Research & Insights

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.

Remarks by our Executive Director, Delilah Rothenberg, during a meeting organized by the G20 in Brazil focused on the fight against hunger, poverty and inequality: "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."

This report serves as a summary of the Advancing Financing Initiatives for Shared Ownership of Enterprise convening 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.

Rising inequalities both between and within countries are fuDiversified 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. It sheds light on how to catalyze action at the policy and regulatory levels through existing sustainable finance initiatives.

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 through the exploration on how to strengthen alignment between investment and stewardship teams, and how to integrate external data on externalities into investment analysis.

It can be difficult for companies to have positive impacts and avoid unintended negative consequences (risks) if those companies aren’t backed by supportive investment structures... Because capital structures, fund structures, and asset allocation strategies are so critical to responsible and regenerative investment, a meaningful change in practice will require stronger alignment between capital stewardship teams and investment “deal” teams at asset owners and allocators. We are encouraged by recent efforts by regulatory bodies globally, including in the US and Europe, to reduce greenwashing. But truly understanding greenwashing and what distinguishes a holistic approach to responsible investing from one only focused on portfolio companies requires a deeper evaluation of markets, the economy, and their impacts on the world.

Karen Kahn and Marjorie Kelly spoke with Delilah Rothenberg, co-founder and executive director of the Predistribution Initiative, about the ways in which the private equity model drives inequality. Delilah Rothenberg has been interested in Pete Stavros’ model for sharing equity with all workers for some time. A few years ago, when she first heard about it, she looked at KKR’s 2017 sustainability report, where KKR talked about several portfolio companies where they had distributed shares more broadly. When she did the math, she found workers were receiving equity grants averaging about $25,000 while KKR’s general partners were taking home more than $100 million each in annual compensation.

As the world emerges from the pandemic with high inflation, vast inequalities, and rising oil and gas prices, it seems timely to ask how much we can expect of investors and businesses in our current system. While individual investors — people and firms — are taking on climate change and other systemic risks like inequality and biodiversity loss, they are doing so in a system where the odds are stacked against them. The very nature of the system resists change in ways that non-financial disclosure and policy and regulation alone cannot solve. Financial decisions are based on financial analysis, and the current system lacks a mode for accounting for externalities in the calculation of returns. In our current economic system, companies and asset managers are expected to maximize their financial return to investors.