Essential Aspects of Systematic Investing
Investment Strategies Differ as Impact Investing and Systemic Investing Navigate Change
Frankfurt - The idea of investing money to facilitate a specific development is broadly known as Impact Investing. Systemic Investing, however, takes a more systemic approach to achieve desired results. Falko Paetzold, founder and head of the Center for Sustainable Finance and Private Wealth at the University of Zurich's Faculty of Finance, elaborated on these differences during a guest appearance on the "Sustainable Investing" podcast of the Börsen-Zeitung.
In the case of Impact Investing, the focus is on investing in individual point solutions, such as employing different drive technologies in vehicles. Systemic Investing, on the contrary, delves into the structures beneath the surface, examining the actors in the mobility system in Germany, for instance, and identifying the key leverage points needed to drive significant change in the entire system.
Paetzold collaborates frequently with high net worth individuals, and the journey to his current role began in classic banking. Reflecting on his career, he mentioned that he wanted to achieve the greatest possible impact through his work. This led him to the financial sector since, as he pointed out, financial flows are essential in a capitalist system.
He observed that many high net worth individuals express keen interest in sustainability, yet sometimes advisors serve as barriers due to time constraints. Often, advisors find it too complicated to determine which sustainability topics and approaches interest a particular client or customer to address appropriately. To help overcome this challenge, Paetzold and his team developed the Systemic Investing Investor Guide that outlines their methodology.
Paetzold emphasized that investors should first contemplate what they wish to achieve with their financial resources, their return expectations, and the extent to which they aim to connect their investments with philanthropic endeavors. Wealth managers or advisors do not engage in these pivotal discussions frequently, Paetzold criticized. Instead, the solution might involve setting different goals for different capital pools, be they impact or financial goals.
Family Offices often maintain close networks, and the systemic nature of Systemic Investing lends itself to fruitful collaboration with other stakeholders. Paetzold also suggested a fundamental shift regarding diversification in traditional investment approaches. While investors typically focus on spreading risks through a wide variety of investments, Systemic Investing's impact is only realized when investors focus on synergies within their portfolios.
To attain risk diversification, investors create multiple portfolios, explained Paetzold. "Diversification is achieved through the different portfolios, but within these portfolios, you look for synergies." Paetzold appears confident that traditional investors can still learn from Systemic Investing's approach, finding it so compelling that once integrated, it becomes second nature.
- Falko Paetzold, a wealth manager, often collaborates with high net worth individuals, expressing that he wants to achieve the greatest impact through his work, and this led him to the financial sector since financial flows are essential in a capitalist system.
- Paetzold, in his career development, has observed that many high net worth individuals express keen interest in sustainability, yet sometimes advisors serve as barriers due to time constraints, making it challenging to determine which sustainability topics and approaches interest a particular client or customer.
- In the realm of personal finance and education and self-development, Paetzold and his team developed the Systemic Investing Investor Guide, outlining their methodology to help overcome this challenge and provide a systemic approach to investing that identifies key leverage points in a system.
