and Willemijn de longh’s work with Commonland to reimagine frameworks for investment to “revitalize communities and regenerate landscapes” are all inspiring examples of this.
Robin Hacke described how in a place down on its luck (or actively oppressed) it’s not enough to turn up with bags of money. You need something to put it in. But as those opportunities are framed and developed, a snowball effect can begin with just one or two deals growing to become a steady stream of investments to build up the economy of an area. So what kind of deals?
Well, for all our speakers in a way, what those deals are is determined by the communities involved. Jeff explained how their approach to investing in Indigenous entrepreneurs and priorities “centred the community in that process and we didn't invite capital in until after we determined what the priorities were”. And so what they managed to do is create the coherence that resources seek, while prioritising community goals; a lot of which is actually about trust.
We are more likely to trust things if we understand them, and so the role of people like Robin and Jeff is in acting as a sort of broker between communities ordinarily excluded from the financial system, and those with the money. This can be a framing and translation role, a structuring role, or it can be more personal than that. It’s the human relationship between, say an Indigenous female CEO and a fund manager.
And as Willemijn de longh reminded us, trust takes time, relationships take time. So the long view is important, flying in and flying out isn’t a steady foundation for building trust. So if we want to frame “money as medicine, not as extraction”, as Jeff put it to us, then this also probably demands generational time frames, which again shifts decision making.
Session 3 - (Un)Stuck In the Middle With You: how catalysts and convenors are unlocking investment flows.
In our third session, Giulio Quaggiotto talked about how, in his varied experiences in international development, the standard approach to creating change is funding individual projects. While there are a number of reasons for this including funding models that demand accountability for each investment vs systemic outcomes, he thinks that there’s no coherence between these small projects and the scale of the task at hand. As Robin reminded us in session 2, resources follow coherence, so how to develop this?
Part of the issue has been that the sums of money at play just weren’t comparatively that big vs the systems challenges at play, and people were cautious about biting too big a set of impact goals. However, both Thomas Bagge Olesen of Den Sociale Kapitalfond and Adam Spence of SVX shared how much more money there is in the world of impact investing than there was just a few years ago.. As the scale of available funds begins to grow, funders start to see themselves as part of shaping ecosystems over and above backing specific ventures (though of course, that mentality isn’t at risk of dying out yet).
A lot of this growth has come from the slow building of trust and the steady forming of relationships between traditional finance and less orthodox approaches. But it’s a contested space, as Giulio explained, where worldviews collide, between people who see the world as complex, interdependent and messy, and those who, and he apologised for the crudeness, see the world through neat Excel spreadsheets.
There’s undeniably a growing movement of people with the realisation that the ways we got here, simply won't get us there. These future systems partly lie in the entrepreneurs brought together, as Erica Barbosa has done with SecondMuse, via shared values and a shared commitment to the possibility of something different. “Entrepreneurs of today (that can) become economies of the future”. Another way to get us from here to there, is in aligning procurement processes with more onus on outcomes than with rigidly prescriptive ‘means of delivery’ as Amit Shah has helped shape in his work with Bridges Outcomes Partnerships. Allowing practitioners, usually in the social enterprise sector to focus on doing the best work and learning as they go, relentless in pursuing outsized social outcomes, rather than feeling hamstrung by a contract they signed a few years ago full of assumptions that turned out to be false.
Session 4 - Funding the Future: where next?
In our fourth, final session we took a step back to talk with several people thinking about how we might support the emergence of new systems of finance that are up to the task of transforming other core societal systems, and creating the new ones we urgently need.
This includes rethinking the potential roles of different types of capital - philanthropic, private, public, community - and how we might truly “invest in transitions”, as Johan Schot of the Deep Transitions Research Project described it. Their research has begun to outline practical strategies and actions to coordinate the tremendous levels of investment required, across multiple types of capital, to truly drive the wholesale transitions needed in key human systems - ‘a fundamental re-ordering of society as a response to the problems created by modernisation’.
Of course a lot of truly investing in transformation will involve challenging the assumptions underpinning what gets invested in, how, and by who, coming back to an important theme of the day. Joe Nelson of Sealaska, who helps guide Indigenous led investment activities to strengthen the people, culture, and homelands of the Tlingit, Haida and Tsimshian communities in what is now referred to as Southeast Alaska, outlined the waves of colonisation that faced him and his ancestors, and how today “the most recent wave of colonising is really coming from philanthropy and conservation groups coming to lock things up”. Sealaska is following the values and guidelines laid down by their ancestors over 10,000 years, and repositioning assets and investments from extractive activities to regenerative and sustainable approaches to food production, renewable energy and community wellbeing.
Derek Bardowell, CEO at Ten Years’ Time, sees the challenge facing philanthropy as people needing to be “fundamentally challenged, and also invalidating some of their truths in order to stand in solidarity with communities, in order to liberate some of this money and capital.” So it’s a personal change and a public, professional one, all at once. We might see this as also a worthy challenge to all forms of capital aspiring to drive system innovation. Cassie Robinson next helped us reflect on how we might strip off some of our closely held identities as ‘philanthropists’, ‘grantmakers’, ‘investors’, to consider what we are trying to accomplish, the skills, competencies and actions needed to actually shift resources into more transformative places. Do we need to re-imagine our assumptions about these roles, invent new ones, blur their boundaries?
Philipp Essl from Big Society Capital described the evolution of their work in relation to system innovation as building on a key insight around moving from a problem focus to an opportunity focus, from assuming a mission to address market failure, to one of market creation and helping tease out new economic and social possibilities. We might describe this as helping build visible attractors for new types of systems. Steve Waddell from Bounce Beyond and Catalyst 2030 suggested that more than building new markets, Philipp’s work really demonstrated the work of building new systems. He shared a framework he has created with others to help think through how investors of all types might think of themselves as participating in creating new systems of finance, in order to then shift the everyday systems we interact with. This included helpful examples of the particular roles and activities different actors may need to take on in these developing and shifting “ecosystems for financing transformation.”
To close in discussing questions about linking investment, reparations, public imagination, and movements, to build new kinds of futures, Cassie Robinson and Derek Bardowell asked questions of philanthropy that we might also extend to all forms of capital required for systems transformation. Cassie asked “are we holding philanthropy to account around really transformative, ambitious, imaginative work?” and “what if” posed Derek, we didn’t think of it as philanthropy at all, but of solidarity instead. How might this shift our mindsets?
Two quotes
“The systems that we are currently trying to adjust or reimagine are not broken, they're doing exactly what they were intended to do. They were just designed with faulty assumptions.” – Erica Barbosa
“Just that question (of how this connects to a 100 yr plan) helps shift that mindset away from next year’s budget…and to think about impact, to think about what we are doing here, think about our purpose here” – Joe Nelson