Research & Insights

Do environmental, social, and governance (ESG) and impact investing practices in their current forms provide investors with sufficient tools to play a meaningful role in “Building Back Better” following the COVID-19 crisis? Many investors, including those who identify as “Universal Owners,” often seek to manage ESG risk and opportunity through corporate governance interventions. However, certain investment structures can also have negative impacts relating to ESG goals and management of systematic risk. Furthermore, they can undermine the positive impacts sought by investors at the portfolio company-level.

PDI advisor, Kim Leslie Shafer, has spent significant time and effort engaging with various investor, legal, academic, and civil society networks to aggregate and synthesize perspectives. As a true leader, she is generously sharing the knowledge she has developed to encourage widespread responses to the SEC.

While data suggests that the ESG and impact investing markets are growing rapidly, concerns abound about how financial services firms are measuring and managing their ESG and impact investing performance writes Delilah Rothenberg.

According to a new report about the private equity (PE) industry, the majority of PE firms are not doing enough to take systematic risks seriously in both their business operations and investment portfolios.

The private equity industry is growing in importance. In recent years, companies have remained private longer. Furthermore, limited partner (LP) allocations to private markets continue to increase as underfunded pensions and endowments search for yield in a low interest rate environment, and in pursuit of diversification as the universe of public companies shrinks.

“The COVID-19 recession has prompted states to offer vast amounts of financial support to firms and households. When combined with steps that central banks have taken in response to the financial crisis of 2008, the bailout is so large that it has ushered in what Sebastian Mallaby, writing in the July/August 2020 issue of Foreign Affairs, calls “the age of magic money.” The combination of negative interest rates and low inflation, Mallaby writes, has created a world in which “don’t tax, just spend” makes for a surprisingly sustainable fiscal policy. The thrust of that description is accurate.”

Denise Hearn argues that investors’ interests may not always be aligned with those of society, and questions assumptions around win-win dynamics […] “Stakeholder capitalism proponents must be willing to sit with these inherent tensions and contradictions. They must also be willing to challenge corporate power, not simply create endless new product mixes that do not fundamentally question the second-order effects of the asset management industry in further concentrating wealth and power. The Predistribution Initiative is one organisation working with investors to explore these issues and work toward solutions.”

Responsible investors need to take into account how fund management and investment structures may be exacerbating wealth and income disparities, as well as systemic market risk writes Raphaele Chappe and Delilah Rothenberg.

Responsible investors need to take into account how fund management and investment structures may be exacerbating wealth and income disparities, as well as systemic market risk writes Raphaele Chappe and Delilah Rothenberg.