Research and Insights

A recent webinar co-hosted by the manager of the UK railways pension schemes, Railpen, and the organization, the Predistribution Initiative (PDI), themed "Perspectives on Workforce Directors – Opportunities & Challenges", explored the potential and hurdles of integrating workforce directors into corporate boards. The event featured notable speakers, including Caroline Escott from Railpen, Velika Talyarkhan from EOS at Federated Hermes Limited, David Foster who is a former board member at Kaiser Aluminum and Evraz North America, and Brandon Rees from the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), with moderation by Tom Powdrill on behalf of Railpen and Delilah Rothenberg from PDI. 

This paper, in which the Predistribution Initiative contributed, considers the different mechanisms through which socio-economic inequality can affect financial markets and the private sector, as well as the incentives for participants interested in reducing socio-economic inequality. It examines existing disclosure approaches in relation to company and investor effects on society and the environment, and in relation to the management of ESG-related risks in the protection of financial value. It also considers wage ratios as one of the most widely used inequality-related disclosure metrics in developed markets, and we analyze South Africa’s BEE policies.

As part of the Sorenson Global Impact Leaders, Delilah contributed to the "What’s Next in Impact?" report where thought leaders and impact practitioners share suggestions on how we can work together to achieve a sustainable, resilient, and thriving future. Delilah highlighted that “Accounting and financial analysis practices will evolve to consider externalities. New approaches to internalizing externalities in financial statements in corporate accounting are already emerging. As these methodologies mature, investors will be able to integrate them into their f inancial analysis, which will then influence capital pricing and allocation. Financial benchmarking practices, which are currently used to evaluate performance, will need to evolve with these trends to allow for consideration of the true value of natural, human, and social capital. As markets begin to recognize the value of this previously underpriced capital, the risk return profiles of previously unattractive investments will become more attractive".

Over the last year, there has been a growing cadence of convenings, panels and publications focused on scaling investment and financing strategies to build wealth and influence for workers and communities in impactful ways across North America. These strategies include a focus on shared ownership of enterprise, shared ownership of real assets, and individual ownership of assets. The October 16 Building an Ownership Lens Investing Movement virtual convening resulted in an inspiring gathering of minds across North America that echoed a shared commitment to scaling strategies and capital to build wealth and influence for individuals and communities. This report provides key takeaways from the session.

The new Taskforce on Inequality and Social-related Financial Disclosures (TISFD) aims to address the systemic risk posed by inequality by developing a global framework for managing social risks and opportunities. In this write-up, Pensions for Purpose explore TISFD's vision to foster stronger, more equitable societies, by integrating existing standards to provide a cohesive disclosure process for companies and investors, focusing on the economic and financial implications of inequality.

The time is now for moving from a financialized economy to one that supports real people everywhere, across both rural and urban communities, developed and developing countries, businesses of all sizes, and which produces products and services that sustain healthy, thriving societies. This vision is attracting broad support from conservatives and liberals alike. We have a long way to go, but are confident that we can achieve this vision together. While there are a wide number of contributing factors that got us here – including numerous forms of discrimination – in this blog, we explore three broad overlooked contributors to inequality and how we might address them: (1) the structure of compensation; (2) market concentration; and (3) underpinning the first two issues, interpretations of risk, return, and value.

The Predistribution Initiative (PDI) partnered with Oxfam America and Omidyar Network on a new discussion paper, "Getting Ahead of the Curve on Dynamic Materiality: How U.S. investors can foster more inclusive capitalism." This paper is designed to support U.S. investors in understanding how sharing more wealth and influence with workers and communities can correct imbalances and support early identification and mitigation of emerging risks. Specific tools and opportunities are highlighted that can foster more sustainable and responsible value creation, and ultimately a more inclusive and thriving economy. Examples include: grievance mechanisms, freedom of association and collective bargaining, human rights due diligence and FPIC, shared ownership models, and workers on boards.

This piece is based on remarks by PDI's Delilah Rothenberg during a meeting organized by the G20 focused on “the fight against hunger, poverty and inequality.” The meeting was facilitated by Brazil’s Ministry of Finance as part of Brazil’s role as host of this year’s G20 meetings. "Relying on redistribution to continuously address socio-economic inequality can result in the disadvantaged being dependent on handouts from the rich. Instead of production resulting in vast imbalances in wealth and power which require continuous remedy, workers and communities could have similar opportunities as executives and investors to share in financial gains and influence over investments."

On November 2nd, 2023, 81 individuals came together to participate in the Advancing Financing Initiatives for Shared Ownership of Enterprise convening. This report serves as a summary of the day and includes key takeaways which can be used to inform next steps. Since the objectives for the day were robust and are likely to only be achieved through further activity and collaboration over time, program participants identified opportunities to continue the dialogue following November 2nd. Following context setting and a review of the program, this report includes a summary of participant suggestions and proposed next steps

Rising inequalities both between and within countries are fueling polarization and protectionist pressures, hampering social cohesion and political stability. Leading economists are calling for society to combat inequality, demanding better measurement and ambitious targets. Businesses and investors have significant roles to play. The private sector, through various practices, can contribute to inequalities, alleviate inequalities, and also face risks posed by inequalities... Diversified investors who sit at the top of the “capital markets value chain” – like pension funds, endowments, and sovereign wealth funds – have an incentive to reduce socio-economic inequality. Their portfolios are so broad across geographies, industries, and asset classes that their financial success is dependent on the health of the economy.

The paper -- "From Fragmentation to Integration: Embedding Social Issues in Sustainable Finance" -- aims to generate momentum within the financial system to tackle inequality and improve a common understanding of the social impacts of a market-based economy. Drawing insights from the climate agenda, it sheds light on how to catalyze action at the policy and regulatory levels through existing sustainable finance initiatives. Based on the collective expertise of several institutions and a global consultation, the paper provides key recommendations for governments, regulators, and financial institutions to: support research on the systemic risk of socio-economic inequality for financial stability; adopt and improve social disclosure standards and risk management tools; and rethink the macroeconomic determinants of sustainable finance.

Forum for the Future, a non-profit that works in partnership with business, government, and civil society to accelerate the shift toward a sustainable future, published an exciting new report that builds on much of PDI’s work reimagining the way the financial system addresses systemic risks. The authors of “Finance: an agent of change?” specifically call out the potential of system-level investing and highlight how “The Predistribution Initiative and Responsible Asset Allocator Initiative are together convening investors to explore how to strengthen alignment between investment and stewardship teams, and how to integrate external data on externalities into investment analysis and decision making, at a systems level.”