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Systems Thinking in Finance and Investing: More Than Just a Trend
- Indra Sarju
- Jul 15
- 5 min read
A New Lens on Complex Challenges
Finance isn’t just reacting to complexity but it’s starting to embrace it. In the face of intertwined global challenges like climate change, inequality, and economic fragility, a quiet shift is taking root: investors and institutions are looking beyond isolated interventions and beginning to work with the interdependence that defines our time.
This shift is often called systems thinking. And while the term has gained more visibility as of late, it’s more than a passing trend. It reflects a growing understanding that lasting impact requires coordinated efforts across sectors, timelines, and stakeholders. At SecondMuse Capital, we’ve seen this thinking evolve from theory to practice—from our own use of Catalytic Factor Analysis (alongside Vibrant Data Labs) to our participation in the inaugural Systemic Investing Summit at MIT and its follow-up in London (Systemic Investing Summit 2025, TWIST/TCI). These gatherings were oversubscribed for a reason: a field is coalescing around a shared sense that it’s time to reimagine how capital engages with complexity.
Read more: Dominic Hofstetter (TWIST) – Systemic Investing Summit 2025 Recap LinkedIn Post
What Is Systems Thinking in Investing?
At its core, systems thinking is about seeing the whole: the relationships, not just the parts; the patterns, not just the events. In finance, this lens is shaping what many now call systemic investing—a strategy that goes beyond targeting outcomes to shifting the systems that generate those outcomes.
Systemic investing is distinct from traditional impact investing. While the latter might support a solar company to scale clean energy, the former would ask: what else needs to change (e.g., regulations, supply chains, public behaviour) for the system to support renewable energy at scale? Rather than funding isolated solutions, systemic investing aims to restructure conditions.
Jason Jay of MIT Sloan describes this shift as a “systems turn,” encouraging investors to apply concepts like leverage points, tipping dynamics, and feedback loops to reimagine strategy and decision-making (Jay et al., MIT Sloan, 2025).
Read more: MIT Sloan – What is systemic investing, and why are impact investors taking notice? MIT Sloan Article
Why Now?
The momentum behind systems investing isn’t incidental but rather it’s a response to the limitations of status quo strategies. Many investors now recognize that complex challenges require coordinated responses. As Rockefeller Philanthropy Advisors (RPA) puts it, “Today’s social and environmental challenges demand more than siloed investments or narrow measurement frameworks” (RPA, 2025).
Investors are also grappling with cross-portfolio contradictions: funding electric vehicles while investing in highway expansion, or supporting racial equity while holding shares in exclusionary institutions. Systems thinking challenges this fragmentation by asking, “How do our investments interact, and how do we make them reinforce rather than undercut each other?”
Philanthropy is catching on. In 2025, RPA released a Systems Thinking for Impact Investing Primer and Playbook, laying out how to apply this mindset across strategy, capital deployment, and measurement (Harji, 2025).
Read more: RPA – Systems Thinking for Impact Investing: Primer, Playbook, and What’s Next RPA Report
Principles of Systems Investing
1. Focus on Leverage Points and Catalytic Change
Systems investors seek catalytic nodes—factors that can trigger change across a system. MIT researchers describe these as “trim tabs”: a small intervention that redirects the whole system (Jay et al., 2025). At SecondMuse and SecondMuse Capital, we’ve adopted what we call Catalytic Factor Analysis to uncover these leverage points through participatory analysis and data synthesis.
Read more: Portland Design Thinkers – Catalytic Factor Analysis: Mapping Impact Potential Event Excerpt
2. Build Synergistic Portfolios
Traditional portfolios aim for diversification. Systems portfolios aim for synergy. As MIT’s investor guide puts it, “Producing an appealing electric car will not move the needle without simultaneous deployment of charging stations.” Foundations like Omidyar Network and Laudes Foundation use blended portfolios (i.e., grants, investments, advocacy) to shift whole systems (Top1000Funds, 2024).
Read more: Top1000Funds – Piecing Together the Impact Investing Puzzle Article by Ben Thornley
3. Embrace Adaptive Learning
Systems are dynamic. Systemic investors adopt adaptive strategies, using feedback loops, soft data, and real-time learning to evolve as they go. United Nations Development Programme (UNDP), for instance, describes its shift from static project plans to learning-oriented portfolios that evolve in response to context (UNDP, 2025).
Read more: UNDP – Introducing Portfolios: A New Systems-Way of Working UNDP Portfolio Approach
4. Collaborate Across Boundaries
No single actor can shift a system alone. Platforms like TWIST and TCI are helping funders collaborate toward shared system goals. These aren’t just coalitions, they’re practice spaces for designing collective strategy across sectors and capital types.
5. Redefine Success
Systemic investing measures change in system behaviour, not just outputs. This means using tools like systems mapping, qualitative indicators, and portfolio-level assessments. RPA encourages evolving from “isolated KPIs to dynamic, systemic learning” (RPA, 2025).
Examples of Systems Thinking in Action
UNDP’s Youth Employment Portfolio: Combines education reform, policy advocacy, entrepreneurship support, and cultural campaigns to tackle youth unemployment as a system.
Laudes Foundation: Funds labour advocacy groups and sustainable fashion startups to shift market norms.
Omidyar Network: Uses investments and grantmaking to build ecosystems for digital financial inclusion.
Systemic Investing Summit: A growing community of practice convening investors to share tools and co-develop systemic strategies.
MacArthur’s Catalytic Capital Consortium: Uses concessionary capital to de-risk markets and draw in mainstream finance, aiming to shift systemic barriers.
Not Just a Trend and Not Without Tensions
Systemic investing is a promising shift, but it comes with real challenges:
Managing complexity: Mapping and influencing systems requires new skills and tools.
Measurement hurdles: System shifts take time and don’t always yield quick, attributable wins.
Equity and access: Current leaders in the field skew High Income Countries and institutional. More pathways are needed for smaller actors and emerging markets to contribute and lead.
Silo-breaking: Internal structures (i.e. budgets, KPIs, incentives) often block system-level strategies unless there’s strong alignment across leadership and stakeholders.
Still, many agree: the payoff is worth it. As one impact investor said, “We’re done with whack-a-mole investing. It’s time to redesign the whole arcade.”
A Future Built on Connection
Systems investing isn’t about control but rather it’s about stewardship. It reframes capital not as a fix, but as a force for rebalancing the systems that shape our world. At SecondMuse Capital, we’ve seen this in action: how convening unusual allies, applying catalytic analysis, and co-creating portfolios with communities can unlock opportunities that weren’t visible through a traditional lens.
If systems thinking sounds hard, that’s because it is. The work of transformation is hard but it’s also deeply necessary. By investing in systems, not just entities, we open the door to more durable, inclusive, and context-aware solutions. More importantly, by sharing tools, expanding access, and staying grounded in learning, this practice can grow beyond its early adopters.
Let’s not just invest in change. Let’s invest systemically in the structures, relationships, and conditions that make lasting change possible.
