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E10 - Delilah Rothenberg, Executive Director of the Predistribution Initiative (PDI)
53 Plays9 days ago
In this episode of Women Changing Finance, Delilah Rothenberg, explains how investment structures can reduce inequality and build long-term resilience. Delilah shares why traditional finance tools often ignore the real risks — from income inequality to environmental collapse — and how a new mindset called systemic stewardship is helping investors think beyond short-term returns. We explore what fiduciary duty actually means when investors’ decisions affect entire sectors, and how new structures like employee and community ownership can transform who benefits from capital. From pushing for stronger governance in pension funds to helping investors measure their impact on inequality, Delilah is working hard to make finance more fair, inclusive, and sustainable. If you ever wondered if finance can really be transformed to serve everyone, tune in and get your answers from one of the experts leading the change.
Please review the episode, share your feedback and subscribe to the podcast!
You can also:
- Visit our website: womenchangingfinance.org
- Read Delilah's full bio
- Follow Delilah on LinkedIn
To go further here are some of the references mentioned during the episode:
- Predistribution Initiative https://www.predistributioninitiative.org/
- The Limits to Growth
- Nell Minow, Robert Monks, James Hawley, Jon Lukomnik cited as experts on the topic of universal ownership
- The Investment Integration Project TIIP https://tiiproject.com/
- Principles for Responsible Investment (PRI) https://www.unpri.org/
- The Generation Foundation – Legal Framework for Impact https://www.genfound.org/our-thinking-foundation/collaborative-publications/a-legal-framework-for-impact/
- “ESG Is Dead - Long Live ESG: Guidance for US Pension Fiduciaries”, article written by Keith Johnson, Rick Funston, and Tiffany Reeves
- Global Reporting Initiative (GRI) https://www.globalreporting.org/
- The Economic Policy Institute (EPI) https://www.epi.org/
- Open Society Foundations https://www.opensocietyfoundations.org/
- Taskforce on Inequality and Social-related Financial Disclosures (TISFD) https://www.tisfd.org/
- PGGM https://www.pggm.nl/en/
- University Pension Plan (UPP) https://myupp.ca/
- Moving Beyond Modern Portfolio Theory: Investing That Matters, by Jon Lukomnik, James P. Hawley
- 21st Century Investing, by William Burckart and Steve Lydenberg
- Wealth Supremacy, by Marjorie Kelly
- The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper with Denise Hearn
- Earth for All – A Survival Guide for Humanity
Recommended
Transcript
Introduction to Podcast and Guest
00:00:05
Speaker
Hi, welcome to the podcast Women Changing Finance, where you will discover amazing women from all around the world who are making finance become a force for good.
00:00:21
Speaker
Welcome to the podcast Women Changing Finance. I'm k Krisztina Tora and I'm welcoming today Delilah Rothenberg, co-founder and executive director of the pre-distribution initiative, PDI in short, a non-partisan multi-stakeholder non-profit designed to co-create improved investment structures and practices that that share more wealth and influence with workers and communities.
00:00:46
Speaker
I met Delilah a few years ago, thanks to a common friend in the impact investment space, and my admiration for her leadership and her work has kept growing ever since. She is one of the rare people who thinks at system level with an ability to engage investors on the way of transformation.
00:01:04
Speaker
I'm thrilled to have her on the show today.
Understanding System-Level Investing
00:01:06
Speaker
So before we go further, Delilah, and get a better understanding of your journey and your work, it would be really great for the audience to have an explanation of what is system level investing? What is this system level perspective that you are bringing into the work?
00:01:22
Speaker
Can you explain what it is and why it matters? Yeah, thank you so much, Krisztina. And really, it's an honor to be here with you. have so much respect and admiration for the work that you do. And so I'm really looking forward to ours discussion and I'm grateful to be here.
00:01:37
Speaker
to answer your question, system level ambassadors. or systemic stewardship is the idea that there are investors who are very diversified across the economy and markets.
00:01:50
Speaker
They're exposed to nearly every industry, every geography, and every asset class, as we call it. There are different sort of parts of a capital structure of a company that investors are exposed to.
00:02:01
Speaker
And so when we think about our portfolios as pensioners or holders of accounts, or you think about pension funds and insurance companies and sovereign wealth funds, endowments, high net worth individuals, family offices, we often have portfolios that are very diversified.
00:02:21
Speaker
And what that means is that we're exposed to system level risks and opportunities related to broad global issues like climate change and inequality and biodiversity loss.
00:02:33
Speaker
And the reason why is because a diversified portfolio is sort of a reflection of what the market looks like. And the market is really dependent on the health of the economy and the health of the economy is really dependent on human and natural systems.
00:02:49
Speaker
And so if we are starting to see widespread dis-ease or instability in our social and natural systems, that can really have systemic effects through the economy, through markets, and therefore to diversified portfolios.
00:03:06
Speaker
It's interesting because previously, prior to investors starting to think this way, and it's really just this way of thinking is really just starting to come about. But what that means is we're moving away from ah kind of mindset amongst investors that they should maximize the return of each individual investment in their portfolio, regardless of negative impacts.
00:03:27
Speaker
Or when we think about a negative impact in economic terms, that's an externality. So previously, and to certain extent still today, a lot of investors think about maximizing the return from each individual investment, regardless of these negative externalities or negative impacts.
00:03:43
Speaker
But what we're seeing is a recognition of systemic stewardship means that these kinds of investors are starting to think about the risks that these negative externalities pose. And so they want to reduce those negative externalities because your long-term return depends on the stability of markets and the economy and your portfolios.
00:04:03
Speaker
And so if you really want to have a solid long-term return, you don't want to just do whatever you need to do to maximize profit regardless of negative impact. And so that's the concept of systemic stewardship.
Systemic Stewardship and Fiduciary Duty
00:04:13
Speaker
And you'll also, it's folks learn more about the space, they'll come across the term universal ownership or universal owners.
00:04:20
Speaker
And that's the term that is used to describe these kinds of investors that I mentioned with diversified portfolios. Thanks. That's very clear. You're mentioning that this is new.
00:04:31
Speaker
So only a few investors are looking it in this way. So can you explain more about how some of the investors have gotten to understand that there is more to be looked at? These risks on social and environmental degradations have actually a very big impact on their portfolios and potentially the long-term portfolios.
00:04:56
Speaker
benefits in their portfolios. Yeah, there are so many different things that have happened over the past few decades that I think have brought us to this really important inflection point where we're starting to see this change. that I don't think I can do it full justice, but I will say that you know rising awareness around the limits to growth, to refer to that specific report,
00:05:18
Speaker
And concerns about climate change and more recently biodiversity loss and inequality have really helped investors see that they need to manage these risks.
00:05:31
Speaker
And there are some leaders in the investment space who started to write about universal ownership. I believe as early as in the 90s, including, might be wrong about about that, but I think it it was in the 90s, including Nelmino and Bob Monk and Jim Hawley and more recently John Lecomnick. And the Investment Integration Project is a new initiative that started around this, the Shareholder Commons. There are a number of organizations who are peers of ours who are also working to socialize this concept with more investors.
00:06:04
Speaker
And there are a number of challenges with actually implementing practices around universal ownership and systemic stewardship, because the way people have interpreted fiduciary duty, which is not necessarily the right way, but the way it's been interpreted has been, unfortunately, to maximize financial return regardless of external. And that's sort of on the governance side of these institutions. and then on the financial analysis side, the tools that have been developed to evaluate financial performance of companies and portfolios have really been designed for sort of short-term maximization of profits rather than long-term, more holistic.
00:06:46
Speaker
So what's interesting right now, as investors are starting to think about systemic stewardship and think of themselves as universal owners, I think what we're finding is that they see a need to reflect on how they change their own internal investment governance and their interpretations of fiduciary duty do not interpret fiduciary duty as maximizing financial return in the short term, but really think about it more holistically. And then also...
00:07:12
Speaker
I think that these investors are really recognizing that they need better financial analysis tools and incentivization tools for their investment teams to consider how negative externalities and even positive externalities might affect product. portfolios. And we don't really have those tools developed at this stage in time.
00:07:33
Speaker
And so therere we've been in discussions at the pre-distribution initiative with a number of partners to try to produce these kinds of tools to support investors and actually effectively carrying out their new interpretations of fiduciary duty that more holistically and consider people in nature.
00:07:50
Speaker
Thanks. So you mentioned a very important term that we hear around, but if you could double click on it, you mentioned fiduciary duty and almost what you were saying is it has to start there.
00:08:02
Speaker
How do we interpret it? And also another thing, and we'll we will come back to that is the tools that people use to analyze what's happening in their portfolios and how that data can feed back into the interpretation of fiduciary duty.
00:08:18
Speaker
So can you explain for people what fiduciary duty is and why is it so important and how actually it can be changed or how the interpretation of it can be changed?
00:08:30
Speaker
Sure. Well, I think it's important to recognize that fiduciary duty varies depending on jurisdiction. There are legal interpretations of fiduciary duty.
00:08:43
Speaker
However, the interpretation that many and the market sort of seem to take away is that they should be maximizing financial return in the short term That's not their fiduciary duty. They have a duty of loyalty, prudence, and care to oversee.
00:08:59
Speaker
When I say they, and I'm talking about, for instance, a pension fund, right? So when thinking about fiduciary duty, I think first, it's just important to recognize that there are different legal interpretations depending on what jurisdiction you're in in the world.
00:09:12
Speaker
The Principles for Responsible Investment, I believe, are the support of Generation Foundation actually put out a really great document a little while back called the Legal Framework for Impact.
00:09:24
Speaker
And that really shows that fiduciary duty can be interpreted in ways that consider long-term systemic issues like inequality classification. climate change, and biodiversity loss.
00:09:37
Speaker
And its most basic form, fiduciary duty, is the duty of loyalty, prudence, and care to carefully oversee, for instance, a pensioner's portfolio, retiree's portfolio, or a saver's portfolio.
00:09:51
Speaker
And that can be interpreted in different ways. But really, if you think about a pension fund or an insurance company or a sovereign wealth fund,
00:10:04
Speaker
to the future. And so they have an intergenerational fiduciary duty, which is really important to keep in mind. That means that they need to think very long term. They can't just focus on their pensioners, if you're a pension fund today, at the expense of pensioners in the future. And this is something that Keith Johnson and ah colleague of his, Tiffany, really leaves I believe is her last name, have really worked on. And they do a really beautiful job of explaining and how it's against a pension fund's fiduciary duty to prioritize only generations today at the expense of future generations. And I think that's probably one of the most important things to keep in mind as we think about the concept of
00:10:45
Speaker
fiduciary duty, particularly for pension funds. There's also a friend and colleague of mine, a co-founder of GRI, Bob Massey, also raised the point that lots of times the meaning of fiduciary duty for a pension fund type of investor, which has more of a trust-based model, legal concept of the trust,
00:11:04
Speaker
is different than what the fiduciary duty might be of, for instance, a nonprofit endowment. And so there's more flexibility in those kinds of endowment models. Or if you're investor investing on your behalf, of course, like you get to interpret your own fiduciary duty of your family office.
00:11:22
Speaker
So it's important to consider the spectrum of different kinds of investors as well and what their fiduciary duties might be. Thank you. That's super clear.
Pre-distribution Initiative Mission and Activities
00:11:31
Speaker
And I would like to move us on to your work.
00:11:36
Speaker
So it would be great if you could explain what the pre-distribution initiative is, how it works, what's the theory of change, and what are the different kinds of activities that you deliver?
00:11:49
Speaker
Sure. so I and a few colleagues started the pre-distribution initiative in We started brainstorming the idea in late 2018. I was working in private equity and my colleagues who I started this with were working in finance as well, finance the legal profession.
00:12:05
Speaker
And I understand that the audience who might be listening might not be that familiar with finance, might not be that familiar with concepts around sort of sustainable investing and ESG and impact investing. So I'll describe this a bit. But part of my job, early in my career, I managed financial models and pitch decks and worked done raising capital and worked in public equities on the sell side.
00:12:26
Speaker
As my career progressed, I started to work on yeah ESG, environmental, social, and governance. and impact investing work And what that meant was that I was really working with portfolio companies to make sure that their operations and their products and services work did not have environmental or social risks that could jeopardize the investment.
00:12:47
Speaker
And that's really what yeah ESG sort of means, right? It's about looking at environmental and social risks and opportunities to the extent that they can maximize the financial return from that particular investment.
00:12:58
Speaker
And impact investing, interestingly, is sort of like the space where if you are somebody who has wealth to invest, you sort of get to pick and choose what issues you care most about and channel your capital toward those issues.
00:13:12
Speaker
Neither, interestingly, are necessarily looking at positive and negative externalities of investments in a more holistic way and and in a systemic way. So that came to my attention I was working on ESG and impact investing with our portfolio companies and with our investors ah And I also started to see that there were just certain issues that occurred in the investment structuring itself or in the way investors govern themselves that weren't captured by the tools we had to evaluate yeah ESG and impact investing. The tools we had to evaluate ESG and impact investing were really about evaluating the portfolio companies and, again, their operations and their products and services.
00:13:57
Speaker
The tools were not designed to apply to the investor and evaluate the investor and think about are certain executives of very large fund managers compensated so excessively that it might be exacerbating socioeconomic inequality. right We talk about the pay ratio between a corporate CEO and the median worker in the portfolio company. And in the United States, people are concerned about that ratio being around 350 times.
00:14:22
Speaker
But you look at the pay ratios between some of the private but equity fund executives and a median worker in the portfolio company, and that is even higher, sometimes around 1,000 times. So that piece of the of what there is to evaluate in the overall economy and the overall system was missing.
00:14:38
Speaker
And I became very interested in that topic in particular. And that catalyzed me thinking that I should leave the world of finance and explore, well, how are we structuring these investments? Who's taking what risk in an investment and getting what return? And in particular, when you think about workers in a portfolio company or an investee of an investor,
00:14:57
Speaker
The workers take a lot of risk and create a lot of value themselves, and yet they're not compensated commensurately. CEOs and investors are valued so much more, and CEOs are actually more frequently compensated in equity to align their incentives with the investors, whereas workers often just are paid a wage or a salary.
00:15:17
Speaker
And that's resulted in dynamics, for instance, in the United States, where top CEOs, if you look at the data from an organization called the Economic Policy Institute, EPI, you'll see that worker pay since between 1978 and 2022 only rose around 15%, whereas top CEO pay rose over 1,000%.
00:15:32
Speaker
only rose around fifteen percent whereas top ceo pay rose over a thousand percent And so you see that really big wealth divide. And if you think about what that means in developing countries as well, and the wealth that or the incomes that workers in a developing country might be getting relative to the wealth building for a foreign CEO or foreign investors, that's magnified even more, right?
00:15:57
Speaker
And so when we think about trickle down economics, and whether it's working or not, I think people in the developed world are starting to question it. And it's really important to think about in the context of development finance as well, who's taking what risk and getting what return.
00:16:10
Speaker
I did a lot of real assets investing as well in infrastructure and agribusiness. And when you do a land-based investment, when you are doing agribusiness, it takes up a significant amount of land, or you're developing a solar plant or a wind farm, the communities are giving up access to land where they they might be using that land for ecosystem services or for cultural heritage purposes or want to preserve it for future generations. And that's worth something and the community should be compensated accordingly. And so I became very interested in this idea to compensate workers and communities so with equity or something comparable to equity as well, and for them to have a voice in the shaping of these investments. And so
00:16:52
Speaker
That's my very long winded way of describing the start to KDI. And then, you know, I very much believe in the the motto from the disability rights movement, nothing about us without us. And so we went on this journey.
00:17:05
Speaker
Luckily, I was able to fund the work, you know, these interests, the work that I started to do with the grant from Open Society Foundations. became an inequality fellow of theirs. and started to engage with stakeholders about what other issues they were concerned about and what their thoughts were on this particular issue. And and that led to the whole suite of what we do at the free distribution initiative.
00:17:25
Speaker
Well, it's great because i was going to ask you about your journey and your career. So I think you started answering that question as well. For the audience, it would be making it quite concrete if you could describe what does an average day look like?
00:17:40
Speaker
What do you do at the pre-distribution initiative? What are the different initiatives or types of activities that you have? Yeah, so we're focused on working with investors and their stakeholders to reform the investment governance piece to align with the concepts around intergenerational fiduciary duty and systemic stewardship.
00:18:01
Speaker
We also have programming to work with investors on the tools that they need to think about incentivizing their investment teams differently and to account for externalities and investments moving forward and in the financial benchmarks that they use to evaluate success.
00:18:18
Speaker
And then we also socialize new and emerging, more potentially regenerative investment structures that investors can invest into, like worker ownership, community ownership opportunities. There are alternatives to investing in startups other than venture capital.
00:18:35
Speaker
as well, revenue-based financing, which can allow for capital to get to businesses that don't have that sort of hockey stick style growth or blitz scaling potential that have more stable, moderate growth potential. And And so we socialize those ideas with investors, permanent capital vehicles, as opposed to you know when you invest in private equity.
00:18:59
Speaker
Often you're investing in a private equity fund that is a 10-year fund. And so the investment period has to be rather short for investments in that 10 years. And sometimes if you're doing investments in less liquid markets, like emerging markets and developing economies, or if you're working with a newer type of market solution or innovation, might take longer for those businesses is to grow.
00:19:22
Speaker
And that certainly happened in the case with infrastructure investments and agribusiness investments that I was working on. And so sort of elongating the term of the fund and the investment and really showing investors how this fits within their portfolio so that they can still rid of returns thinking about risk in a systemic way and return in a systemic way as well. It's really changing the equation so that investors can cover their obligations and needs. So for instance, pension funds can still pay their pensioners, insurance companies can still pay their claims and so forth.
00:20:00
Speaker
And so those are some of the areas of programming. I'll also say ah did miss one area, which is around measurement. And I know we've talked a lot about the task force on inequality and social related financial disclosures, which is we need new tools to evaluate information. investment performance, to better understand inequality and its relationship with both companies and investors, how companies and investors might affect inequality, how inequality and also social risk and opportunities affect inequality. affect investors and companies through feedback loops.
00:20:35
Speaker
So we are part of an initiative to launch task force on inequality and social-related financial disclosures to better understand how investors themselves can reform and companies can reform to address inequality and social risks, but also pursue opportunities.
00:20:51
Speaker
Thanks. That's been so rich. ah Well, thank you also so for mentioning the task force because I was going to ask you about it. If you would allow me, i would like to come back to some of the programs that you're working on.
00:21:03
Speaker
There's much more behind the what you just described. I would like to start with what you call the regenerative structures of investment. You mentioned some of them and it would be really interesting. I actually have this curiosity to hear more about that. First of all, because I see that being hopefully the future of investment, but also kind of the different underlying assets in which it can be invested. So you mentioned community ownership.
00:21:31
Speaker
I was very curious to hear how is it different or similar to, for example, some of the structures that we have in Europe, like cooperatives. And how is it developing perhaps in the US at this moment, or how is it innovating on existing models?
00:21:47
Speaker
Yeah, there are a number of different ways to structure these kinds of investment. There are certainly cooperatives, which for the most part seem to have a more democratic approach where the members of the cooperative, whether it's workers a company that's structured as cooperative, or if it's producers who come together to form a cooperative,
00:22:10
Speaker
It's very democratic. And there historically have been more limited opportunities for investors to invest into these structures, certainly from an equity perspective, little different from a debt financing perspective.
00:22:22
Speaker
But there are other structures where investors can invest equity into ah company or they can provide private debt to a company to convert it to full worker employees. There are examples, you mentioned community ownership, there are examples of community ownership, certainly in Canada and elsewhere where indigenous communities are starting to own some equity and projects alongside investors.
00:22:45
Speaker
And so there are lots of different ways that these can be structured. And there are different asset classes too, right? You can have a public company that also shares equity with workers in the company.
00:22:59
Speaker
You can have A private company where oh where there's private debt provided by an investor so that the workers can essentially buy the company and then own it.
00:23:11
Speaker
There are private equity models where workers can own equity alongside the private equity investor. So there are a lot of different structures. i don't know how much detail I should go into about each structure, but it can be done across asset classes.
00:23:25
Speaker
Great. No, I guess that's what I wanted to get out of it is the fact that the innovation or yeah the structuring in a way that is more regenerative and reduces potentially the inequalities between the investors and the workers it can be done at very different levels. And it's not one side fits all.
00:23:44
Speaker
The second question that i I wanted to double click on is you mentioned stewardship a number of times since we began this conversation. And I think that that's also a very powerful way for investors to act, to create change, and also maybe linking it to the governance. That's another very important aspect.
Investor Practices and Governance Changes
00:24:04
Speaker
of the work that you do is to kind of highlight what are the good governance practices that can be transformative for positive results. And yeah, if you can describe a bit more this perspective of how investors are changing their practices around stewardship and governance.
00:24:22
Speaker
Sure. Well, investors, I guess, know, we've been using investors as a broad term during this session. And perhaps it's helpful for your audience to think about investors or to be aware that there's some more nuance to the investor classification, right? So you have asset owners and allocators who are the pension funds, insurance companies, sovereign wealth funds, endowments,
00:24:46
Speaker
high net worth individuals, family offices. And then you have the asset managers who raise money from the asset owners and allocators. And sometimes asset managers also raise money from each other. That's another layer ah complexity.
00:25:00
Speaker
we don't need to go there. But ultimately, it's the asset owners and allocators who are at the top of the capital markets value chain, so to speak, right? there They have the capital, they can invest into companies directly, they can get invest in um companies or sovereigns, and municipalities through asset managers or directly.
00:25:20
Speaker
Sorry, I did have that in the first part too. But that's really where we're focusing right now are the asset owners and allocators. And they often show, i mean, in reflect their interpretations of fiditiciary duty and there must objectives in investment belief and policy statements.
00:25:40
Speaker
And so one thing that we're starting to see is that investment belief and policy statements in a few cases are starting to reference system level issues like climate change and inequality and biodiversity at loss. And that's an important step in the right direction for these investors to be able to acknowledge this as these issues as part of what they consider in their investment objectives.
00:26:01
Speaker
However, as I mentioned before, then what, right? So now how are you gonna incentivize your investment teams to consider these issues. And one other thing that might be helpful for your audience to consider as they think about this picture of these institutions and how they're trying to go about things.
00:26:20
Speaker
So the institutions have a board of trustees. The board of trustees really works on setting the investment belief and policy statements, delivers the investment of
00:26:32
Speaker
and the chief investment officer is responsible for sort of delivering that to the investment teams and saying, you know, these are investment objectives. And the trustees also really shape what the investment incentives are for the CIO.
00:26:49
Speaker
teams by saying, you know, we expect you to meet or exceed a certain financial benchmark, right? That is based on historical understanding of market performance, of expectations of peers.
00:27:01
Speaker
And there's some sort of tracking error and volatility constraints that the investment teams are expected to stay within. But really, they're incentivized to meet or exceed that benchmark. And if we think about how financial markets have performed over the past decades and how most institutions act,
00:27:19
Speaker
they're not accounting for externalities. So you're basically incentivizing your investment team to continue to invest in ways that don't account for externalities and might be quite extractive. And yet in parallel, the investment teams that I'm talking about often have peers within the same institution that are the stewardship teams or sometimes the ESG people.
00:27:38
Speaker
And so they they're like, okay, well, we care about inequality and climate change and biodiversity loss. So we're gonna engage with our asset managers and companies to focus on these issues so you've got the storeship teams of the institution engaging with its stewardship counterparts at the asset manager and companies.
00:27:56
Speaker
And you've got the investment teams at the asset owner allocator engaging with the investment teams of the asset managers and companies. And they're sending mixed messages, right? Because the investment teams are incentivized to still try to achieve these extractive returns.
00:28:11
Speaker
And the stewardship teams might not be incentivized that way. And so it can be very frustrating for asset managers and companies to hear these two different messages from the same institution. And I can give you a really concrete example of not a particular asset manager. or company that shareded an anecdotal story necessarily but i was at a conference once and the chief investment officer of a large pension fund was speaking about macroeconomic conditions on a macro panel. And she said, oh, well, we like ah the market conditions in Europe right now because wage pressure is lower, meaning wages aren't rising as much as in the U.S. And then you had somebody from the trustee level of that pension fund, I'm trying to anonymize things, speak later that day with somebody from a labor union in the United States saying, how important it was to raise wages in the united States.
00:29:01
Speaker
And you can just see that there's a lack of alignment in institutions. And it's not because they're bad people or it's not that they're ignorant or stupid. There's a really smart people, but it's a really bureaucratic system. And we sometimes, you know, just because we're working in in a system that we have inherited over time and that's evolved over time, sometimes like we're just so focused on our job and what we're told we're supposed to do that we miss these blind spots.
00:29:25
Speaker
I think it's ah it's a beautiful illustration. Thank you so much. I was also going to ask you if you were seeing perhaps any, i don't know, pioneers or leaders in this space who in a way the good students that you're working with today. Yeah, we certainly are. I mean, I've been really inspired by some of the conversations that we've been having with participants in roundtables we've been convening with our partners on changing financial benchmarks.
00:29:55
Speaker
So we're partnered with a responsible asset allocator initiative on this project to reform financial benchmarks and account for externalities. And my colleagues on that project are Scott Kelb, who's a former chief investment officer of KIC, the Korean Sovereign Wealth Fund, and paul O'Brien, who's a former deputy CIO of the Abu Dhabi Investment Authority, as a current trustee of Wyoming's retirement system.
00:30:17
Speaker
They both have many other accolades, but that's for short. And Scott ah leads the Responsible Asset Allocator Initiative, and we've convened now six roundtables about reforming financial benchmark.
00:30:28
Speaker
And we've just been so impressed with some of the work that PGGM is doing um in particular around this issue. And we've identified a number of other emerging solutions with different allocators as well and are excited about the potential to bring allocators together share what they're working on and to workshop you know the challenges, the opportunities, and some pathways forward that we can really promote systemic reform in these practices.
00:30:58
Speaker
I don't know if I'm at liberty to talk about the other allocators because the roundtables are Chatham House rule, but PGGM has actually spoken and written publicly about their work. So that feels like a comfortable one to mention.
00:31:11
Speaker
I also know that your organization of ours, the Investment Integration Project, has done work with UPP, a Canadian pension fund. And but i when I've spoken with UPP, you can really tell that they're thinking um the forefront of these issues. And when I talk to some of UPP's peers, they are very appreciative, actually, to see a leader in the space that they can learn from learn.
00:31:35
Speaker
and and build from. So those are a couple of examples. Thanks. That's great. And you mentioned two pension funds as being a kind of showing the way forward and and being leaders.
00:31:47
Speaker
I was wondering about insurance industry and insurance players, because, and you've been very clearly describing the landscape and segmenting the types of investors.
00:31:58
Speaker
Let's say that pension funds and insurance companies are potentially the ones that will have a greater impact if they change their practices because they're sitting on on the top of the value chain, if we can say that.
00:32:13
Speaker
Do you feel that the insurance companies are moving as fast in this direction are they harder to get on board? Yeah, it's a great question.
00:32:23
Speaker
i know people who work at some of the large insurance companies, and I'm really impressed with their work. I have not had the opportunity to really sit down and spend time with insurance companies on how they're thinking about their fiduciary duty and risks out into the future. I think insurance companies are ah very interesting part of the market to focus on because they Their business model is focusing on risk, right?
00:32:48
Speaker
And I live in Florida right now, at least. And we are seeing insurance companies start to recognize their exposure to climate risk. And I do think that from everything I'm observing on the margins, because I'm not actively deeply engaged, But from everything I'm observing on the margins, it does seem like insurance companies are thinking certainly about climate risk, to a certain extent biodiversity risk, probably not so much risks around inequality at this point, but that's not acceptable. exclusive to the insurance industry. That's unfortunately an issue with much of the market. So, yeah.
00:33:27
Speaker
Thanks. And I would say let's perhaps, well, I could go on and on about many different other questions because all of this is really fascinating.
Delilah's Career Journey and Challenges
00:33:39
Speaker
But perhaps moving on to kind of more personal questions about your journey. You started to describe your journey and and how you got to PGI. Do you want to share other moments in your life where you had aha moments or how you got from one step to another in your career?
00:33:58
Speaker
Sure. Yeah. Maybe I'll, there's so many, but I'll focus on two in particular. One was the whole reason why I went into finance in the first place. And the other is sort of explains why we focus on certain issues at PDI. So they're two very different points in time in my life.
00:34:15
Speaker
The first about why I became interested in finance. I mean, I didn't study finance in school. I triple majored in history, politics, and African studies and thought that I had all my bases covered to work on sort of socioeconomic, political issues around neocolonialism and decolonization in Africa.
00:34:36
Speaker
And I guess I thought I was going to go into the nonprofit space or, I don't know, work with the UN or i didn't really understand at the time what the World Bank did, but maybe the World Bank. And then I happened to study with Bill Easter. who actually left the World Bank at this time and was one of the first, well, early, we um probably not the first. I mean, lots of these ideas are just repeated throughout history, but Billy Sterling, who was one of the early proponents, you know, in our time of trade versus aid and the idea that aid recreates cycles of dependency. And then I i did volunteer in Tanzania for three months. I think it was going into my senior year
00:35:12
Speaker
ah school And um maybe it was coming out. I don't know. It was one of the last summers of school. And I was doing i was volunteering with an aid organization that I actually saw ah felt was doing more harm than good and in recreating those cycles of dependency. And sort of it was that volunteerism type thing also where it was pretty bad anyway.
00:35:33
Speaker
and my three months in tanzania i saw ah number of small businesses that had the potential to grow if they had access to capital and skills training. And so I thought at the time that it would be much more interesting than working in the aid industry to focus on attracting that capital and skills training to them. And and that was around the time when people were becoming aware about sweatshops in China and India.
00:35:56
Speaker
And I thought, well, instead of big multinational companies coming into sub-Saharan Africa and creating all the jobs and developing the economy and sort of social... um fabric in a way that's not celebrating or lifting up or empowering local people, why not just try to attract capital to local people?
00:36:15
Speaker
And that skills training so that they can build the companies in the future that they want to see in the way they want to see it. And so that's why I went into finance and I didn't know anything about it. I had dreadlocks at the time and I pulled them back in a ponytail and I tried to look professional and I went to the business school career fair. and and Again, I didn't go to the business school, but I crashed the business school career fair. and I got a job in finance. And I spent the first four years of my career working in public equities on the sell side, which is really focused primarily on the US. s But I got to do some emerging market work to Brazil, for instance.
00:36:50
Speaker
But I realized pretty quickly that I wanted to be in private equity and or venture capital at the time. And so I was able to make the switch during the financial crisis. I was actually at Bear Stearns on the trading floor um during the financial crisis. And I was like, well, you know this is really sad for my peers who are dependent on Bear Stearns stock, but it was the right time for me to go anyway. I'd already been thinking about it. And so I made that switch.
00:37:17
Speaker
And then interestingly, you know you get into private equity and it's like... private equity and infrastructure, and it's not SME financing, and you realize there's this whole missing middle gap with attracting capital to SMEs. And you start to look at the financial models, and you see that the investor return expectations they leave very little value locally.
00:37:33
Speaker
And so that informs some of the thinking behind the pre-distribution initiative as well. The other thing that happened, I mentioned that when I started, so we're now we're going back into the future or more recent times.
00:37:46
Speaker
And so the other thing that happened when i started the pre-distribution initiative was I'd engage with civil society organizations and talk about this fund manager compensation issue. and they'd be like, well, that's great that you're focused on that issue. But we are really concerned that private equity firms are overburdening their portfolio companies with too much debt in the private equity firm's effort to generate a return.
00:38:07
Speaker
and they And so that like it's not in every leveraged buyout, as they call it, transaction. But in some leveraged buyout transactions, in many, unfortunately, throughout the time that private equity has really existed, private equity firms have used significant debt that then becomes a burden for their portfolio company.
00:38:25
Speaker
to service and then the portfolio company can't afford to offer quality jobs and quality and affordable goods and services. And so, you know, that's this idea of financialization that's getting these portfolio companies of the resources that they need to serve their stakeholders and so significant returns going to the private equity firms to the point where the private equity firm might pay itself in dividends so much that it pushes the company to go under, right? Eventually. And so private equity firm gets to walk away with benefit, but the workers lose their jobs.
00:38:56
Speaker
Talk about nursing homes or hospitals, patients or residents are negatively affected. And i it's really awful. other issues have have come to our radar in terms of tax structuring at the investor level, the idea that investors are sort of um engaging in significant M&A and grouping together companies into one entity that results corporate consolidation, workers losing their bargaining power, price increases, ah loss of quality services.
00:39:24
Speaker
These are all issues that we're focused on that really, I mean, had been blind spots before and the um yeah ESG and impact world's Thanks. Well, I'm really glad I asked this question.
00:39:37
Speaker
It's a great journey. Thank you. And back to the past, back to the future, it's an opportunity as well to for you. you know i'm I'm giving you this platform to reflect on your achievements so far. What are the things that you most proud of?
00:39:50
Speaker
And perhaps also a reflection on something or some things that you would like to still achieve, ambitions that you would like to see come to life.
00:40:02
Speaker
Yeah, I'm um really assured that more of our peer organizations are starting to look at investor level governance and investment structures. And i think that our work has been really well received by our peer organizations, as well as by the market.
00:40:22
Speaker
The approach that we're taking is, as I mentioned before, not to, we never name and shame investors. We are not an activist organization. we also aren't just an organization by the market for the market. We are really carefully working on multi-stakeholder policies engagement and co-creation with market actors and with workers and communities to come up with solutions together. And I think that's been a really fine line to walk so that we have aren't threatening the industry and we don't receive the sellouts to workers and communities either. And so I think we've done an okay job of that so far.
00:41:01
Speaker
And the reception from the investor community has been really positive. And you see actually that a lot of investors are just, they're not, investors aren't institutions, right? Like they are, but they aren't. They're made up of people.
00:41:13
Speaker
And most people, almost everybody I've met in finance and my, I worked in official finance for 15 years before starting the pre-distribution initiative. And now it's been 20 years in this space. And almost every single person I've met, I think, is a genuinely good person and wants to do the right thing.
00:41:32
Speaker
They have just been trained to do their job in a certain way. They've been trained to think of success in a certain way and they're open to learning and particularly open to learning if you're not attacking them, right? Because then it's like scary and you clam up and you think like, well, you know, nothing i do is going to be right.
00:41:49
Speaker
And so it's been a real pleasure to work with people in this way and to see people's faces light up when they realize something or their minds start to change. And that's been incredibly rewarding.
00:42:00
Speaker
I think that our next challenge is going to be actually getting out of the finance echo chamber and connecting with everyday people who don't work in finance to help them understand how the success of the individual and your financial portfolio is dependent on the health of human and natural systems, right? And to help people understand how they can get involved with finance, how they can build wealth through finance by owning some equity in a company that they work for or and infrastructure project that's been built in their community. that they can have a voice to and they can benefit ah alongside the executives and investors. And I think that if we are able to bring more people into this space, there will be more trust, right? There will be less polarizations. there'll be less like, oh, you know, you wealthy white collar executives and and investors who are like shoving your values down my throat when using my retirement account for your values, right? Like we need to build trust with one another.
00:43:07
Speaker
And from everything I've learned in my life, focusing on inequality, and I've been interested in inequality since I was very young. i think that when you help people build wealth and their voice, their tendency to scapegoat fades away, right?
00:43:24
Speaker
Often scapegoating ah arises in situations where there are significant inequality of wealth and power. And it's sort of like a fight over resources and and a fight over power. And it's like, oh, well, those people are influencing things too much and we don't like them, right?
00:43:41
Speaker
And so if we can we can just foster more balance, I think those kinds of fears that foster the polarization and the scapegoating go away. It's beautiful. And I completely agree. Giving people or giving back people voice and agency.
00:43:54
Speaker
I really like this term of agency as well. I have stopped using the word empowerment and start using more the word agency because it's this ability to use your every resources that you have to really change things for yourself and for others.
00:44:10
Speaker
Absolutely agree. Thank you. i have a question that I must ask because i I'm asking it every guest. How does it feel to be a woman doing this job?
00:44:21
Speaker
Yeah, it's an interesting question. Well, I think part of my challenge is that I'm not only a woman, but I look younger than I am. I'm one of those few women out there who wants more gray hair.
00:44:32
Speaker
Welcome to my world. yeah Right. Yeah, we should definitely ah exchange notes over a drink sometime. You know, it is hard because i think People do underestimate you.
00:44:44
Speaker
And, you know, you want to be accepted and liked. And so that sometimes leads you to play the role that you expect. You think other people expect you to play, right? Like, and it was really hard when I was younger too, because I had these ideas that were different than my bosses. And so I would try to gently raise them. And then I'd be like, and basically, it would end up in a situation where it's like, oh, Delilah doesn't know what she's talking about, because she's new to this space. And then later, you know, the whole thing would manifest. And I'd be like, wait, I was right. Like, I should have spoken up, and I should have been stronger about this. And so I think that, you know, there's, I've learned a lot through all of that.
00:45:23
Speaker
And I still think it's difficult. It's difficult in terms of raising funding for our nonprofit. We have some amazing donors. I think that the universe of donors could be larger.
00:45:36
Speaker
and it's, I think it's hard, you know, when you are speaking on, maybe not a panel, but when you're in a group of people, right. And you first open your mouth and then like, as people get to know you, that's somebody said that to me once they're like, Oh, you know, you look so young. And then like, you'll your mouth and it's like you realize how much you actually know so it just takes some time I think to build that kind of trust and respect with people and I have certainly also not made the kind of money I think in my career that I should have that's a big one that came up a few times so that's what it is at this point well I can relate to many of that any advice or kind of guidance that you would provide to the audience on this topic
00:46:18
Speaker
Well, I was at a conference a couple of weeks ago and there was a young woman who was on the panel and she basically said something very similar to what I just said, which is why i said what I just said, because I heard her say it. And I was like, that's a really important point to repeat.
00:46:32
Speaker
And I think it is important to encourage young women, young people everywhere. But and know this podcast is specifically you focused on women. And I think it's important to to be bold and to follow your conviction and to speak up.
00:46:47
Speaker
And I think if I had done that at some points earlier in my career, I wouldn't have actually seen some of the negative impacts that manifested in our investment. And so it's not just a matter of being true to yourself, but really standing up for other people who are impacted as well.
00:47:03
Speaker
So that's really what comes to mind. Yeah, thank you.
Personal Balance and Inspirations
00:47:07
Speaker
And another aspect of you know this work is we tend to work a lot. What has helped you be your best self or what is helping you be your best self?
00:47:20
Speaker
It's a really timely question for me because lately I've been working way more than I should. and my partner reminds me that I have other things to do in life like exercise and spend time with him and be a person and so my partner is very grounding and i'm very grateful to ah him you know in the past when I was starting the pre-distribution initiative in particular i spent a lot of time on meditation and i guess you could call it spirituality and I really like Buddhist teachings and they really resonate.
00:47:53
Speaker
And I was doing a lot of yoga, not really like the sort of mainstream kind of yoga, i guess. don't know if that's the way to put it. But I mean, I think that was really important. And I'd like to find more time in my life for that. And outdoors, just like being in nature, just remembering like we're we're part of nature.
00:48:13
Speaker
It's all very grounding. Yeah, absolutely. Well, we are approaching the end of this conversation. So I have three quick questions for you. One, what is inspiring you or who is inspiring you?
00:48:27
Speaker
Okay, this is going to be a really unexpected answer, but I'm really inspired by conservative populists who care about socioeconomic inequality. Okay.
00:48:39
Speaker
I'm learning a lot. And I think that there are stronger potential bridges and openings than we think. And I would just encourage people on the left or consider themselves liberal versus conservative to hear the messages from conservative populist spaces with empathy and look for where these messages are coming from and try not to judge each other so much in our beliefs. So, yeah.
00:49:08
Speaker
Very unexpected, but very wise, especially from someone sitting in the US. So actually, I'll reflect on that one. How can I do that best? It's something that has been an issue, a rising issue in Europe.
00:49:23
Speaker
The second question, what's keeping you optimistic? Honestly, I think it's going back to the Buddhist teachings, the idea of equanimity, that things change and they don't stay constant and you have to be present and you have to be comfortable, i think, with the present. And that doesn't mean that you should be complacent about climate change or biodiversity loss or inequality. I'm not a practitioner of organized religion, but there was somebody, Jake Barnett, actually from West Path, I don't want to misquote him, but I think he shared a quote that somebody shared with him once that said, faith is walking on a path in the dark and only being able to see one or two steps in front of you
00:50:08
Speaker
and i find a lot of peace in that quote. So Jake, if you listen to this, thank you. Beautiful. And final one, are you reading anything that you would recommend? Yeah, I mean, I think particularly for what we talked about during this podcast, I think the readers should check out Moving Beyond Modern Portfolio Theory, Investing That Matters, because that really lays the foundations for, you know, what is systemic stewardship and universal ownership. And think that's a helpful but book in that perspective.
00:50:36
Speaker
And the Investment Integration Project also has a book, 21st century investing that's focused on the practice side. I also think that we're not going to find all the answers in the financial services industry.
00:50:50
Speaker
And ah friend of mine, Marjorie Kelly, wrote a book, Wealth Supremacy, that is about financialization ah the economy and how that really has resulted in the eroding away of wealth and influence for workers and communities.
00:51:04
Speaker
And I think that's a really important message to keep in mind. And so I would recommend people read that book as well. There are many other great books that I would recommend. i mean, if people are interested in issues around corporate concentration, Denise Harn's book, she's co-author on the book with Jonathan Tepper, The Myth of Capitalism. is was I read that as um I was starting the pre-distribution initiative and it was absolutely phenomenal and really influenced a lot of our thinking. And we're writing a paper on Earth for All, a survival guide for humanity now from the Club of Rome, which is a great book. So yeah, there's lots out there.
00:51:40
Speaker
Awesome. Thank you. And thanks for reminding me that Marjorie Kelly's book was on my list. So I will put it back on the top. Brilliant. This has been and amazing conversation. Thank you so much.
00:51:55
Speaker
Do you have any final thoughts or advice for fellow changemakers or maybe any specific call to action for them? I think my call to action would be to think about how socioeconomic inequality is driving a lot of the polarization and the world right now.
00:52:15
Speaker
The protectionism, the geopolitical conflicts, the all the phobias, and think about what we can do to reduce that kind of inequality so that we can have more trust amongst one another and more peace.
00:52:32
Speaker
Yeah, fantastic conclusion. Thank you so much. Thank you so much, Delilah, for your time
Conclusion and Call to Action
00:52:37
Speaker
today. it was in really, really great conversation. I wish you a beautiful weekend. Thank you, Krisztina. I'm wishing you a beautiful weekend as well and really appreciate you having me.
00:52:52
Speaker
If you'll stay with us, thank you so much for the time that you took to discover one of the amazing women changing finance. If you enjoyed this episode, please share it with your friends, colleagues, and on social media.
00:53:03
Speaker
Your feedback is also incredibly valuable. Please take a moment to leave a review on your favorite podcast platform. It will help me for the next episodes. And don't miss out on future episodes.
00:53:15
Speaker
Subscribe to the podcast and follow me on LinkedIn. See you for the next episode.