Not radical enough? Why some investors and founders are walking away from the impact scene

Have impact-driven businesses and investors become too hungry for profits and exits? Are so-called impact companies actually making enough of an impact? And what does impact even mean at a moment when companies in sectors from defence to mining are now aligning themselves to the sector?

These questions have been circulating within the impact sector for some time. However, in recent months, a niche but growing group of investors, founders, and other stakeholders are calling for an even more fundamental shift in how businesses operate, how society functions, and how we plan for the future.

Advocates of so-called "systemic change investing" argue that too many impact companies have focussed on "band aid solutions" – making money out of tweaking existing industries and value chains in order to lower carbon emissions or tackle social problems.

Instead, they argue the focus should be a more longitudinal, interconnected approach – redesigning how we work and live rather than focussing on isolated interventions, even if this results in slimmer profit margins.

"Things are moving faster"

One core voice in recent debates is Amit Paul, cofounder of Innrwrks, a self-titled "transformation lab" and "systemic change" consulting business based in Rejklavik, Iceland (he is also a former member of the hugely successful, ABBA-influenced pop band, A-Teens).

He started the organisation in 2020, but says there’s been an uptick in interest in his work – from both investors and corporations – since the beginning of this year.

"Things are moving faster than a lot of us could have predicted," he tells Impact Loop. "Last fall, I would have said that a majority was saying 'we don't really understand what you're talking about – impact is working, carbon is a good metric for what we're trying to do'," he explains.

But now, he says more impact players are questioning the status quo. "It is a sort of harshening climate…'do you believe that our current economic system is a healthy way of looking at the world, or don't you?'."'

Polarisation in business approaches

Paul attributes this shift partly to the expanding scope of the impact sector to include areas like resilience and defence technology, which has alienated some purists. Additionally, the rollback of social and environmental impact measures in the U.S. has created a polarisation in business approaches, with some companies reverting to more conventional practices, frustrating those committed to meaningful change.

Thomas Høgenhaven, another systemic change advocate and managing partner at Copenhagen-based Planetary Impact Ventures says he has also noticed an uptick in interest in systemic change investing. Previously, he had not been invited to any courses on system change investment; in the past few months he has been invited to several.

Like Paul, Høgenhaven senses growing investor frustration with the impact sector. He says some now see their impact investments as small "grains in the sand" – isolated actions that won’t drive meaningful change unless the broader ecosystem also adapts.

Høgenhaven himself warns that focusing only on ventures chasing big returns risks making investors part of the problem, not the solution. However, he argues systemic change investing shouldn’t be seen as anti-capitalist, rather a call for "a different, more humble financial system" recognising that "we can't keep having economic growth across the board."

Planetary Impact Ventures for instance focusses its investments on agriculture, food and biodiversity companies with long-term business models that "contribute to a holistic restructuring of our economic systems." The focus is on what the company describes as "a fair financial return", rather than hockey-stick maximised profit model.

A movement gaining momentum

Other key players in the systemic change space include London-based Dark Matter Labs, which funds collaborative impact projects, and campaigns for a "radical reframing of our relationship to everything: from technology and money to land and the other-than-human world."

TransCap Initiative in Zurich also aims to scale systemic investing in what its website describes as "the places that matter most for human prosperity" such as cities, landscapes, and coastal zones.

Grassroots initiatives are emerging too. Anna Branten, a system change advocate and Impact Loop columnist based in Malmö, Sweden, recently launched a donation-based fanzine called Weave, accompanied by an e-book that has received over 400 requests.

"The overall response has been far beyond what I expected," Branten tells Impact Loop. "The most engaged are often people working with sustainability, entrepreneurs, investors, system thinkers, communicators, designers and quiet bridge-builders who don’t fully identify with either the 'impact' or 'business-as-usual' camps,” she says.

Resistance to change

However Branten's interactions also highlight ongoing resistance to the systemic change investing movement. "I've been in contact with several individuals [at VC firms], who want change, but feel frustrated that it is so hard," she says.

Paul also stresses that while there is "a lot of opportunity" for the systemic change sector to grow, moving the needle on centuries of economic policies focussed on profits and wealth accumulation "is going to require some very skillful navigation… to really go above and beyond where we have been used to doing."

Indeed, when Impact Loop raised debates about systemic change investing with the CEO of one well-known European investment firm, it was clear she knew little about the trend.

Another core impact player warned there was a danger of businesses veering into "venture philanthropy" if they moved too far away from the goal of creating scaleable, global companies that compound returns.

So what next?

For now, systemic change investing remains more niche than mainstream practice. While interest is rising – from grassroots thinkers to institutional investors – any shift away from traditional, profit-first models is likely to be controversial, slow and messy.

Whether the movement will meaningfully reshape the impact sector, or remain a niche subculture within it, will likely depend on how willing funders, founders and policymakers are to rethink not just business models – but the economic rules they’re built on – and even how we live our lives.