Funding the system: Rethinking how capital flows drive sustainable change

When I worked on the Global Infrastructure Programme, one constant ran through every Task Force: “financing”. Whether we were discussing ports, roads, or social housing, everything came back to the same question: how is it financed?

It wasn’t a minor question: “How is it financed?” meant very different things depending on who asked. For some, it was financing: covering costs, ensuring liquidity, executing. For others, investment: betting on returns, measuring risk, capturing value. And for a few, capital: taking on risk, sustaining structures, creating leverage.

Money — in all its forms, public or private, philanthropic or multilateral — acted as an invisible current that kept the system in motion, though not always in balance.

I remember one meeting with the Stock Exchange and multilateral institutions. We weren’t discussing blueprints or engineering, but instruments, risks, returns, and timelines. And yet, we were speaking the same language that underpins physical structures: flows, tensions, equilibriums.

In that moment, I realised money wasn’t simply a figure filling a gap. It was part of the system’s metabolism — a current that could nourish it, accelerate it, or block it.

Later, when I delved into the field of sustainable finance, that intuition became clearer. Behind every financial instrument lay a deeper question: What kind of system are we sustaining with this capital? One that depletes — or one that regenerates?

Since then, I’ve learnt to see money differently: not as an external resource, but as a living force — one that reflects, drives, and transforms the very systems it enters.

When capital learns to move with systems

Over time, I realised that the link between capital and systems was not accidental. It is part of the larger cycles of transformation that shape economic and social history. From time to time, the world rediscovers new ways of producing, moving, and creating value.

Economist Carlota Pérez calls these moments technological revolutions. But beyond machines, what truly changes is the invisible logic that organises the economy — how we define value, decide where to invest, and measure progress. She describes this as the techno-economic paradigm: a shared mindset that determines how we design, finance, and even imagine our systems.

When a paradigm shifts, so does the circulation of capital. It reshapes our sense of risk, the sectors we call “the future”, and those left behind. In every technological wave, capital finds its own rhythm: it begins with promise — funding exploration and prototypes — then accelerates, multiplies, and stabilises into institutions. That movement is not outside the system; it is its pulse.

When financial capital meets a new technology or infrastructure, it does more than feed it — it translates it into its own terms: investment, risk, return. In doing so, capital evolves too — learning new speeds, channels, and rules. What once took the form of oil or steel may now appear as artificial intelligence or renewable energy. Over time, capital mutates, revealing its cycles of euphoria, excess, correction, and maturity.

Every investment decision, in essence, directs the future. When capital flows towards a technology, an infrastructure, or a field of care, it decides what kind of world becomes possible. Not all futures share benefits and risks equally; some deepen inequality, others restore balance. Capital is never neutral: each flow tilts the system toward one paradigm or another.

From this lens, sustainable finance is the latest expression of those paradigms — the modern version of Pérez’s dilemma: how to steer capital toward development that is viable, fair, and regenerative. What industrialisation or electrification once were now takes the form of green transitions, social infrastructure, and care economies. Capital still moves change, yet faces a new challenge: learning to do so without eroding what keeps systems alive.

In Europe, sustainable finance often means aligning capital with the Green Deal’s environmental and social goals. Here, I approach it differently: not as regulation, but as a living dynamic — how capital learns to move in step with the systems it seeks to transform.

This raises basic questions: Do we know when capital truly enters a system — at the start, in transition, or at maturity? What kind of change does it finance — structural or adaptive? And what impact does that flow have on the system’s relationships and incentives?

Sustainable finance cannot be reduced to a green label. It must read the anatomy of the systems it touches — their rhythm, timing, and vulnerabilities. Otherwise, it risks repeating the extractive logic it wants to replace. The challenge is not merely to fund projects but to understand the metabolism of capital — when it regenerates and when it stagnates. Seen this way, capital is no longer passive: it becomes a living force, an energy that can nourish or exhaust depending on how it connects with the system.

That, perhaps, is the real question behind sustainable finance: not colour, but the quality of the relationship between capital and the systems it moves through.

How capital behaves within systems

If capital truly transforms alongside the systems it enters, it is worth observing how it behaves in different contexts. The goal is not to compare them, but to trace shared patterns: how money circulates, where it stalls, and what that says about the system’s health.

This is why I look at three settings — infrastructure, health & social care, and housing — different on the surface, yet connected by the way capital moves through them.

1. Infrastructure: when capital gets stuck

British infrastructure is not just a field of investment; it is a mirror of the State itself. The path of money reveals more than spending or efficiency. It shows how a society converts resources into value. Financial flows expose the invisible architecture of power, time, and coordination.

In theory, the process seems linear: the Treasury allocates funds, departments deliver projects, and the country gains an asset. In practice, movement halts precisely when value should mature. The system celebrates completion, not learning. Capital fulfils its short-term function and then stops — it does not circulate; it discharges.

This blockage is not accidental. The machinery of control — the Green Book, audits, Gate Reviews — prevents mistakes but also suppresses innovation. Money does not flow like blood; it moves like liquid under pressure — measured, monitored, unable to adapt.

Added to this is a clash of three timelines: the political, seeking visibility; the fiscal, imposing discipline; and the systemic, requiring time to mature. Within this collision of incompatible clocks, capital wavers, freezes, or diverts — a sign of the State’s lack of internal alignment.

The result is a system that spends without learning. Money, more than financing, organises behaviour. It exposes the system’s tensions, fears, and capacity — or incapacity — to evolve. Where it flows without reflection, the system survives. Where it turns into knowledge, it transforms.

HS2 is not an exception but a symptom. Its story shows how capital behaves in a misaligned system: political pressure to show progress released funds before the design was ready; the Treasury’s desire for control conflicted with long-term commitments; governance focused more on compliance than on value creation.

What should have been a unifying current — aligning vision, rhythm, and purpose — broke into fragments of reports, audits, and renegotiations. In HS2, money was not lost; it was immobilised. It kept circulating inside the bureaucracy but not towards transformation. It produced no new value and failed to accelerate the project’s aim. Capital simply took the shape of the system that held it. When institutions prioritise control over learning, they create expenditure without memory. HS2 did not fail for being too ambitious, but for advancing with unsynchronised clocks.

Public–private partnerships try to correct that paralysis by replacing control with collaboration. Here, the State acts not as an external auditor but as a partner sharing risk, learning, and reward. When public money remains invested — instead of retreating after approval — it can influence social and financial outcomes.

Yet even in these partnerships, one condition defines success: temporal certainty. Without a stable horizon — a predictable project pipeline, consistent rules — public and private capital cannot align.

PPPs are not a cure, but they are a useful laboratory. They show how money moves again when the State and the market learn to breathe in the same rhythm.

As HS2 and other major projects reveal, the problem has never been a shortage of funds, but a shortage of structure to channel them with purpose. Overruns, delays, and revisions point to the same root cause: a system that wants long-term outcomes but operates through short-term mechanisms.

Every pound invested sits between three forces rarely in harmony: Treasury control, departmental execution, and public value. Until this triad is realigned — through stable governance, broader definitions of value, and space for innovation — any “build back better” plan will meet the same limits.

The challenge is not technical but cultural. The UK must shift from an economy of approvals to one of stewardship — where public money stops defending against failure and starts enabling collective transformation. HS2 and similar programmes are not management failures but mirrors reflecting a deeper truth: the system must rebuild trust in its own capacity to invest.

2. Health & social care: when capital dissolves

In palliative care, money moves by the logic of compassion rather than policy. The recent parliamentary inquiry into the financial sustainability of hospices in England makes this visible: the system that supports people at the end of life — one of the state’s most human functions — depends largely on donations, legacies, and charitable campaigns. Of the £1.8 billion sustaining it, barely a third comes from public funds.

This creates a structural paradox. The care of the most vulnerable rests on a moral architecture of money — a current of organised compassion sustaining, through voluntary means, what should be a universal right. Here, capital circulates not as policy but as empathy: intermittent, emotional, and uneven.

Over time, this hybrid model — part state, part charitable — has grown fragile. Hospices must meet clinical standards comparable to the NHS, yet their finances rely on the volatility of donations and local fundraising capacity. In 2023–24, many warned they might need to cut up to 20 per cent of services; around 300 beds were lost due to lack of funding. In this system, money behaves like a network of small, flickering streams — sustained by social empathy but undermined by its own instability.

The government’s £100 million fund for 2024–26 offered relief but not resolution. Even the National Audit Office acknowledged that it does not tackle the root problem: the sector’s structural dependence on non-state income. As the population ages and demand for palliative care rises, the issue becomes systemic. The question is no longer how much funding is missing, but what kind of capital is needed to sustain life at the end of life — philanthropic, public, or a new hybrid form that recognises care as part of the nation’s essential infrastructure.

3. Housing: when capital redefines what “affordable” means

In housing, money does not vanish — it changes form. What the British state now calls affordable housing no longer means what it did thirty years ago. To illustrate this dynamic, I refer to data from the 2022 House of Commons Library Briefing on affordable housing — not as a current policy snapshot, but as a lens into how public capital behaves within a system that calls itself “affordable”. It once referred to social rent — homes let well below market rates and supported by the state or housing associations. Today, most new “affordable” homes fall under affordable rent (up to 80 per cent of market value) or shared ownership schemes. These mechanisms behave more like financial instruments than social guarantees.

In systemic terms, money has stopped acting as a public safety net and now functions as a market tool. Public capital, once a social buffer, has turned into a lever that accelerates market logic — still wrapped in the label of “affordability.”

The flow of housing finance repeats the same pattern seen in megaprojects: it moves in political bursts rather than through steady structures. Each fiscal cycle opens or closes the valves — supply rises one year, contracts the next — without building lasting capacity. Policies such as Right to Buy, the mandatory rent reduction (-1 per cent per year between 2016 and 2020), and the shift from social to Affordable Rent have steadily weakened the system’s public base. Instead of flowing consistently, capital now moves in intermittent surges: the system breathes in budgetary shocks, leaving gaps precisely where need is greatest.

Recent reforms — including the Infrastructure Levy, Section 106, and the First Homes programme — deepen this problem. They aim to fund affordability through market mechanisms, making social housing ever more dependent on developers and land values. In short, affordability is financed by the same market that fuels inaccessibility.

The result is a structural paradox: the financial system profits from the scarcity it claims to solve. Investment in “affordable” housing now depends on homes staying scarce and expensive enough to protect profit margins.

What it really means for a system to need financing

After observing how capital behaves across sectors — infrastructure, health & social care and housing— a deeper question emerges: what does it truly mean for a system, whatever its scale or complexity, to “need financing”?

In each case, capital takes different forms but reveals a similar pattern. In major infrastructure projects, it becomes immobilised by the attempt to control complexity: financial flows mirror institutional disorder. In health and social care, it fragments across donations, public funds, and one-off investments, leaving social sustainability dependent on unstable flows. In housing, it changes nature: it stops acting as a public guarantee and adopts a market logic under the label of “affordability”.

Each system shows a different misalignment between capital and the purpose it is meant to sustain. The issue is not only how much is invested, but how — and when — that investment takes place.

Transforming a system does not simply require more money, but money that understands its temporal role in the process of change. Capital needs to adapt to the phase a system is in: financing a starting point is not the same as financing a transition or a maturity state.

Every system moves through distinct stages. The capital needed at the beginning differs from what is needed midstream or at maturity. So rather than asking “How much does it cost?”, actors should be asking: What type of capital is needed, for how long, under what conditions — and to enable what kind of change?

These are not project phases, but evolutionary moments in the life of a system — points where its capacity to learn, adapt and stabilise demands different types of capital. Not all funding sustains the same transformation. Some stabilise what exists; some accelerate transitions; and only a few truly reshape the system itself.

Yet finance still operates with a logic built for markets, not for living systems. It measures returns, not resilience; it manages isolated risks but overlooks the interdependencies that hold ecological and social systems together. Capital should serve the needs of the system it enters — not the other way around. When finance dictates the rhythm, systems bend to short-term incentives instead of long-term regeneration.

This is why, when finance tries to align with sustainability goals, it stumbles on three structural gaps: a weak bridge between science and finance; metrics obsessed with ESG labels rather than substance; and a limited capacity to see how local decisions reshape global dynamics over time.

Sustainable finance, in this sense, represents the modern effort to close those gaps and respond to the evolving requirements of capital in transformation. More than a green label or a moral stance, it demands a new sense of time — learning to invest patiently through transitions, to measure value through long-term effects, and to coordinate public and private flows around a shared systemic purpose.

Its real challenge is not choosing “sustainable” projects, but ensuring that capital — in its type, form, timing, and governance — evolves with the systems it seeks to sustain. After all, directing capital towards “sustainable” activities is not enough; once it enters a system, it behaves according to that system’s internal logic — it can strengthen what works, or amplify what is broken.