It is time for a Taskforce on Inequality-related Financial Disclosures

The current crisis reminds us that inequality is a systemic financial risk just like climate change

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Without question the world’s most vulnerable workers have been hardest hit by the COVID-19 pandemic. At the same time, inequality has also worsened the economic and health effects of the pandemic. The crisis has pulled back the curtain on the fragility of our “just in time” economy built for efficiency over sustainability. Workers are increasingly reliant on precarious jobs, often marked by poverty wages, zero-hour contracts, and a lack of benefits, resulting in fewer opportunities for families and communities to build wealth. These weaknesses in the economy have been laid bare by the crisis, resulting in rent and debts going unpaid, steep investor losses, and the need for government intervention. 

Investors are among those waking up to the reality that unless something is done, the downward economic spiral will continue. To stem the losses and reverse these trends, it will be critical for investors, the business community, and policymakers to work together with civil society. One approach, inspired by the Taskforce on Climate-related Financial Disclosures (TCFD), is a Taskforce on Inequality-related Financial Disclosure (TIFD).   

Now is a rare opportunity for diverse stakeholders to come together in an acknowledgement 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.

Take the situation in the US. Pervasive economic inequality means that much of the population cannot afford to self-quarantine, social distance and cover costs. In a 2018 study, the Federal Reserve found that approximately 40% of Americans would struggle to come up with $400 for an unexpected emergency.

In another study from that year, data showed that cities that had required companies to pay workers while ill witnessed a 40% drop in infection rates the following year. How many fewer infections might there now be if hotel and food industry service workers, 45% of whom entered into the crisis with no paid sick leave, had enough financial security and protections to stay home if they felt ill? What might the economy look like if families had enough savings to pay for a few months of rent or medical bills, or repay debt?

The crisis also highlights the relationship between economic inequality and investment structures. For instance, civil society and policymakers alike have been warning about excess corporate debt, share buybacks, dividends, and exorbitant executive compensation packages, which deteriorate companies’ financial positions, squeeze payrolls and benefits, and can put workers at risk in the case of bankruptcy. What would be the reduction in taxpayer bailout funding had corporate balance sheets been healthier? What jobs and benefits might not have been jeopardised? 

These are systemic risks which investors cannot avoid by simply diversifying their portfolios. They must be prepared to identify and address them before it’s too late.

Recognising this problem in relation to climate change, in 2015, the Financial Stability Board, overseen by the G20, formed the TCFD, which brought together governments, investors, corporations and subject matter experts to publish guidelines for reporting climate risk to the financial system. Published in 2017, the guidelines include questions such as: who in the organisation is responsible for assessing and acting on climate risks, the processes they use, their strategies for mitigating risks, and the targets they have set to accomplish these strategies. Risks are communicated from the individual company through to the financial system, because financial institutions are also asked to report about the risks across their entire investment portfolios. 

The TCFD’s work on systemic risk has the enthusiastic sponsorship of more than 1,000 corporations. These numbers will continue to grow: the world’s largest asset manager, BlackRock, is requiring the companies in its investment portfolios – virtually every public corporation in the world – to produce a TCFD report in the near future.

Like climate change, economic inequality is a widely recognised systemic risk among economists and investors. Rising economic inequality is a danger to economic growth, and thus financial returns, and this relationship has been recognised by Federal Reserve Chair, Jerome Powell,  and the credit rating agencies Standard and Poor’s and Moody’s, among many others. Even the CEO of J.P. Morgan, the largest American bank, and the head of the world’s largest hedge fund have publicly acknowledged the societal threat of economic inequality. Yet there has been no comparable effort like TCFD for economic inequality.

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 an acknowledgement 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.

The Predistribution Initiative and Rights CoLab are building momentum for a TIFD initiative. We invite you to join us in this effort. For more information, please visit

Delilah Rothenberg is the Founder & Executive Director of the Predistribution Initiative

Paul Rissman is Co-founder of Rights CoLab and former Executive Vice President of AllianceBernstein

Joanne Bauer is Co-founder of Rights CoLab and Adjunct Professor at Columbia University