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2025 was the year sustainable investing hit peak backlash. ESG mentions plummeted, regulatory frameworks wavered, and skepticism from both sides of the Atlantic reached new highs. But according to Professor Ioannis Ioannou of London Business School, this moment may not mark a collapse. It may be a turning point.
In this episode of Sustainability Wired, Lorenzo Saa sits down with Ioannou to ask a pressing question: What should investors actually do in 2026? Rather than fine-tuning ESG labels or reacting to the latest regulatory headlines, Ioannou calls for a more fundamental shift: one that prioritizes long-term value creation through resilient, forward-looking business models. That includes identifying companies positioned for a low-carbon economy, scrutinizing the systems that enable sustainability, and reassessing how capital is allocated in the face of political and market fragmentation.
Ioannou makes the case for three big pivots. First, investors must recognize the fragmented nature of global decarbonization and tailor their strategies region by region. Second, they must resist the pull of “greenhushing” and embrace transparency, even when politically uncomfortable. And third, they must identify and fund “trapped competencies”—those undervalued capabilities, like circularity or regenerative agriculture, that are best suited for the world we’re heading toward.
The conversation also tackles governance, AI, and the future of sustainability expertise itself. In a job market where sustainability professionals have seen cuts and demotions, Ioannou calls for renewed investment in organizational resilience and warns that undervaluing these roles today could create blind spots tomorrow.
For investors thinking seriously about what comes next, the message is clear: the easy answers have fallen away. What remains is a chance to reassess, rethink priorities, and take action that reflects both the risks ahead and the kind of economy we want to help build.
Listen now to hear the full conversation.
Key Moments
| 00:00 – 07:00 | Introduction to Ioannis Iouannou |
| 07:21 – 15:25 | 2025: The Year of Peak Backlash |
| 15:26 – 24:38 | System-Level Investing & Regional Fragmentation |
| 24:39 – 28:10 | Looking Ahead: 2026 Predictions |
| 28:11 – 33:06 | Net Zero Coalitions & Alliances |
| 33:07 – 39:59 | Sustainability Careers & Trapped Competencies |
| 40:00 – 45:59 | Message to Investors & AI Governance |
| 46:00 – 50:16 | Quick Fire Questions & Closing |
Notable Quotes and Insights
Ioannou outlined how sustainability is being reshaped by political backlash, regulatory uncertainty, and uneven progress across markets. He emphasizes the need for investors to shift focus from global narratives to regional realities and from surface-level metrics to deeper structural alignment. The role of data, the importance of transparency, and the undervaluation of forward-compatible business models all emerged as critical themes. Here are some key quotes from the conversation.
1. 2025 Was the Year of Peak Backlash
Ioannou frames 2025 as a necessary correction point—one that clarified which institutions are genuinely committed to sustainability, and which are not.
“If I were to summarize 2025 for sustainability or responsible investment in one sentence, I would call it the year of peak backlash. In other words, it was the year where we realized that the ten year, about ten year sort of ride that we had in the markets, in the corporate world, even in the regulatory world, was coming to an end. It was a stark reminder, of course, that progress does not happen in a linear manner, progress, especially when it’s fundamental, it also triggers backlash. It triggers reaction and sometimes negative reaction.”
2. ESG Silence Will Not Build Trust
When asked whether investors should just continue their sustainability efforts but keep quiet about it due to political backlash, Ioannou warned that silence does more harm than good. This is especially true when trust and coalition-building are critical for systemic change.
“I disagree with that approach. Because if we go back to the point that I was making earlier: we need to realize that if you want to shift the system, you need more alliances and more stakeholders. And building that sort of trust then not talking about it is not going to get you there, in my humble opinion.”
3. Global Decarbonization Is Fragmenting
Ioannou argues there will be no unified global roadmap to decarbonization and urges investors to shift their thinking toward localized strategies aligned with regional political and economic realities.
“We are far from a global narrative and a global policy and a global framework that will guide decarbonization. And that is very important, especially as an investor going into 2026, because I need to start looking at, for instance, the process of decarbonization as a very regionalized, fragmented story. And that has implications.
So, for instance, in the UK, it’s almost certain that any sort of decarbonization, policy and therefore investment opportunities will have to align with regional development in regional economic policy.
In the US, investors should be prepared for what I would call a poly centric approach.In other words, it will be different across progressive and not progressive states…But there will also be a gap between federal policies and state level policies.
And for those investors that might be looking at other regions like the MENA region, for instance, there, what we have seen in recent years is, is, state level driven investment, even when we talk about Saudi Arabia or, added other Arab countries.”
4. Look for the Upside in Undervalued Capabilities
Trapped competencies. such as regenerative agriculture or circularity, are undervalued today but may become essential in a sustainable future. Investors who recognize them early could benefit from both resilience and long-term performance.
“These are undervalued assets. And you can think of those as skills. Capabilities. In other words, these are firm level capabilities that are a better fit for the world that is sustainable. But the current system, which is short term oriented…undervalues that.
And to be more concrete here, we’re talking about, for instance, advanced circular economy business models. We’re talking about regenerative business models like regenerative agriculture for instance, or more inclusive forms of governance. Those are capabilities that we would want our best companies to have.”
5. Abandon Legacy Models and Invest in the Future
Ioannou’s closing message is unambiguous: investors need to stop propping up outdated, extractive business models and redirect capital toward the future they claim to support.
“Stop funding legacy business models, business models that are based on yesterday’s economy or yesterday’s economics and start finding and investing in business models that are instead based on tomorrow’s economy. I think that’s as cleanly as you can say it.”
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