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Aligned capitalism: Rewiring finance for a sustainable future
Episode 10
Tuesday, 7 October, 2025
Is the transition to a sustainable economy happening to us or because of us? Associate Professor Ioannis Ioannou (London Business School) joins host Kate Webber to unpack the recent ESG backlash and why today’s “disorderly transition” must become an orderly one. We explore how investors can push markets toward aligned capitalism - a system that lives within planetary and social boundaries - while unlocking “trapped competencies” and long-term value.Overview Ioannou argues we don’t choose whether to transition—the system is already shifting amid climate change, biodiversity loss, and widening social inequalities. The real choice is whether that transition is orderly (policy-led, long-term, and integrated) or disorderly (reactive, crisis-driven). He outlines how investors can re-center long-termism, integrate sustainability into core strategy (not a side product), and restore the original purpose of capital markets: scaling real-economy solutions.Detailed coverageOrderly vs. disorderly transition: Planetary boundaries are breached; social stress is rising. An orderly path minimises harm and plans within ecological and social limits.Aligned capitalism: Capitalism is a human-made system that can be re-ruled to fit reality. Policy, incentives, and investment practices should align with science and society.From stranded assets to “trapped competencies”: Future-fit capabilities (circularity, regeneration, inclusion) remain undervalued until the system aligns—creating alpha for first movers.Investor playbook: Reframe metrics beyond short-term profits; deploy patient capital toward companies building system-shifting capabilities; advocate for rules that unlock these competencies.Integration, not silos: Sustainability must hold authority inside firms; RI can’t be a niche fund while the rest ignores impacts.Capital markets’ role: Finance the next industrial transformation (energy, transport, food). Prioritise scaling real solutions over purely financial engineering.Beyond shareholder primacy: Re-balance to a “team production” model that values natural and human capital alongside financial capital.Long-termism & multilateralism: Global problems need global collaboration; regionalism can’t substitute. Impacts are already “now,” not just long term.Why the ESG backlash can help: It forces clearer, evidence-based narrative infrastructure (not just technical standards) that connects with citizens and beneficiaries.Agency & communication: Engage end-investors better (including with AI-enabled tools); reflect their values in products; compound positive choices over time.Responsibility redefined: Don’t just align—restore and regenerate ecological and social capital.Chapters00:01 – Welcome & series context00:52 – Guest intro and PRI’s Investment Case database02:11 – Orderly vs. disorderly transition05:38 – Defining “aligned capitalism”07:37 – Future-fit capabilities & trapped competencies10:51 – Investor incentives for alpha & impact14:12 – Making RI core (authority, integration, structure)18:17 – Capital markets’ original purpose21:08 – Shareholder primacy & governance rethink25:30 – Long-termism, regionalism, and global coordination29:02 – Why the ESG backlash might be good31:18 – From technical to narrative infrastructure36:53 –...
