#36: Climate Change, Root Causes and System Change Investing

Two major hurricanes hitting the United States in less than two weeks further indicates that we are not adequately mitigating climate change. It is one of the most widely addressed issues in the responsible investing, corporate sustainability, and broader sustainability fields. Yet carbon emissions are growing and many countries and companies are unlikely to meet their climate goals.

The main reason climate efforts fail is that they largely are focused on changing companies and addressing symptoms. System Change Investing (SCI) shifts the focus to system change and root causes. It is a powerful lever for effectively addressing climate change and other Sustainable Development Goal (SDG) problems. This post summarizes why.

The Root Cause of Climate Change

Greenhouse gas emissions are not the root cause of climate change. Reductionistic economic and political systems that compel companies to emit these gases are. These systems fail to hold companies fully responsible for the harm they impose on the environment and society. This often makes it impossible for companies to voluntarily stop climate and other types of harm. If they try to do so, when competitors are not, relative costs usually rise. Continued voluntary mitigation ultimately puts companies out of business.

Flawed systems effectively (though certainly unintentionally) say to companies: cause climate change and other SDG problems or cease to exist. It is inevitable that corporate efforts to resolve climate change will fail under systems that unintentionally demand climate change.

Improving these systems probably is at least 80 percent of the climate change solution. Although, one could argue that system change is closer to 100 percent of the solution. Once systems make it more profitable to protect rather than harm climate, exhortations to voluntarily reduce greenhouse gas emissions will become unnecessary. Companies will automatically protect climate because this will be the profit-maximizing strategy.

How Do We Change Systems?

Evolving human systems into sustainable forms (i.e. system change) is the most complex challenge facing humanity. Beyond complexity, other system change barriers include vested interest opposition, public deception, and the potential disruption of system change.

Balancing that, several factors facilitate system change. A key one is growing awareness that keeping systems the same is not an option for much longer. Reductionistic systems put humanity in conflict with nature and business in conflict with society. It is inevitable that these unintentionally destructive systems will change through voluntary or involuntary means.

Rapidly growing, often unprecedented problems strongly indicate that we already have entered a phase of system change. Involuntary change (collapse) would wipe out extensive investments, destroy many companies, and greatly disrupt society. Those who profit from current systems (i.e. vested interests) are better off voluntarily driving system change rather than suffering the consequences of collapse.

Whole system approaches also can facilitate system change. The Global System Change (GSC) framework, for example, clarifies sustainable society and the means to achieve it. It can guide and coordinate the many systemic changes and actions needed in all areas of society to achieve effective system change.

GSC illuminates key system change leverage points. The most important is using investing to drive system change (i.e. SCI). Only the corporate and financial sectors have the power and resources needed to drive voluntary system change in a timely manner. They largely are controlled by investing.

System change can be further facilitated by making it comprehensible, practical and profitable. SCI and GSC were developed to do this.

System Change Investing

SCI uses the proven ESG strategy to strongly engage the corporate and financial sectors in system change. Few companies had sustainability strategies 25 years ago. Today, nearly all large companies have them. Investors shifting investments to sustainability leaders (i.e. ESG) strongly incentivized companies to implement sustainability strategies.

SCI works the same way. Companies are rated on system change performance, and then investments are shifted to system change leaders. This encourages companies to implement system change strategies.

SCI reduces risk, increases returns, enhances reputation, attracts new investment, and provides the highest possible sustainability benefits. It’s easy to implement and has broad capital market applicability.

For more information about SCI and the GSC framework, visit our website SystemChangeInvesting.com or contact us at info@SystemChangeInvesting.com