ImpactAlpha: Sustainability is at risk when asset managers are the judge, jury and executors of the ESG agenda
“The Predistribution Initiative’s Delilah Rothenberg, Raphaele Chappe, and Amanda Feldman argue that certain capital structures and investment behaviors do not lend themselves to positive impact outcomes and can often have negative impacts, especially on vulnerable communities and stakeholders.
In their search for yield, investors have increased their leverage, resulting in riskier investments and a more fragile economy, the authors write in “ESG 2.0: Measuring and Managing Investor Risks Beyond the Enterprise-Level.”
“Institutional allocation toward higher risk asset classes is systemically contributing to increased global debt burdens, corporate and fund manager consolidation, and risk across capital structures, resulting in fragility for companies, the real economy, and financial markets,” the paper says. “The resulting risks are therefore shared not only by investors, but also governments, workers, and communities alike.”