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If frameworks already exist to assess how social risks affect investments, why create a new one? TIFD will harmonize existing frameworks and incorporate novel elements that are not found in any other framework.<\/p>\n
First<\/strong>, TIFD is conceived as a systemic risk framework that can shed light on the risks of inequality to investors\u2019 and corporate returns (outside-in risks), as well as the risks of private sector activity to inequality, including those that affect the most marginalized and vulnerable workers and communities (inside-out risks).<\/p>\n Second<\/strong>, TIFD will assess the entire value chain, including not only corporate activity, but also investor-level activity, including how investments are structured and the distribution of returns and value to all stakeholders.<\/p>\n Third<\/strong>, TIFD will also provide context-based targets as guidance to investors and companies. Without\u00a0 guidance on \u201cwhat good looks like,\u201d disclosing organizations typically set targets that are convenient for them, relative to historical performance, and\/or relative to peers. This is beginning to change, however. In the area of\u00a0 climate change: companies are starting to set Science-Based Targets<\/a>, which recognize that if the world is going to stay below 1.5 degrees Celsius for each company, there is a natural limit to its allowable emissions relative to its activity. For social issues, an example of a science-based target\u00a0 is the allowable pay ratios between the average worker in a company and the executives. TIFD\u2019s targets, which are being developed by our global partners, will deepen the framework\u2019s effectiveness.<\/p>\n Finally<\/strong>, TIFD incorporates a human rights-based approach, which crosscuts all efforts to measure inequality in its multiple and various forms. This implies two important points:<\/p>\n TIFD is designed to enable all stakeholders affected by inequality to be included in the process of co-creating the framework. This entails inviting not only investors and corporations, but also vulnerable groups and communities, and civil society organizations working on these issues, both in the Global South and North. This is an important shift in how disclosure frameworks are developed and, for us in the Global South, the most important one.<\/p>\n<\/li>\n The many different layers of inequality \u2013 vertical inequality (e.g., income or wealth) and horizontal inequality (e.g., gender or racial) \u2013 have diverse manifestations in the global South and North. For instance, in the global South, inequality may manifest more in the informal sector, as noted below.<\/p>\n<\/li>\n<\/ul>\n Unlike climate change, there is no universal way to define and measure inequality. TIFD is being designed to recognize such regional nuances.<\/p>\n In conversations about TIFD within Latin America, stakeholders confirm the importance of broad-based participation and the consideration of context. For example, most of the people and organizations we consulted expressed interest in the inclusion of considerations of the informal sector within TIFD. According to the International Labour Organization<\/a>, during the first quarter of 2021, in Latin America \u201c\u2026around 76 per cent of independent workers, and just over a third of wage earners, were informall.\u201d To substantially contribute to reducing inequality globally, TIFD will have to include this sector within its framework. This is a departure from most existing social and environmental disclosure frameworks, which were created primarily by Global North actors for Global North-based multinational companies, and tend to focus narrowly on the formal sector.<\/p>\n While some civil society organizations may have a healthy dose of skepticism about a \u201cfinancial\u201d disclosure framework to address their goals and concerns, others see an advantage in working with the private sector. Working together might help them move forward with specific agendas that not even the State or the non-profit sector are considering. For example, many companies have shown openness and willingness to tackle the issue of discrimination against people of indigenous descent in Argentina. This is a debate that Argentina\u2019s society is just starting to have, and the private sector could be a strong ally in enhancing the discussion. Additionally, once developed the TIFD framework can be used by civil society to hold the private sector accountable.<\/p>\n Participants also emphasized that, to be successful, TIFD must guarantee that the information disclosed to investors will be public and accessible to all. Only in this way can it be used not just as a tool for investors, but also as a civil society tool for monitoring and holding to account business actions to address their impacts on inequality as well as investors’ use of the disclosures.<\/p>\n\n
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