Private capital - Evolving with markets, creating tools for advocates
Financial markets are not abstract concepts. They are tools that can be harnessed to work for us. But without a deeper understanding of the machine, we will always be a few steps behind. In the meantime, opacity allows financiers to operate with impunity.
Getting to grips with and keeping pace with financialization is vital if we are to hold financiers to account and halt the excesses of markets. Financialization is the growth of the financial sector and the power of wealth over the real economy at the expense of society’s access to the realm of finance.
When it comes to financial services, people and planet-focused advocacy strategies must evolve as rapidly as financial markets and instruments themselves.
While an understanding of other financial instruments and institutions has rapidly increased, private capital remains largely a mystery for most transparency advocates and in civil society.
This dynamic allows many drivers of private capital to operate largely free of regulation. This is alarming because:
Asset managers, private equity, and hedge funds control portfolios worth more than US$100 trillion—more than a third of the total value of global financial assets.
As of 2020, private market assets under management reached US$10.74 trillion or roughly 10% of global gross domestic product.
By 2025, private market assets under management will raise to US17.16 trillion with Asia set to be the biggest driver of growth.
At this rate serious harmful impacts on human rights, labor rights, the environment, and public goods and services are inevitable and already being identified.
This is why I collaborated with Empower LLC to provide advocates and other stakeholders with tools to catch up with the “Runaway Train: The Perilous and Pernicious Path of Private Capital Worldwide”.
We sought to fill a knowledge gap about the origins, trends, and impacts of private capital. This includes the decline in public markets, the rise of private markets, and the links between the two. By demystifying it and making it more accessible, the impacts and actual capital can be better tracked, exposed, and addressed with appropriate regulatory and accountability measures.
Advocates and campaigners are a unique target audience for this research as we attempt collectively to contain, if not reverse, the shift of capital from public markets under public scrutiny into private markets that operate in the shadows.
There are opportunities.
With a bit of coordination and some innovation, our existing advocacy regarding banks and pension funds can quickly evolve to include demands to engage with or divest from private capital as well as to reverse the capital shift to private markets.