The Case for Bringing Systemic Investing to Agricultural Transitions

This is the second in a series of articles presenting insights from our Regenerative Food & Agriculture Prototype in the Midwest, USA. This investigation sits at the heart of a collaboration between the New Capitalism Project Lab (NCP) and the TransCap Initiative (TCI), which have joined forces to bring systemic investing to support the move to a regenerative agriculture system.


By Andre Ticoulat

Intro

Transforming the food system is a question of climate resilience and food security, and this is deeply complex and challenging. On the other hand, incremental change by singular asset investment, although positive, is too slow to bring about the change we need.

There is tremendous potential for a more systemic approach to investment programming, deployment and management in agriculture.

Next is an introduction to systems thinking … please note this is not an attempt to explain the field fully but rather to create common ground for understanding the complexities behind the food systems.

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A brief intro to systems thinking

Systems thinking is a way to make sense of the world's complexity by looking at it in terms of wholes and relationships rather than by breaking it down and focusing on individual parts.

A system is a set of interconnected elements that produce their own rules or patterns of behaviour. In other words, each element presents its individual behaviour. And these elements together produce a set of behaviours that is different from that of its own.

Because elements are interconnected, there are constant flows and feedback loops among elements of a system. By understanding flows and feedback loops, we can see how one part affects another (or many others) and ultimately affects the entire system. A critical consequence of intervening on individual elements is that you may miss critical synergistic opportunities or, worse, create unintended consequences.

Following is an illustrative example of different elements, flows and feedback loop interactions in a generic food system.

Illustrative Causal Loop Diagram of a generic eco-agri-food system
Illustrative Causal Loop Diagram of a generic eco-agri-food system (Source: TEEBAgriFood)

Systems take many forms, such as ecosystems, social structures, immune systems, transport systems, religions, organisations, etc. Systems thinking allows us to see the world as a web of connections and system mapping can help us identify leverage points, where a slight shift in one element can produce significant changes in others and the system at large.

One tenet of systems is that they are dynamic and constantly changing. Harnessing this dynamism towards reframed goals for a system can change how the whole system operates.

Insights into the food systems

“The world is a complex, interconnected, finite, ecological– social–psychological– economic system. We treat it as if it were not, as if it were divisible, separable, simple, and infinite. Our persistent, intractable global problems arise directly from this mismatch.” Donella Meadows, 1982: Whole Earth Models and Systems

The food system extends beyond production and consumption, encompassing a natural system shaped by intricate interactions of biological and climatic factors at local, regional, and global scales. For instance, global dynamics have caused elevated overnight temperatures in Indiana, affecting local corn and soy yields through increased plant respiration, reduced sugar availability for grain production, and altered pollination success.

These natural systems are intertwined with social, cultural, and economic systems that facilitate food production and distribution through market infrastructure, corporate strategies, government policies and consumer preferences. For example, the recent surge in organic produce markets can be attributed to factors like implementing organic certification and regulation, changing consumer preferences, price premiums and corporate strategies.

Technology, information and culture are also pivotal in how we produce, distribute and consume food, influencing interactions among these systems. Ultimately, our health and the planet hinge on the multitude of interconnected systems and the choices we, as consumers, make within them.

Food systems map showing how multiple subsystems interact
Food systems map showing how multiple subsystems interact (Source: TEEBAgriFood and Nourish Initiative)

(Source: TEEBAgriFood and Nourish initiative n.d)

It is imperative to remember that the notion of a universal global food system is a misconception. It is true that international commodity markets exist, and many products are cultivated in one region before being distributed worldwide. However, the factors influencing demand and those affecting supply, frequently emphasize the significance of local context over global dynamics. The transformation of food systems necessitates a fundamental shift in our dietary preferences, market dynamics and how food is produced. This is attributed, in part, to the fact that our food choices reflect our cultural identity. Furthermore, local economic conditions, climate, policy frameworks and traditions significantly influence farmers’ decisions on what crops to cultivate and where to sell them.

What’s next?

Food systems are the quintessential complex adaptive systems. Transforming them requires a broad-based approach. A systems diagnosis is needed to understand the complexity that lies in the nexus of ecology, agriculture and food. By diagnosing the interactions and trade-offs among the region's different sub-systems, we can identify possible leverage points that could move the system towards a more desired dynamic.

Over the next year, we intend to produce a systems diagnosis of the food systems by looking at the links between elements, drawing out causal loops and identifying investable intervention points with the potential to create positive systems dynamics.

Transforming the food system requires a new and broad-based approach to systems change. We will probably need all the tools in our systemic investing toolbox: equity and debt capital, infrastructure finance, technical assistance grants, tax incentives and subsidies, supply chain finance and advanced market commitments, and new insurance products, to name just a few.

Get involved

To learn more about our motivation and the starting point of our activities around the Regenerative Agriculture prototype, check out our prototype home page.

If you would like to be involved, get in touch via community@transformation.capital and continue reading about the ideas fuelling the TransCap Initiative here.

Do you want to collaborate with us?

There is an urgent need to rethink the way we deploy financial capital for transformative impact in human and natural systems. The field of systemic investing has garnered significant momentum, and now is the time to scale deep and scale out. So we invite challenge owners, systems thinkers, innovation practitioners, investment professionals, ecosystem shapers, and creative voices to join us in figuring out how to redeploy financial capital in service of a prosperous and sustainable future for all.

How is systemic investing relevant to

Foundations

...because the pots of capital operating under a philanthropic logic are orders of magnitude smaller than those operating under an investment logic, so systemic investing is a way for foundations to leverage their capital in the systems they care about.

Corporations

...because their supply chains are becoming increasingly fragile and societal expectations of business are growing. This requires companies to deploy all the tools in their finance toolbox (incl. direct investments, advanced purchase agreements, and supply-chain financing) and partner more strategically with governments, foundations, and NGOs.

Impact Investors

...because single technologies, start-ups, or social enterprises—no matter how ingenious their solutions and how brilliant their teams—are unlikely to change systems by themselves. So what matters is that these single-point solutions are synergistically nested within a broader systems change effort.

Institutional Investors

...because mainstream ESG investing doesn’t benefit places and communities at the pace, scale, and quality required, so institutional investors must channel more capital into real-economy assets in a strategic and collaborative manner.

MDBs and DFIs

...because sustainable development in a VUCA world requires portfolio approaches to systems innovation, and those need to be funded with a different investment paradigm than those dominant in development finance institutions today. And because the public sector cannot finance sustainability transitions alone, so systemic investing is a way to crowd-in private-sector capital in a smart way.

Engage with us

Which option best describes your interest in systemic investing?

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About

Who We Are

The TransCap Initiative is a think-and-do-tank operating at the nexus of real-economy systems change, sustainability, and finance. We operate as a multi-stakeholder alliance coordinated by a backbone team and comprised of wealth owners, innovation leaders, system thinkers, research institutes, and financial intermediaries. Our community is open to anyone committed to our cause and values.

Why We Exist

We exist to improve the way sustainable finance is purposed, designed, and managed so that money can become a transformative force in building a low-carbon, climate-resilient, just, and inclusive society. We believe that the key to accomplishing this vision is to inspire and enable investors to leverage the insights and tools of systems thinking and complex systems science for addressing the most pressing societal challenges of the 21st century.

What We Do

Our mission is to build the field of systemic investing. This means developing, testing, and scaling an investment logic at the intersection of systems thinking and finance. We do that by convening a multi-stakeholder alliance to develop a knowledge and innovation base, test novel concepts and approaches, and build a community of practice.

Our core ideas borrow from the disciplines of systems thinking and complex systems science, challenge-led innovation, human-centred design, new economic frameworks, and financial innovation. Our experiments are contextualised in those place-based systems that matter most for human prosperity—such as cities, landscapes, and coastal zones—as well as in value chains and other real-economy systems. We hope that our work produces knowledge and insights, methods and tools, and a self-organising community of inspired and enabled change makers.

The places and value chains we intend to transform act as centres of gravity for our work. In each of these systems, we will work with challenge owners, communities, innovators, investors, and other stakeholders to design, structure, and finance strategic investment portfolios nested within a broader systems intervention approach.

Learn More

Contact Us

TransCap Core Team
community@transformation.capital