We specifically focus on four workstreams that are designed to address the interconnected root causes of systemic and systematic risks.
We are working with investors and their stakeholders to develop a shared understanding of how investors —often unintentionally — contribute to negative impacts and how to improve their practices. This includes:
- Serving on the Interim Secretariat of the Taskforce on Inequality-related Financial Disclosures (TIFD), which is being developed as a systemic risk management framework complete with thresholds, targets, and metrics for companies and investors to measure and manage both their impacts on inequality, as well as inequality’s impacts on company and investor performance.
- A partnership with Impact Frontiers (an initiative of the Impact Management Project) to develop metrics to gauge how investors are contributing to systemic risks.
We are also collaborating with other partners, including NYU Stern’s Center for Sustainable Business, on their research initiative, “Value Drivers in Private Equity: A Shift Towards Positive Stakeholder Impacts.”
Making shifts at large institutions requires a tone from the top and structural policy adjustments. Therefore, investment governance is a key starting point for tangible change. Adjustments to the investment belief statement, investment policy statement, and other policies and procedures which flow from these standards can support an institution in fully aligning with the principles of Universal Ownership and systematic stewardship.
We are actively working with industry leaders — including The Investment Integration Project (TIIP), Jon Lukomnik of Sinclair Capital, and Keith Johnson of Global Investor Collaboration Services — to develop investment governance guidance that enables institutional investors to adjust their practices.
Efforts are being made to quantify externalities by leading academic institutions, field building organizations, and service providers. However, more needs to be done to integrate this information into investment analysis and decision making in order to manage systemic and systematic risks.
In partnership with the Responsible Asset Allocator Initiative (RAAI) and Paul O’Brien (a Trustee of Wyoming’s retirement system and former Deputy Chief Investment Officer of the Abu Dhabi Investment Authority), PDI is collaborating with leaders in the institutional asset owner and allocator community to explore uptake of these new approaches.
A key finding of PDI’s flagship ESG 2.0 working paper is that institutional investors are consolidating their investments with the largest fund managers and companies, which squeezes out opportunities for emerging fund managers and small and medium-sized enterprises (SMEs) while also contributing to procyclical market behavior that can lead to asset bubbles and credit crises.
Investors have responded well to our proposals that more regenerative investment structures are needed and that they need to deconsolidate capital flows, but seek more examples of “what good looks like” and how to access these opportunities.
Our efforts aim to not only document what models currently exist, but how they can scale with integrity to meet the allocation needs of institutional investors, as well as what practical opportunities exist for institutional investors to adjust their allocation practices.
Public Policy Engagement
The Predistribution Initiative periodically engages in public policy and regulatory reform. Please see below for examples of our comment letters to various public consultation periods:
- Amendments to Form PF to Require Current Reporting and Amend Reporting Requirements for Large Private Equity Advisers and Large Liquidity Fund Advisers (read the original SEC proposal)
- Reopening of Comment Period for Pay Versus Performance (read the original SEC proposal)
- Climate Change Disclosures (read the SEC call for public input)