The Engagement Week’s Role in Bridging Public and Private Investment for Systemic Change

How does the Engagement Week align with the overall aims and ambitions of TIPC and the Deep Transitions Lab?

The Engagement Week closely aligns with the overarching aims and ambitions of TIPC and the Deep Transitions Lab, where our focus is on enabling transformative change. Achieving such transformations requires the collaboration of a diverse group of actors. Currently, we observe a gap in how public and private investments coordinate and align. Often, it’s unclear how these investments intersect and support each other’s efforts. The Engagement Week serves as a platform to bridge this gap, fostering the necessary dialogue and collaboration among stakeholders. 

The Engagement Week resolves around the theme ‘Scaling Experimentation’. What are key challenges for scaling experiments and how can the collaboration of public and private actors address these?

Over the last decade, we have witnessed numerous pilots and successful applications of transformative practices. However, these have largely failed to scale, with the notable exception of the energy sector, where renewables have become far more dominant. Other areas, such as organic farming and mobility-as-a-service, have not experienced similar scaling. 

The challenge of scaling experiments lies in expanding these niche practices. This expansion requires the collaboration of both public and private actors, fostering collective action. One of the key challenges is aligning the diverse experiences and approaches of these actors, as they come from very different positions. Sharing experiences is crucial for understanding how to enable transformation effectively. 

Creating robust networks plays a significant role in the scaling process as well. We consider various aspects here, including circulation, replication, and institutionalisation, where each of these elements presents its own set of challenges, and overcoming them requires the concerted efforts of both public and private sectors.  

Is it also the sheer lack of finance that is a key challenge for scaling experiments and progressing transformation?

Yes, the lack of finance certainly is a key challenge. It’s been calculated that the sustainability revolution requires trillions of dollars. However, our focus goes beyond just the amount of money available. We concentrate on the nature of finance instead. 

Injecting substantial funds into the system is insufficient if those resources are used for system optimisation rather than genuine transformation. For example, investing heavily in cleaning the fossil fuel system, rather than replacing it with sustainable alternatives, does not achieve the necessary long-term shift.

Our emphasis is on redirecting public finance toward transformative initiatives that fundamentally change existing systems, rather than merely optimising current practices. This strategic redirection of financial resources is crucial for enabling true transformation. 

Where do you see the added value in the collaboration between public and private actors, and what commonalities can they leverage to drive transformative change?

The added value in the collaboration between public and private actors lies in their shared commitment to addressing the critical challenges of our time, often referred to as the “polycrisis.” Both sectors have similar ambitions to create positive change, despite operating under different financial models. 

Private investors, including pension funds, institutional investors, and impact investors, seek returns on their investments. In contrast, government funding, often referred to as concessionary finance, does not require immediate financial returns. Governments, however, expect that their investments will stimulate economic development and growth, leading to long-term benefits. 

Despite these differences, both public and private actors aim to improve the world and make it a better place. This common goal fosters a collaborative environment where each sector’s unique strengths and perspectives can be leveraged to drive transformative change. 

What about those that are less keen to improve the world?

For now, our approach focuses on working with front runners in both public and private sectors, who are committed to transformative change. These individuals and organisations are eager to contribute and need the right tools, ideas, concepts, and theories to do so effectively. Our goal is to provide these resources and facilitate conversations across the private and public sectors. Engaging these actors may create a ripple effect as they introduce new definitions and concepts, new practices, into their own operations.  

Could you give an example of a successful collaboration between public and private investors and maybe even policymakers in the mix that have contributed to scaling experimentation?

A notable example of successful collaboration between public and private investors, as well as policymakers, is the current energy revolution, particularly in the solar and wind sectors. In this case, significant public investment has been complemented by substantial private investment, in Germany, for instance, by people collectives. 

However, this collective action, has not been very well-coordinated, and the energy revolution, which is still ongoing, took far too long. We should have reached our current state a decade ago. So while renewables have been able to attract a lot of money from various sources, it is not attracting it fast enough.

Looking ahead, future transitions in areas like food systems and mobility require better coordination and new mechanisms for collaboration. Currently, the process is somewhat ad hoc and follows a linear model: public or concessionary finance, which doesn't seek immediate returns and takes on more risk, is invested first, followed by private investors coming in later. This approach needs to change. 

Private investors should be involved earlier in the process, and public investment should continue for a longer period to ensure sustained progress. 

For example, in the Netherlands, the new government is considering ending subsidies for renewable energy sources, partly because they have been unevenly distributed, benefiting the wealthy more than the poor. However, I question whether stopping these subsidies sends the right signal to the market. It’s crucial to ensure that less wealthy people have access to sustainable options. 

While it’s true that the market for solar energy, for example, has developed to the point where it is competitive without subsidies, we still need to accelerate the adoption of renewable energy. This acceleration requires ensuring that all segments of the population can access and use solar energy. Instead of stopping subsidies altogether, we need a broader portfolio of actions. The model where the government withdraws once the market is developed is flawed. The government needs to stay involved to drive further, long-term progress. 

Based on your experience, what are key elements that make a collaboration between public and private sectors successful in the context of Transformative Innovation Policy and Transformative Investment?

I would say that there are a number of key elements that contribute to successful collaborations between public and private sectors. Firstly, I think we need to challenge and evolve the current linear model that governs how public and private finance interact. Often, these sectors operate under agreements embedded in rules, which assume a set approach without ongoing dialogue. 

Secondly, effective platforms or institutions are needed where stakeholders from both sectors can convene and collaborate. While existing platforms like Invest NL in the Netherlands aim to increase public investment’s risk tolerance to attract private capital earlier, these efforts may not yet be substantial enough.  

Experimenting with new collaborative models and initiating conversations through platforms like the Deep Transitions Lab are crucial steps forward. These collaborations must redefine investment practices to prioritise systemic impact over optimisation. For example, when considering fiduciary duty in the private sector, particularly for pension funds, it’s often argued that their primary obligation is to create wealth by generating high returns to secure future pensions. However, this narrow focus on returns overlooks the broader societal and environmental impacts of their investments.

Negative environmental and social impacts can ultimately undermine both societies and financial returns in the long term. Therefore, it is crucial to reassess the risk aspects and redefine wealth to encompass broader well-being, not just monetary income. This redefinition calls for a deeper discussion on interpreting fiduciary duty in a way that considers long-term societal flourishing. These are the kinds of conversations we aim to stimulate with the organisations we work with, pushing for a more holistic approach to investment. 

How do you balance the different priorities and goals of public and private investors when discussing systemic change?

Well, this involves understanding their distinct roles and values, their distribution of labour. The government can do certain things that private investors find very difficult to do. For instance, the government needs to secure public values, while private investors also consider their own values that they want to push for. At the same time, I feel there is enough overlap. In fact, given the state of the world and the polycrisis, I think we have more shared interest across the public and private divide, without always realising it.  

The key is to recognise and highlight these shared interests. The role of the Deep Transitions Lab and research is to make these commonalities visible. This topic will be addressed during the Engagement Week, which aims to articulate the rationale for collective action and introduce the concept of transition bundles—financing mechanisms that span a portfolio of actors. The conference will also focus on practical tools for implementing these ideas, as there is a growing alignment in the finance world with this narrative.  

However, two main challenges remain: the current rules of the financial system often prevent many desired actions, so we need to discuss whether these constraints are real or can be reshaped. Additionally, we must develop ways to measure impact to ensure investments are driving systemic change. These practical, instrumental questions are crucial for moving forward. 

How can private investors be incentivised to collaborate with public actors and to support long-term, systemic change initiatives that may not have immediate financial returns?

Oftentimes, private investors are constrained because the risks of investing in certain areas are too high. Public investors have historically played a crucial role in de-risking these ventures, for instance investing in railways in the 19th century. However, this is a rather traditional approach. 

In general, talking about incentives is not enough. It’s about building a community of practice where both sectors can learn from each other. Transition theory emphasises the importance of rules, routines, principles, and values. It is never just due to incentives, that actors start behaving in a certain way, but guided by these underlying elements which is why we are trying to work at that level.  

Public actors, less constrained by immediate returns, can invest in riskier ventures. Still, they also face political constraints and could benefit from the stability and impact that private investments can bring. Conversely, private investors should recognise their role in generating not just financial returns but also societal impact, which can lead to a more stable world, ultimately benefiting their long-term interests.  

To give a very practical example, such a collaboration between the two sectors could involve creating joint funds or aligning investments toward common goals, such as developing a bioeconomy in a specific region. By working together and understanding each other’s constraints and opportunities, both sectors can contribute to and benefit from each other while fostering systemic change. 

How can such a collaboration be facilitated in practice and what kind of instruments are needed to support scaling experimentation?

To facilitate collaboration between public and private sectors and support scaling, it’s essential to start with a common narrative. Aligning the narrative across both sectors creates a shared understanding and purpose. The next step is fostering interaction—encouraging people from both sides to know each other, interact and discuss shared experiences. Building a community of practice that includes participants from both sectors is vital for this process. 

Also, the collaboration with academia, which can serve as an intermediary actor, because we study both sides and can help in sharing and grounding experiences in evidence. Policymakers, who are often public investors or involved in shaping regulations that can either support or hinder transitions progress are another important piece of the puzzle. 

During the Engagement Week, initial connections can be made. The goal is to encourage continued dialogue and collaboration after the event. The Deep Transitions Lab aims to stimulate the idea of investment bundles and experiments, organised learning processes, where both sides collaborate. TIPC is an established platform for sharing learnings and this will be extended to the private sector to integrate insights from both sides. 

The Engagement Week in Barcelona represents the first meeting where networks from public and private investments, academia, and participants from both the Global South and North come together. The challenge and opportunity lies in whether we can talk to each other and share experiences, so hopefully it is the start of deepening and scaling a collective action journey. 

Originally published on our sister project website, TIPC, by Jenny Witte.

Engagement week 'Scaling experimentation' will take place in Barcelona 18-20th September 2024, click here for more information.

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