Capital Design: The Role of Design in Institutional Capital Allocation

Abstract

There is a paradox within the $100 trillion institutional investment industry: the more choices an institutional investor has, the more challenging it becomes to make investment decisions. This paradox is significant because capital is one of the most transformational elements of the 21st century, driven by financialization, universal ownership, and increasing systemic risks. The direction of capital flows significantly influences the approach to addressing climate change, aging populations, and the transition to sustainable energy, in addition to supporting the essential physical and social infrastructure supported by institutional capital. This research proposes and substantiates a novel hypothesis: design can significantly influence capital allocation in institutional investment contexts. Through an institutional case study, expert interviews, workshops with master’s level design students, and systems-informed reflective practice, this research identifies asset classes as an important and changeable lens through which institutions engage with the future. It explores how these asset classes shape choices in the capital allocation process and identifies eight design capabilities particularly suited for institutional investment contexts. In doing so, it introduces a framework termed Capital Design. This framework illustrates how design can influence institutional capital allocation by integrating these design capabilities with investment tools through informational lenses within a choice/knowledge map. As a result, Capital Design offers an innovative approach for investors and investees to reorient toward emergent asset categories that directly meet the most urgent societal needs.