Founders4Impact is a new impact investment fund operating primarily within Australia. They commissioned this research to reflect on how, within the parameters of a closed-end fund, investors might engage with broader systems and systems change efforts.

In a world where creating change is complex (i.e. dependent on multiple actors and interventions), Founders4Impact wanted to examine how they can make meaningful contributions to long-term social and environmental change. With the insights from this research used to inform their impact and investment strategy.

Impact investing is a financial instrument that often promises to deliver transformational environmental and social change alongside financial returns. Yet such a promise misrepresents how change occurs. Recognising this, impact investing has an obligation to speak more modestly about how it contributes to better outcomes for people and planet.

With this in mind, the design challenge was to understand how closed-end impact funds and the ventures they support can help cultivate the conditions for collective change.

Understanding this would help inform how a fund's strategy could be shaped to work in more synergy with broader system change efforts - such as systemic investing.

An iterative and adaptive approach to desktop research was adopted, guided by dialogue throughout the process.

The research paper should be framed not as a final output but rather as an informed starting point for more dialogue (internally and externally). It proposes that:

Impact investing's strength lies in supporting purpose-driven ventures in overcoming structural innovation challenges, and building their capability to provide targeted solutions that coexist alongside other interventions to drive collective social and environmental change.‍

It builds on this by calling for impact investors to adopt a context-first, systems-aware mindset. To articulate what this looks like in practice, four implications for conventional impact funds are identified. They are:

1. Start with a system's approach.
2. A fund's role is to enable.
3. Measurement should be used to support (not drive) learning and adaptive strategy.
4. Generating knowledge on impact requires specialist expertise.

A list of strategic reflections are also included to provide additional support in bridging this research to practice. They don’t prescribe a path forward, rather they are prompts for practitioners to engage in dialogue about the key tensions and opportunities identified in the research.

‍*This paper has not yet been published online. However with permission from Founders4Impact, a copy of the report can be accessed here.

• Build an external review into the budget and emphasise the importance of continually reassessing and critically reflecting on assumptions throughout the research process.