A group of organisations dedicated to improving economic inequality throughout global markets is preparing to launch a new reporting framework that will push for more expansive financial disclosures from private investors.
The framework will provide institutional asset owners, government policymakers and other stakeholders with guidelines for collecting data about how the investment structures and business practices of capital managers impact economic growth and mobility, according to Delilah Rothenberg, executive director of the Predistribution Initiative.
The US-based non-profit organisation, which seeks to create a more equitable global financial industry, is leading efforts to form the Task Force on Inequality-related Financial Disclosures alongside Rights CoLab, a civic engagement group focused on human rights and sustainability. TIFD is also receiving support from the Argentine Network for International Cooperation and the Southern Centre for Inequality Studies at the University of Witwatersrand in South Africa.
Research from Predistribution Initiative and its partners suggests that capital managers are contributing to economic inequality, intentionally or not. Strategies including excessive leverage, asset stripping and aggressive tax structures are shortchanging workers, local governments and regional economies.
The impact this has on operating environments presents a pervasive, long-term risk to institutional portfolios similar to climate change, Rothenberg told New Private Markets in an interview. Inspired by the success of the Task Force on Climate-related Financial Disclosures, a widely recognised reporting framework, Rothenberg said the goal for TIFD is to provide reporting guidelines that go beyond material risk to be a tool for “systemic risk management.”
“[TIFD] believes that inequality is a systemic risk for the economy, and therefore markets, investors and portfolios,” she said. “If asset owners and allocators want strong portfolios, there needs to be some form of support infrastructure in place to ensure orderly markets.”
Last February, TIFD’s organisers published a draft proposal for the new disclosure framework and, over the summer, received a $200,000 “seed grant” from the Tipping Point Fund, a philanthropic organisation supporting impact investing markets.
The next part of TIFD’s development is to open solicitation in the coming weeks for interested investors and stakeholders to participate in building the framework’s structure and governance, Rothenberg said. In 2023, working groups will form to identify existing disclosure frameworks and develop “comprehensive guidance” that avoids overlaps.
Then the draft disclosures will be made available for public comment, with the goal to officially launch TIFD by around 2025.