Manulife’s chief sustainability officer for private markets, Brian Kernohan, has issued a rallying cry to the investment industry to do more to alleviate global social inequality.
Inequality is a “great source of risk and missed opportunity” for the investment industry, said Kernohan. “It limits productivity and innovation; it constrains consumer spending and growth; it creates political instability; and also acts a threat multiplier making other problems worse,” he said.
Kernohan is a biologist by training and now heads up sustainability for the financial giant’s $74 billion AUM private markets group, which comprises timber, agriculture, real estate, infrastructure, private equity and credit asset strategies.
Speaking at the Impact Investor Summit: North America in early November, Kernohnan likened the type of action needed to address inequality to the steps currently being taken to tackle climate change and, more recently, nature degradation. Kernohan referenced the DasGupta Review, a UK government commissioned report on the economics of biodiversity, and how the report was a “seminal work” for him and other biologists in bringing “everything that I was taught, and preached, on the importance of nature to society into the mainstream in the language of economics”. A similar “awakening” is required for inequality, he said.
Inequality requires a disclosure regime of some sort similar to the TCFD, which has become the recognised standard for climate risk disclosure, and the more recently designed TNFD, which is set to play a similar role for nature. Kernohan pointed delegates to the nascent Task Force on Inequality-related Financial Disclosures (TIFD), which “will provide guidance, thresholds, targets and metrics for companies and investors to measure and manage their impacts on inequality” and vice versa, according to its website.
The TCFD has become the “gold standard” for climate, Kernohan said, and he predicts that the TNFD will achieve the same status for nature and “much faster” than did the TCFD. “So when it comes to social equity, we are anxious for a TIFD – whether it is the one that’s out there today or something similar – we encourage its development and its advancement.”
Kernohan also advocated a “3D” approach – define, diagnose, disclose – for institutions to get started on social issues, and gave the example of work Manulife had undertaken at a firm level in terms of human rights issues. The firm accessed the UN Global Compact Business Human Rights Accelerator programme to help define salient human rights risks and then participated in a human rights deep dive coordinated by the World Business Council for Sustainable Development, which allowed it to benchmark its human rights disclosures against peer organisations.
“I can tell you that these three steps are not being followed with enough ambition, for my view, relevant to rising inequality,” he said.
Protecting basic human rights is the starting point for the investment industry to contribute to a more socially equitable world. “We have to start by protecting these basic human rights. From there we can begin to unlock the potential of sustainable investing to tackle rising inequality by investing in social equity in communities,” he said. “We can’t continue to fuel this rise in inequality with the investing decisions that we make.”
“I don’t want to look back after 10 years and regret that we didn’t make the world a more socially equitable place.”