Aligned capitalism: Rewiring finance for a sustainable future

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 coverage Orderly 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. Chapters 00:01 – Welcome & series context 00:52 – Guest intro and PRI’s Investment Case database 02:11 – Orderly vs. disorderly transition 05:38 – Defining “aligned capitalism” 07:37 – Future-fit capabilities & trapped competencies 10:51 – Investor incentives for alpha & impact 14:12 – Making RI core (authority, integration, structure) 18:17 – Capital markets’ original purpose 21:08 – Shareholder primacy & governance rethink 25:30 – Long-termism, regionalism, and global coordination 29:02 – Why the ESG backlash might be good 31:18 – From technical to narrative infrastructure 36:53 – Investor–beneficiary engagement (agency, tech, product design) 41:23 – The responsibility of investing: align, restore, regenerate The PRI has published a database to support investors to make the case for responsible investment. Find out more on our website: Keywords responsible investing, aligned capitalism, planetary boundaries, disorderly transition, long-termism, narrative infrastructure, trapped competencies, stranded assets, PRI Investment Case, ESG backlash, fiduciary duty, capital markets, circular economy, regeneration, system stewardship, stakeholder governance, beneficiary engagement Disclaimer This podcast and material referenced herein is provided for information only. It is not intended to be investment, legal, tax or other advice, nor is it intended to be relied upon in making an investment or other decision. PRI Association is not responsible for any decision made or action taken based on information on this podcast. Listeners retain sole discretion over whether and how to use the information contained herein. PRI Association is not responsible for and does not endorse third parties featured on in this podcast or any third party comments, content or other resources that may be included or referenced herein. Unless otherwise stated, podcast content does not necessarily represent the views of signatories to the Principles for Responsible Investment. All information is provided “as-is” with no guarantee of completeness, accuracy or timeliness, or of the results obtained from the use of this information, and without warranty of any kind, expressed or implied. PRI Association is committed to compliance with all applicable laws. Copyright © PRI Association 2025. All rights reserved. This content may not be reproduced, or used for any other purpose, without the prior written consent of PRI Association.

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Aligned capitalism: Rewiring finance for a sustainable future is an episode from PRI Podcasts by The PRI.

This episode is 44:51 long.

This episode was published on Oct 7, 2025.

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