The construction industry is at a crossroads, grappling with the tension between universal solutions and context-specific approaches in sustainable development. As capital flows into impact investing, the debate intensifies over whether to pursue technologies and practices that can be universally applied or to focus on initiatives tailored to specific geographic and social contexts. This dichotomy is not merely academic; it has real-world implications for how we build, innovate, and mitigate environmental impacts.
Consider the example of Lime, a company operating shared electric bike and scooter networks. Their approach is context-agnostic, aiming to reduce greenhouse gas emissions by replacing more polluting means of transportation. This model can theoretically succeed in various locations, but its effectiveness hinges on local factors such as infrastructure, regulations, and cultural acceptance. In contrast, initiatives like the GroundBreak Coalition’s blended finance offerings in the Twin Cities of Minneapolis-St. Paul are highly attuned to specific local challenges, such as reducing racial wealth inequality by promoting homeownership and entrepreneurship among BIPOC and low-wealth individuals. These context-specific approaches often yield more tangible and immediate impacts, but they require a deep understanding of local nuances and systemic challenges.
The TransCap Initiative, a pioneer in systemic investing, has spent years building an investment approach designed to tackle society’s greatest challenges. Their experience underscores the importance of context-specific solutions. For instance, regenerative agricultural transitions in the American Midwest and net-zero mobility transformations in Switzerland are not one-size-fits-all solutions. They are deeply rooted in the unique socio-economic, political, and environmental contexts of these regions. This approach challenges the traditional impact investing model, which often seeks universal solutions that can be scaled globally.
The reasons behind the preference for context-agnostic investing are clear. Investors are drawn to the potential for higher financial returns in larger, more universal markets. Additionally, investment teams often lack the multidimensional expertise required to navigate the complexities of specific geographic contexts. Capital is typically organized thematically (e.g., future of mobility, climate change), rather than around specific system/challenge constellations (e.g., climate change adaptation in Southern Spain). Furthermore, deal flow tends to scale with context size, making it easier to find a pipeline of universal innovations.
However, the challenge with context-agnostic impact investing is that the actual effectiveness of a solution depends on how well it integrates into the specific contexts in which it is used. The varying uptake of electric scooters around the world illustrates this point. While Berlin recorded a world-leading 17.5 million e-scooter trips in 2023, Paris banned them altogether that same year. This disparity highlights the importance of understanding local factors that influence the success of innovations. The “Not-Invented-Here” problem, where innovations of foreign origins are rejected, is a well-documented barrier. Additionally, the readiness of a system to accommodate new technologies, legal and political factors, and idiosyncratic issues can all impede the success of an intervention.
Systemic investing, by design, centers context at the heart of the investment process. This approach involves articulating transformational intent, drawing system boundaries, performing systems analysis, and building coalitions of capital deployers. Each step requires a deep understanding of the specific problem, its drivers, and the stakeholders involved. This context-specific analysis is crucial for generating actionable insights and ensuring that investments yield tangible impacts.
The analytical mindset of systemic investing pulls us toward specificity and context. It requires understanding problems from multiple perspectives, recognizing that some drivers are macro-level forces while others are micro-level issues. For instance, structural racism perpetuates economic immobility across various scales, but specific issues like bridge damage can triple commute times for affected communities. This deep dive into context is essential for generating combinatorial effects, where multiple interventions reinforce each other’s work in tangible ways.
The construction industry must embrace this context-specific approach to drive meaningful change. By focusing on the unique challenges and opportunities of specific regions, we can develop more effective and sustainable solutions. This shift requires a rethinking of investment strategies, a deeper understanding of local contexts, and a willingness to engage with the complexities of systemic challenges. The future of sustainable construction lies not in universal solutions but in tailored, context-specific innovations that address the unique needs and challenges of different communities.
