CFANY – Sustainable Investing Group Meeting with The Predistribution Initiative
The founders of The Predistribution Initiative spoke to the members of the CFA Society of New York for a discussion of the role of institutional investors in society.
The term, “pre-distribution,” was first coined by Yale political scientist, Jacob Hacker. Instead of only redistribution, which calls for addressing economic inequalities via taxes, benefits, and philanthropy after the fact, pre-distribution is the idea that society should try to prevent such inequalities from occurring in the first place. In our interpretation, we are seeking to narrow compensation ratios between actors in the “capital markets supply chain.” This process includes research on how to more adequately compensate actors for the value that they create and the risk that they take.
PDI discussed their recent working paper ESG 2.0: Measuring & Managing Investor Risks Beyond the Enterprise-level that analyzes existing approaches to asset allocation – from private equity and private credit to high yield bonds and leveraged loans – and finds that many of these high-risk investment strategies, executed at an institutional scale, are making the financial system and real economy more fragile by contributing to corporate and asset manager consolidation, increased global debt levels, higher rates of inequality, and market instability, among other negative impacts.