#48: System Change Investing in 2025
Can responsible investing actually solve climate change and other major challenges? Yes… if we switch the focus to system change! 2025 is an ideal time to do so.
Using investing to drive system change is a huge opportunity for the capital markets, business and broader society. System Change Investing (SCI) posts in 2024 addressed many aspects of SCI and system change in general. This first post of 2025 summarizes the SCI opportunity and highlights critical system change issues in 2025.
The Need for System Change
Climate change and many other environmental and social problems are growing rapidly, despite responsible investing and corporate sustainability becoming mainstream over the past 20 years. Why? What's wrong with current approaches?
These approaches provide many benefits for shareholders and other stakeholders. But they do not resolve Sustainable Development Goal (SDG) problems because they don’t adequately address root causes. Companies largely do what economic, political and financial systems demand.
These reductionistic systems do not hold companies fully responsible for harming the environment and society. This often makes it impossible to stop harm in competitive markets. If companies try, costs usually increase and they ultimately go out of business. Flawed systems are the root causes of SDG problems. Improving them (i.e. system change) is the most important action needed to achieve the SDGs and protect business and society.
We are in a time of accelerating consequences. Without system change, environmental and social problems will accelerate and cause rapidly growing problems for companies and investors. Capital market growth is driven in large part by wealth concentration and environmental and social degradation. This is not sustainable.
Business is essential for the well-being of society. However, we must transition to sustainable business that provides goods and services without degrading the environmental and society.
For over 100 years, companies could profit by harming the environment and society. As has occurred throughout history, unintentionally destructive systems will not last. Rapidly growing problems show that we are near the time of transition. System change has become the most important sustainability and business issue.
Artificial intelligence and other technologies are largely impacting business and society. However, from a whole system perspective, technology is secondary. The foundation of society is the environment. There is no life without it. The next foundations are the social and economic systems that enable individuals and communities to survive and prosper. Technology can play an important role in system change and sustainability. But the primary focus should be on system change, not technology.
The SCI Opportunity
Enhanced profitability is the main reason responsible investing and corporate sustainability became mainstream. Once companies and investors realized they could make more money with sustainability, they got involved. The growing financial relevance of environmental and social issues made effectively addressing them profitable.
The same logic applies to system change. Effectively addressing financially relevant sustainability issues requires effectively addressing root causes – flawed systems. Very generally speaking, companies can only profitably mitigate about 20 percent of negative environmental and social impacts. System change is essential for mitigating the remaining 80 percent.
Negatively impacting the environment and society harms companies and investors through lawsuits, boycotts, reputation damage and other means. Reducing impacts protects companies and investors. System change is essential for mitigating the large majority of impacts. This makes system change the most financially relevant sustainability issue.
Companies that effectively address system change will gain many financial and competitive benefits (as current sustainability leaders often do). System change leadership strongly indicates sophisticated management that will outperform in many areas and thereby earn superior returns.
SCI rates companies on system change performance. This research enables investors to shift investments to system change leaders. SCI profitably engages the corporate and financial sectors in system change. It is a huge opportunity for investors, companies and society.
Key System Change Issues in 2025
Evolving human systems into sustainable forms is the most complex challenge facing business and society. SCI posts in 2024 discussed many aspects of this. Key issues include promoting system change in weak regulatory environments, aligning human systems with nature and its laws, and strengthening democracy.
Post 41 (How Do We Sell System Change in a Tougher Sustainability Environment) discusses the likely scaling back of environmental and social protections in the US and some other countries. This will accelerate environmental and social degradation and create growing problems for business and investors. In weak regulatory environments, the corporate and financial sectors must play a stronger role in system change. This post discusses how SCI facilitates this by making system change profitable and easy to implement.
Posts 32 and 33 (Nature’s Laws – A Guide for Human Society and The Laws of Nature and the SDGs) discuss using the laws of nature to guide sustainability and system change. Advanced SCI models are based on the Global System Change (GSC) framework. The three-part framework defines sustainable society using the laws of nature, identifies systemic changes needed to achieve it, and clarifies the actions required in all areas of society to bring about these changes. Human survival and prosperity will be completely determined by the extent to which we align with the laws of nature. SCI and GSC provide practical and profitable means to achieve this.
Post 30 (How SCI Drives Democracy) discusses how SCI can be used to strengthen democracy. Vested interest control of the US and other governments restricts democracy. This can benefit vested interests in the short term. But it is a main driver of environmental and social degradation and growing threats to companies and investors. Democracy is an implied law of nature. It is essential for the long-term well-being of business and society. Investors can use SCI to strongly promote increased democracy.
For more information about SCI, visit our website SystemChangeInvesting.com or listen to this recent SCI podcast.
SCI posts are shown on the SCI LinkedIn site and the SCI Blog.
