Biden urged to revamp capitalism to tackle racial inequality and climate

TORONTO (Thomson Reuters Foundation) – About 50 U.S. investor, business and civil society groups called on the Biden administration on Wednesday to reform business and finance rules to combat rising inequality and climate change.

Economic reform is needed to tackle the “monumental crises” of COVID-19, a widening racial wealth gap and global warming, said the group, led by the U.S. Impact Investing Alliance and B Lab, both of which lobby for business to be a force for good.

“Shareholder capitalism is a key part of why our communities have been hollowed out,” said Fran Seegull, president of the U.S. Impacting Investing Alliance, which favors a shift to ‘stakeholder capitalism’ that benefits workers and communities.

“We believe that system is broken,” she told the Thomson Reuters Foundation.

The coalition wants the Biden administration to create a White House Initiative on Inclusive Economic Growth to make the economy and capital markets more socially and environmentally responsible.

With his $1.9 trillion stimulus package and proposed $2.3 trillion infrastructure plan, President Joe Biden has made tackling climate change a priority, along with reducing economic inequality, with direct payments to families and the unemployed.

Biden is seeking to steer capital to neglected people and parts of the country, having witnessed a fall in the share of national wealth going to the middle class and the gains from U.S. growth concentrate in a handful of regions.

Seegull said events of the past year, including the new coronavirus pandemic, Black Lives Matter protests and extreme weather events, have highlighted the key tasks ahead.

“The Biden-Harris Administration will experience significant headwinds on their priorities if businesses and investors remain singularly focused on optimizing financial returns,” said the coalition.

“An holistic agenda of inclusive economic growth … will enable companies and investors … to proactively address our nation’s biggest challenges and create wealth that is shared by America’s workers, communities of color and future generations.”

The initiative would increase investment in underserved communities, including updating the Community Reinvestment Act, last revised in 1995, which requires regulators to assess how well banks are meeting the needs of poorer communities.

The current rules governing businesses and investors have allowed them to ignore negative impacts, such as low wages or planet-warming emissions, said Andrew Kassoy, co-founder of B Lab, which promotes “purpose-driven” business.

“The long-term change that’s needed is the change in the accountability of companies and investors to consider the social and environmental systems in which they exist,” he said, such as rules forcing them to disclose their impacts.

“There is a shift taking place culturally. We need to hammer that home now with public policy that’s consistent with that cultural shift.”

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