#56: SCI – Addressing the Root Causes of Global Decline

Current responsible investing provides many benefits to shareholders and other stakeholders. However, it has not come close to resolving climate change and other major challenges. Instead, they often are getting rapidly worse.

Why? What's wrong with current responsible investing? The answer mainly is that it seeks to change companies, instead of the systems that control them. And it focuses on symptoms, such as climate change and other Sustainable Development Goal (SDG) problems, instead of root causes.

Root Causes

What are the root causes of global decline? On the surface, there seem to be many. These include growing political division in the US and numerous other countries, immigration driven by inability to survive in home countries, potential or actual military conflicts, concentration of wealth making billions of people unable to meet basic needs, and growing environmental disasters.

But these are like waves on a turbulent ocean. Root causes are the deeper forces producing these waves. The foundational root cause is human thinking, primarily reductionism. Everything in human society, including every major challenge, is a reflection of human thinking. We focus on the parts and ignore the whole (i.e. reductionism). This flawed thinking produces economic, political and other systems that ignore relevant factors, and thereby produce unintended consequences, such as vast environmental and social degradation.

Under current economic and political systems, companies only can profitably mitigate about 20 percent of total negative impacts.  These systems make it impossible to stop harming the environment and society without putting companies out of business.  It is not possible to achieve the SDGs under current systems because these systems are the root causes of SDG problems.

The laws of nature have controlled all life on Earth for 3.8 billion years, and will continue to do so, regardless of what humans think, say or do. Flawed thinking and systems put humanity in conflict with nature and its laws.

Whole System Solutions

The only way humanity can survive and prosper on Earth is to align ourselves with nature (which also could be called reality). The nearly infinite coordination, sophistication and prosperity of nature imply whole system thinking. All factors implicitly are taken into account. As Einstein said, we must think at this higher, whole system level to resolve complex challenges and prosper over the long-term.

Whole system, nature-guided thinking can be used to evolve economic, political, financial, and other systems into forms that produce the immense prosperity already present in nature. The Global System Change (GSC) framework describes how to do this.

System Change Barriers

Complexity is a main barrier to system change (i.e. evolving human systems into sustainable forms). Taking all relevant factors into account can be far more difficult than current reductionist, reality-ignoring approaches.

Another major system change barrier is vested interest opposition to system change. Those in power routinely oppose changing systems that benefit them, but harm society. System change solutions must effectively address these and other system change barriers.

System Change Investing

No single solution will resolve major challenges and ensure the long-term well-being of individuals and society. Actions are needed in all major areas, including government, the general public, and corporate/financial.

System Change Investing (SCI) is a high leverage strategy that can strongly incentivize many of these necessary actions. The approach addresses complexity, vested interest opposition, and other system change barriers.

SCI addresses complexity by providing a clear, whole system vision of sustainability. The approach is based on the GSC framework. It uses the laws of nature to define sustainable society at a high level and clarify the systemic changes and actions needed to achieve it.

SCI is intended to overcome vested interest opposition by providing easy and practical system change strategies that deliver extensive financial and competitive benefits. In its simplest form, SCI involves minor changes to ESG models that nearly all large asset managers already are using.

The approach involves rating companies on system change performance and shifting investments to system change leaders. This strongly incentivizes companies to engage in system change. All companies can be rated on system change performance. This enables nearly the entire capital markets to be used to drive system change. It is one of the highest leverage system change strategies available to humanity.

Like current ESG, SCI enhances short-term investment returns by identifying well-managed companies. It also assesses relevant systemic risks and opportunities that are not addressed by conventional financial and ESG analysis.

SCI is not the entire system change solution. However, it can incentivize companies to drive the many other systemic solutions needed to achieve sustainability, hence the high-leverage nature of the approach.

For more information about SCI, visit our website SystemChangeInvesting.com or listen to this SCI podcast.