Departure Blog: Bringing Systemic Investing to Cities

Building a centre of competence to catalyse the net-zero transition of city-regions, in partnership with the Centre for Public Impact and Climate-KIC

Cities play a critical role in driving society’s transition toward a low-carbon, climate-resilient, just, and inclusive future. More than half of the world’s population lives in urban areas. Cities consume 78% of the world’s energy and produce more than 60% of its greenhouse gas emissions.

The Role of Finance for Net-Zero Cities

Finance is a key enabler of net-zero transitions of cities, and the challenge to be met is colossal: The C40 cities alone will require annual investments of about USD 50 billion up to 2030 and beyond. If these massive investment flows are to drive structural change in urban areas (and their surrounding regions), their stewards must be enabled to design and deploy financial capital in a way that generates systemic effects.

This is particularly true of municipal governments (particularly the legislative and executive branches) because the financial mechanisms they control have the power to exert great leverage over the stocks and flows of money in cities. But it is also true of a rising number of non-governmental actors dedicated to urban climate finance, such as multi-stakeholder alliances, impact-driven private sector investors, innovation partnerships, and multilateral financial institutions.

Existing Support Offerings Are Stuck in Ineffective Finance Practices

A great many support offerings exist to help these actors get savvier on climate finance, including peer-to-peer learning platforms, technical assistance facilities, training courses, policy support offerings, and concessional finance. Yet, as our research shows, most of these offerings focus on a narrow set of issues and are steeped in traditional mindsets and practices.

For instance, many see the greatest challenges for cities in mobilizing capital, training civil servants, and strengthening project pipelines. While these are important issues to address, they are not, on their own, sufficient to lead to more systemic ways of capital allocation. That’s because they neglect the complexity of city systems and the myriad ways in which a slew of factors inhibits more systemic approaches to climate finance, including culture, decision-making frameworks, approaches to visioning and futuring, institutional structures and governance, ways of collaboration, and modes of citizen participation.

Systemic Investing in Cities

We believe that there is tremendous potential in a more systemic approach to investment programming, deployment, and management in cities. What, exactly, this could look like and how it could be delivered in ways that are both empowering for city stakeholders and complementary to existing offerings is the key question at the heart of our partnership with the Centre for Public Impact and Climate-KIC.

The long-term ambition of this partnership is to establish a centre of competence for systemic investing in cities. The purpose of such a centre would be to support municipal governments and other urban stakeholders in stewarding financial flows to catalyse the net-zero transitions of city-regions. We are currently in an exploratory process to deepen our knowledge of the specific challenges cities face, sharpen our value proposition, and design a first set of service offerings to be piloted by such a centre starting in early 2023.

To learn more about this work, reach out to Ivana Gazibara of the TCI Core Team and Josh Sorin at the Centre for Public Impact.

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.