Institutional Investor: How institutional investors encourage corporations’ bad behavior

A new paper argues that the investment strategies of pensions and other large investors contribute to systemic risks […] “The growing scale of institutions and the large amounts of money they need to deploy into high-risk investments is leading to consolidation among asset managers, higher global debt levels, short-term corporate behavior, and market instability, according to a paper published Wednesday by the Predistribution Initiative, a group that focuses on governance, investment practices, and the systemic risks of investments, among other things.

In the paper, group founder Delilah Rothenberg and her co-authors lay out a case that institutions’ investment strategies are in conflict with environmental, social, and governance goals to which they are increasingly committing. In an interview with Institutional Investor, Rothenberg said critics of structural flaws in investing and markets need to look at how capital flows through the system to pinpoint the source of problems, including the anti-competitive behavior of corporations.”