IEN's Investment Governance Initiative supports endowment fiduciaries in developing the tools needed to provide the leadership, stewardship, and governance to ensure their portfolios and institutions are positioned to have their investment practices reflect their mission while meeting the endowment’s risk and return objectives. This call will expand on the initiative's work around systems level investing with perspectives from The Investment Integration Project (TIIP).
The Investment Integration Project (TIIP) recently released a report entitled (Re)Calibrating Feedback Loops: Guidance for Asset Owners and Institutional Investors Assessing the Influence of System-level Investing, which provides a framework for investors to assess their impacts and influence on systemic risks, through case studies of climate change, income inequality and racial inequity. Co-authored by William Burckart, Melissa Eng, Jessica Ziegler and Monique Aiken, the reports brings together concepts from several of TIIP’s preceding measurement reports as well as a range of industry thought leadership to re-introduce pathways for system-level investing.
The report builds on a series of interrelated projects, each of which aims to develop dimensions of the shared infrastructure and principles that are pivotal to shifting the financial sector from uncoordinated innovation to building the marketplace for system-level investing. The first of these was TIIP's Industry Needs Project in 2021, which helped determine whether and how much the financial industry knows about system-level investing and how to encourage and support widespread adoption of this approach. One of the primary findings was that an industry-wide embrace of system-level investing will depend, in large part, on ensuring that investors have access to frameworks for assessing their impact on systemic issues. This includes guidance on good governance, effective due diligence, meaningful reporting, and the data to support these processes.
(Re) Calibrating Feedback Loops seeks to provide a practical framework with tools to help investors ensure that their policies, programs, and practices are aligned with their overarching system-level goals—do all actions work in the direction of a healthier and more resilient system? Furthermore, the impact of an investor’s actions will be amplified when they can gain momentum through collaborative efforts of the financial system. Aligning the actions of many investors with varying resources and capabilities to achieve system-level goals is what will recalibrate feedback loops to support stable systems.
The report was informed by a working group of industry leaders who were instrumental in ensuring the practical applicability and usability of the guidance. The report also includes a detailed roadmap of the process by which investors can assess system-level investing progress, with examples focused on the systemic issues of climate change, income inequality, and racial inequity. The guidance developed through this research and report seeks to answer the following questions:
- What is the relationship between the standards and goals set by investors at a portfolio level and the overarching indicators of progress at a system level?
- In what ways and to what extent does the management of portfolio-level risks and rewards translate into system-level progress?
- In what ways and to what extent do system-level developments affect portfolio-level performance?
The findings from this project reinforce the need for more robust data to be leveraged in the evaluation of system-level progress. Applying the framework presented in this report will help the financial industry better fulfill the promise of system-level investing as a force for calibrating—or recalibrating as the case may be—the feedback loops between investors, and overarching social, financial and environmental systems. In doing so, investors will help to ensure that their investments intentionally support the health and resilience of crucial systems, reduce systemic risks, and promote opportunities for all
To learn more or join this group, please contact Georges Dyer at [email protected]