William Burckart
Editor’s Note: This commentary is the third in a series of essays from this author on the future of institutional investment management.
Around the world, CIOs are rethinking risk, responsibility and influence—embedding system-level awareness into investment beliefs, governance frameworks and portfolio-wide decisionmaking.
In Part I and Part II of this series, I explored how institutional investors are shifting from managing risk at the level of individual holdings to strengthening the systems that determine long-term value. Today, we turn to how that shift is playing out in practice.
System-level investing emerged from the evolution of sustainable and impact investing. My colleague Steve Lydenberg, a pioneer in this sector, and I launched The Investment Integration Project in 2015 to help investors move from analyzing company performance to influencing the systems that shape it. From that conviction, we coined the term system-level investing and built tools to make it actionable.
The stakes have only gotten higher. Climate disruption, erosion of democracy and capital market instability all expose the limits of firm-level risk management. Investors now face a clear imperative: Portfolios will not thrive if the systems they depend on fail.
Redefining Investing
As I covered in Part II of this series, conventional environmental, social, governance and impact strategies focus on firm-level improvements—through measurable outcomes, risk screens, shareholder engagement and proxy voting. These remain essential, but they do not aggregate to create system resilience.
In fact, and perhaps counterintuitively, what works at the firm level can actually backfire at the system level—a dynamic that economists call the “fallacy of composition.” A thousand companies maximizing short-term performance do not yield long-term market stability. Nor do a thousand firms pursuing divergent, idiosyncratic impact goals. Addressing threats like biodiversity loss, financial system fragility and democratic backsliding require investors to go beyond individual companies and influence the systems that shape portfolio-wide exposure.
Fortunately, many are already doing just that, and they are not straying from fiduciary duty. As legal experts Keith Johnson, Susan Gray and Tiffany Reeves have noted, the duty to act in the best interests of beneficiaries includes addressing foreseeable, intergenerational systemic risks. System-level investing does not deviate from fiduciary duty; it reinforces it.
Reshaping the Rules
Investors are already putting system-level investing into practice:
- The California State Teachers’ Retirement System, with more than $350 billion in assets under management, has formalized system-level investing strategies, established a dedicated Sustainable Investment & Stewardship unit, and reshaped beliefs to recognize the interdependence between market health and portfolio value;
- PGGM, the Dutch pension fund manager with 261 billion euros in AUM, uses a “3D” framework (return, risk and impact), maps holdings to the U.N.’s Sustainable Development Goals and recently exited fossil fuel investments when engagement failed; and
- The University of Cambridge, in partnership with Bloomberg, launched the Bloomberg Cambridge University Fixed Income Index—the first bond index built to align with real-economy emissions. The tool enables institutional investors to calibrate bond exposure with science-based climate targets.
Translating Beliefs Into Investment Action
TIIP has had the privilege of working with some of the leading investors putting system-level investing into practice. These institutions are not just updating policies. Like those referenced earlier, they are rethinking influence, realigning incentives and retooling their operations to strengthen the systems their portfolios depend on.
Take the University Pension Plan of Ontario. When UPP approached TIIP and consultant Sinclair Capital, they were reevaluating their theory of influence—shifting from tracking ESG compliance to proactively shaping market conditions. We supported the expansion of their Statement of Investment Beliefs to explicitly include system-level objectives, which they have since operationalized through targeted actions on climate and inequality, strengthened proxy voting, and more intentional board engagement. (See coverage of this work previously in Chief Investment Officer.)
Another example is Domini Impact Investments, a women-led investment adviser and early leader in socially responsible investing. Domini partnered with TIIP to deepen its system-level approach by clarifying investment beliefs, restructuring portfolio construction and engagement practices, and sharpening the firm’s policy advocacy to focus explicitly on mitigating systemic risks.
Some investors are going even further—adapting system-level frameworks not just to shape markets, but to help reshape capital allocation norms themselves. Koppa Capital, for instance, has customized TIIP’s framework to chart impact across portfolio, industry and systems levels. Their goal is not simply to invest in overlooked founders; it is to reform the financial system so that the LGBTI+, refugee and disability communities can build durable economic power.
The Surdna Foundation is similarly interrogating the systemic effects of its endowment. With TIIP’s support, Surdna is moving beyond traditional grant- or investment-level metrics to examine how its strategies—and the norms they reinforce—either perpetuate or challenge system-level drivers of racial inequity. The key question is no longer just, “What did we fund or invest in?” but, “How did we shape the system?”
As Jon Lukomnik and James P. Hawley noted in their 2021 book “Moving Beyond Modern Portfolio Theory: Investing That Matters,” MPT was designed to diversify away idiosyncratic risk—not to manage systemic threats. But investors do have the tools to do just that—if they choose to use them.
Building the Research and Practice Infrastructure
As system-level investing enters a new phase of maturity, both its intellectual foundations and practical infrastructure are evolving rapidly. Professor Caroline Flammer, of Columbia University’s School of International and Public Affairs, where I am also an adjunct professor, launched the Sustainable Investing Research Initiative in 2022. The initiative is driving an agenda focused on education, research and dialogue on system-level investing.
To advance the empirical underpinnings of the field, Hawley launched the Externality Investment Research Network earlier this year—a global hub of academics, practitioners and data scientists developing the models and methods needed to map externalities to financial outcomes. This work is especially important for CIOs seeking analytical tools to quantify and communicate how systemic risks translate into portfolio-level implications.
Meanwhile, Lukomnik, who co-teaches the course on system-level investing with me at Columbia University, is editing—with support from Delilah Rothenberg and me, the “Handbook on System-level Investing” (due in April 2026)—a volume of more than 20 chapters written by practitioners across the globe. From asset allocation to stewardship, and from fiduciary interpretation to policy engagement, the “Handbook” will serve as the CIO’s reference guide—translating abstract concepts into actionable strategy.
Building Infrastructure for Action
For decades, the evolution of responsible investing has been marked by ambition and constrained by inadequate tools. In the 1980s, annual reports were requested by postcard and analyzed with scissors and newspaper clippings. It took nearly a decade after Domini launched the first SRI index for major players like Dow Jones and FTSE4Good to follow suit. Investors can now choose from thousands of ESG indexes. Today, access to data is no longer the bottleneck. Action is.
By 2022, after nearly a decade of helping define system-level investing—from our book “21st Century Investing: Redirecting Financial Strategies to Drive Systems Change” to dozens of practical reports and case studies—it became clear that the field had crossed a threshold. Investors were not asking for more theory. They needed practical, enterprise-grade tools to apply system-level principles at scale.
This need is now quantitatively validated. According to the 2025 Thinking Ahead Institute peer study of $6.3 trillion in AUM:
- 88% of asset owners expect systemic risks to increase in scale, frequency and interdependence;
- 73% say managing complexity is now their top concern—representing a dramatic rise since 2017; and
- 84% anticipate artificial intelligence will become foundational to their investment infrastructure within five years.
But despite this awareness, the Thinking Ahead Institute argues: “Systemic risks are under-estimated and demand urgent attention. We need tools that connect the dots—and help us act.”
In response to this clear demand, TIIP developed the Systems Aware Investing Launchpad, an AI-enhanced platform designed to meet these needs and close the gap between insight and implementation. SAIL supports institutional investors as they: design strategies rooted in system-level influence; benchmark progress against peers and leading practices; and report coherently across disclosure regimes like Principles for Responsible Investment, the Netherlands-based benefit corporation GRESB and the U.K. Stewardship Code.
But SAIL is more than just another enterprise management tool—it provides the kind of infrastructure this moment demands. Just as earlier generations established benchmarks and engagement norms to scale sustainable and impact investing, today’s system-level challenges require tools that embed systems thinking into the core of investment operations.
SAIL supports strategy development, enables due diligence comparisons, illuminates patterns of system-level influence and integrates fragmented performance data into a single, decision-ready view
From ‘Why’ to ‘How’
From CalSTRS to UPP, Surdna to PGGM, University of Cambridge and Koppa Capital, institutional investors are stepping into a new role—not just as stewards of capital, but as co-architects of the systems that underpin financial performance. They are:
- Clarifying investment beliefs to explicitly include systemic risk and interdependence;
- Aligning portfolio construction and engagement strategies with system-level goals—not just firm metrics;
- Participating on collaborative platforms to drive standards, policy and market norms;
- Using tools like SAIL to benchmark systemic exposure and drive cross-portfolio learning; and
- Embedding system-level metrics into reporting and evaluation frameworks.
Again, this is not a break from fiduciary responsibility. It’s how we uphold it.
System-level investing is no longer an emerging idea—it’s an emerging standard. For CIOs serious about managing long-term risk, delivering durable returns and acting with foresight, the time to lead is now.
William Burckart is the CEO of The Investment Integration Project, adjunct professor of international and public affairs and the Brandmeyer Fellow for Impact and Sustainable Investing at the School of International and Public Affairs at Columbia University, and a fellow with the High Meadows Institute.
This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.
Tags: Climate Risk, ESG, Impact Investing, Institutional Investing, Modern Portfolio Theory, sustainable investing, system-level investing