An interview with Global Knowledge Lead and Partner, Dalberg, Kusi Hornberger on his new book

In his newly published book, “Scaling Impact: Financing and Investment for a Better World”, Kusi Hornberger, a Partner and Global Knowledge Lead at Dalberg, makes a compelling case for reimagining our financial systems to make them more inclusive and accountable.

With over 20 years of experience in investment, strategy, and project management across diverse sectors and regions, Kusi Hornberger is well-positioned to demonstrate how this shift can drive long-term, sustainable change. As both an investor and an advisor, he has engaged with solutions that focus on using innovative approaches like blended finance, impact measurement and management, and results-based finance to address global challenges of poverty, climate change, and inequality.

He writes about the daily reminders we often encounter of how crises around the world disproportionately impact those least able to cope with them — whether it is greater learning loss borne by students from low-income homes during the Covid-19 pandemic, or the staggering impact of climate change on vulnerable communities. Smarter financial innovations, he argues, can help us close such gaps more effectively.

“Scaling Impact” illustrates the need to reimagine capitalism itself for impact investment to attain scale, restore integrity to finance, and once again make investing work to create value for society as a whole.

In this interview, Kusi Hornberger discusses the driving concepts behind his book, how to enhance the effectiveness of capitalism, and the necessary paradigm shifts to achieve our goals. 

What motivated you to write this book?

There are three primary reasons I decided to write “Scaling Impact: Financing and Investment for a Better World.”  

Firstly, it stemmed from the collective frustration that we are nowhere near closing the annual financing gap of over $3.7 trillion needed to achieve the United Nations Sustainable Development Goals (SDGs) by 2030. New approaches to address global systemic challenges like climate, poverty, and inequality are urgently needed. Secondly, I realized that I had insights to offer on doing things differently. With over 20 years of experience advising and investing with development finance institutions, donors, family offices, foundations, and private investors, I’ve gained valuable insights into what works and what doesn’t in terms of innovative approaches like blended finance, innovative finance, and impact investing to generate positive societal impact. Lastly, I deeply believe in the importance of sharing knowledge with others, not just providing technically correct answers. Without communication and knowledge-sharing, we are less likely to see the behavior changes necessary for these solutions to succeed.

Discuss your belief in the need for greater intentionality in prioritizing impact as a goal within financial and investment practices. What are your suggestions to spark this kind of far-ranging shift?

At the heart of my book lies the conviction that both individuals and our broader society must put more emphasis on valuing aspects beyond mere financial considerations. This includes recognizing the social and environmental consequences that affect a diverse range of stakeholders, not just shareholders, stemming from our monetary decisions. Putting this into practice means accepting lower financial returns for things that may create more public benefit or pricing in things like the cost of carbon emissions or the net dignified job loss generated by a business activity.

The approaches like blended finance and impact investing I discuss in the book can help accelerate progress against the world’s biggest remaining collective challenges. However, the application of these more effective capitalist strategies remains considerably underdeveloped. Blended finance and impact investing remain 15 to 200 times smaller than traditional approaches to finance and investment. The discussions presented in the book are firmly grounded in pragmatism and optimism.  Achieving this shift necessitates a change not only in our actual behaviors but also in the established practices within the capital deployment ecosystem.

In the book, you address concerns that capitalism is inherently unjust and can create more problems than it solves by widening systemic inequalities rather than closing them. How did this argument inform your ideas about how we can reimagine capitalism to make it work for the greater good?

Much like many others, I appreciated the challenge Anand Giridharadas presented in his widely discussed 2018 book, “Winners Take All: The Elite Charade of Changing the World.” In that work, Giridharadas argued that well-intentioned elite “do-gooders,” including individuals like me, despite having the best intentions, are often self-serving. Rather than helping the less fortunate, he asserts, these “do-gooders” maintain and even increase systemic inequalities. Giridharadas’ critique holds that the “market world” is intrinsically unjust, enabling the wealthy to influence policies and regulations rather than contributing their fair share of taxes to provide essential public goods and services. His probing assessment led me to question some of my assumptions and career choices. However, my perspective is also shaped by personal experiences; I am the son of a father who suffered imprisonment and torture at the hands of a “revolutionary” South American government that claimed to assist its people through a collectivist model with high taxes and centralized public services. I also know that ostensibly more idealistic models are not necessarily superior. Instead, I firmly believe that our current capitalist model can and should be improved. This book offers practical pathways to achieve that improvement.

How do we get started on making changes to our financial systems to widen scale and impact and build on capitalism’s strengths?

The six strategic paradigm shifts explored in “Scaling Impact” call on various actors to change their traditional practices to realize this shared vision for improving finance practices to achieve a better world.

• Seek financial health, not financial access: Commercial banks, fintechs, and other providers of financial services to individual consumers should focus beyond creating access and focus on improving financial outcomes. To be successful, finance must be considered holistically, offering nonfinancial services bundled with credit or insurance while listening to consumers, understanding their real needs, and measuring performance from the consumer’s perspective.
• Provide patient capital, not venture capital: There are a number of small and growing businesses (SGBs) across the globe that struggle to access financing. They are often stuck squarely in the “missing middle” of enterprise finance — too big for microfinance, too small or risky for traditional bank lending, they lack the growth, return, and exit potential sought by venture capitalists. A shift toward a more patient model focused on the true financing needs of these enterprises provides a path forward.
• Be an impact-first investor, not an ESG: The proliferation of large private equity firms that raise billion-dollar impact funds and the common practice of greenwashing are problematic. Rather than focus on scale, investing should take an intentional, impact-driven approach, with measurement and accountability, to ensure truly value-oriented impact investing strategies.
• Offer catalytic finance, not just blended finance: The central role of development finance institutions is to push markets to areas experiencing true market failure and lack of adequate finance. More risk-tolerant catalytic capital must be provided and blended with traditional, more return-seeking sources of finance that may help crowd in and scale financing for development goals.
• Measure success based on results, not on activities: Practices of innovative, results-based finance are commonly misunderstood and underutilized tools in all of finance and investment. However, a more results-centered approach is needed, particularly in government- and donor-funded social programs, in order to align incentives and scale up financing for successful programs.
• Provide capacity building, not just capital: Offering customized support to entrepreneurs and/or leadership teams plays a critical role in ensuring the impact potential of business activities are realized. Furthermore, different types of delivery models for capacity-building services should be considered to ensure that entrepreneurs make these types of nonfinancial support activities effective at boosting growth and performance.

How can readers take action on these paradigm shifts you call for?

In Scaling Impact, I explore these paradigm shifts in detail, with specific examples of how we can start to make the changes necessary to take advantage of capitalism’s strengths. By intentionally making impact the goal of our practices in providing finance and investment, we can help keep the climate bearable for everyone, solve poverty for hundreds of millions of people, and ensure that all people everywhere lead lives of dignity and opportunity. I hope it inspires readers to join me in the endeavor to scale impact and make finance and investment work for a better world.