Systems thinking for climate finance

In our fourth episode, Kirsten Dunlop and Dominic Hofstetter discuss why adopting a systems thinking perspective is key to tackling the climate crisis. They explain that it’s necessary to overcome a project-by-project mentality to achieve structural change. We hear why achieving a net-zero economy calls for an approach as ambitious as the Marshall plan. Both guests argue for the need to build portfolios of investments that are connected and create synergies to achieve sustainable transformation. Kirsten and Dominic also discuss how such an investment logic is at odds with traditional finance portfolios, which are built for diversification to reduce financial risk. Last but not least, the conversation addresses what needs to be done to foster a new logic to finance transformation

• A funding architecture that blends different types of capital (public funding, philanthropic capital, institutional first loss tranches) can finance portfolios of strategic investments to amplify impact.
• The challenge of systems transformation is not lack of funding, technology, innovation or people caring for the problem. The challenge is that most institutions are not yet built to operate adopting a systems perspective.
• Careful curation of collaborations and capacity building are thus needed to foster a new logic of how to deploy capital. A shift towards systemic investing for impact needs to take into account culture, incentives, capabilities and decision-making structures.

• Climate-KIC is the EU’s main climate innovation initiative, of which Kirsten is the CEO.
• The Transformation Capital Whitepaper authored by Dominic elaborates on many of the ideas touched upon in this episode.
• The TransCap Initiative sets out to put to practice the ideas articulated in the Whitepaper.

Financing Impact is a podcast about funding and scaling societal impact. This podcast is brought to you by SciFi, the Societal Impact Financing Initiative at ESMT Berlin. SciFi is supported by the Bill & Melinda Gates Foundation, among others.

For feedback on the show or to suggest guests for future episodes, contact us at scifi@esmt.org