Thought Leadership & Research

TIFD is premised on the concept that inequality is a systemic risk that negatively impacts the economy, markets and corporate profitability, and that the corporate sector has contributed to such inequality. According to the International Monetary Fund, socio-economic inequality is on the rise globally. Almost 90% of advanced economies around the world have seen an increase in income inequality over the past 30 years. Further, the financial impact of the Covid-19 pandemic was magnified by the lack of economic resilience for large segments of the global population, with inequality serving as a contributing factor to the intensity of the downturn.

When the European Union embraced the concept of double materiality in the Corporate Sustainability Reporting Directive, mandating that investors consider risks corporations externalize onto people, the business and human rights movement notched a significant win. Now the notion of double materiality is also taking shape in a different guise beyond Europe: in rising investor concerns around systemic risks, including inequality.

The Task Force on Inequality-related Financial Disclosures (TIFD) is a global initiative designed to address the systemic risk of inequality by providing information on inequality risks to investors’ portfolios, businesses, workers and communities. To develop this knowledge base, a process is underway of building a coalition to collectively create a risk management framework that harmonizes existing disclosure frameworks, refines existing metrics of materiality, complete with targets and thresholds.

The advent of Task Force on Inequality-related Financial Disclosures (TIFD) raises important conceptual questions about inequality, and the role of the private sector in the reproduction of economic inequality. On 6 December 2021, the Southern Centre for Inequality Studies (SCIS) and Intellidex hosted a South African focus group to share the TIFD concept and facilitate discussion among market analysts with experience in economics, finance, auditing, and investing and gender and labor market experts focused on inequality in the Global South. This feedback is shaping the 2022 research agenda for TIFD, which SCIS and Intellidex are leading.

[…] First, inequality disclosure and other corporate transparency frameworks will need to be harmonized. Harmonization would make it easier to compare data and processes across companies, thereby facilitating benchmarking and providing useful ESG data on inequality to investors and other stakeholders. Efforts to harmonize inequality disclosure are already underway. For example, the Taskforce on Inequality-related Financial Disclosures (TIFD) was formed by the Predistribution Initiative and Rights CoLab in 2021.[2] It will be important for initiatives such as the TIFD to build on the success of existing ESG disclosure frameworks and standard setting organizations

Inequality – in a social, political and economic sense – is influenced by a number of factors. The causes of inequality are systemic and rooted in wider social and economic structures. These give rise to unfair differences in the extent to which people with different characteristics (e.g. gender or race) or statuses (e.g. low paid or living in disadvantaged areas) are able to enjoy their human rights and freedoms. Tackling inequality means addressing not only the impacts of these differences but also the factors that cause them. Ultimately, that is what leads to transformative impact.

The World Benchmarking Alliance's (WBA) inaugural Social Transformation Baseline Assessment looks at what 1,000 of the world’s most influential companies are doing to contribute to the social transformation of our global system – a transformation we desperately need in order to eradicate poverty in all its forms, end discrimination and exclusion, and reduce the inequalities and vulnerabilities that leave people behind. WBA's assessment scores these companies on 18 core social indicators and presents five key findings that show the gap companies need to close in order to demonstrate they are contributing to just and equitable societies. It also features good practice examples that demonstrate what is possible when companies respect human rights, provide and promote decent work and act ethically.

This article reviews the current state of corporate disclosure on inequality and assesses its utility to companies as well as investors and other stakeholders. Drawing on recent evolutions in climate change disclosure, the authors suggest a path forward for companies and investors to drive improved disclosure from companies on the risks presented by socio-economic inequality to their business.

The Investment Integration Project’s (TIIP) report, Systemic Stewardship: Investing to Address Income Inequality, supports investors in confronting and managing the systemic risk of income inequality. The report builds on a previous income inequality toolkit and offers a six-step process for investors to tackle systemic issues such as income inequality.

Time to deliver: mobilising private capital at scale for people and planet provides the summary conclusions of the Impact Taskforce (ITF). It presents the case for urgent action, provides actionable recommendations and sets out a clear pathway as to how private capital can be mobilised at scale in support of key global sustainable development targets. Workstream A of the report focuses on accelerating impact transparency, harmonisation and integrity of all capital flows in order to achieve the Sustainable Development Goals (SDGs) and a just transition.

(By Joanne Bauer, Rights CoLab) — Inspired by the successful uptake of the Task Force on Climate-related Financial Disclosures (TCFD), a wide range of stakeholders from the Global North and Global South are collaborating to launch a Task Force on Inequality-related Financial Disclosures (TIFD). Conceived as an explicit systemic risk management framework, TIFD aims to reduce inequality created by the private sector by improving transparency on corporate and investor contributions to inequality, while at the same time illuminating how inequality can present risks to companies and investors.

(By Imraan Valodia, Southern Centre for Inequality Studies) — Plans are afoot to make amendments to South Africa’s Companies Act that would require companies to report on wage differentials. This is the gap between executive pay and the lowest paid workers in the company. The announcement was made by South Africa’s Minister of Trade and Industry Ebrahim Patel. This is a significant development. And in my view, long overdue.

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. In this paper, the Predistribution Initiative (PDI) explores how the growth of institutional investors (asset owners and allocators) and certain asset allocation strategies can be in conflict with ESG objectives.

[…] It is time for a Taskforce on Inequality-related Financial Disclosures. The negative financial effects of the pandemic have been greatly magnified by the lack of economic resilience of a large segment of the population. Now is a rare opportunity for diverse stakeholders to come together in acknowledgment that economic inequality is a strong contributing factor to the intensity of the downturn, and to develop a mechanism that can address it straight on.