Institutional Shift | December 18, 2020

A roadmap for building a financial system resilient to future disruptions

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Dec. 18 – The Covid-19 pandemic has revealed that financial systems are one disruption away from disaster. Financial markets’ commitment to shareholder primacy and short-termism has contributed to eroding labor standards, diminished workers’ livelihoods, and economic and racial inequality.

Addressing systemic social risk: A roadmap for financial system action, released last week by The Investment Integration Project and Moving the Market, calls on investors and market shapers to embrace long-term horizons and begin to treat social risks as material.

“It is time for big ideas and major structural change focused on building and preserving the long-term health of our systems,” says Kilian Moote of Humanity United, a partner on the project.

  • Systems-level. Investors can address value-extracting behaviors, for example, by pressing corporations to pay their share of taxes. They can invest at a system level, by leveraging each asset classes to address systemic challenges in different ways (venture capital investments, for example, can target funds that invest to solve for clean energy or create good jobs. Public equity investors can pressure companies to operate in the public’s long-term interest).
  • Shaping markets. Policymakers and regulators should limit the use of corporate profits to enrich executives and shareholders at the expense of workers and other stakeholders. They should do more to protect worker rights to collectively bargain and form unions. And they should mandate corporate social risk disclosures, according to the roadmap. “Systems are complex and dynamic,” TIIP’s Bill Burckart said on an August Agents of Impact conference call. “Solutions have to be equally complex.”
  • Join the conversation. TIIP’s Monique Aiken, an ImpactAlpha contributing editor, joins David Wood of Initiative For Responsible Investment to discuss the roadmap on January 12. Zoom in.