Today, the States United Democracy Center and the Brookings Institution released a new report cautioning that the erosion of democratic practices and norms in the United States pose risks for investors. The report outlines a series of steps investors can take to protect American democracy as well as their own portfolios.

Report author Layna Mosley, a professor of Politics and International Affairs at Princeton University with a focus on the politics of the global economy, argues that U.S. institutional investors have a fiduciary duty to monitor political risks associated with threats to democracy in the United States, especially as election deniers continue to pose a threat in office. In the 2022 midterms, thirty-three percent of election denying candidates prevailed in statewide races for positions that oversee voting and election administration. And in all, 23 election deniers now hold those positions in 17 states.

The report also analyzes political risks in countries and corresponding market economies around the world including in the United States. And it provides mitigation tools for institutional investors in the United States to protect democratic norms and practices.

Key recommendations for mitigation include:

• Institutions should add U.S. political risk to the set of factors assessed when seeking to safeguard the assets of shareholders and beneficiaries.
• When seeking to acquire existing operations or open new ones, investors should consider the state’s voting laws and assurances of full access to the ballot, as well as any state-level efforts to interfere with the democratic process.
• Institutional investors should advocate full disclosure of corporate lobbying expenditures, as a means of ensuring that lobbying is consistent with corporate strategy, as well as with respect for democratic political institutions.
• Institutional investors should identify an appropriate subset of U.S. portfolio companies (based on risk profiles, market impact, and responsiveness, among other factors) and focus mitigation strategies—including discussions of U.S. political risk—on them.

“Institutional investors have a fiduciary duty to not only monitor but also respond to threats to democratic institutions in the U.S., just as they would do for other countries. These threats include the risks that election deniers pose,” said Layna Mosley, report author and Professor of Politics and International Affairs at Princeton University. “We are heading into a critical presidential election cycle, and investors need to take a serious look at their role in protecting our democracy.”