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Time to get serious about the role of finance in climate change

To read the headlines, you could easily be forgiven for thinking that climate change and ESG are the number one issue in capital markets. When it comes to equity markets, ESG integration does seem to be fully underway, as the value of global assets applying environmental, social and governance data to drive investment decisions has soared to $40.5tn, representing more than a third of the $95tn equity market in 2020.

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COVID-19: The Great Reset

A Review

The COVID-19 pandemic is a global disruption on a scale unprecedented in modern history. While there are useful parallels to be drawn with previous pandemics like the Spanish flu epidemic, financial downturns like the 2008 Great Recession and geopolitical upheavals like World War II, none match the scope and shape of the human and economic toll of COVID-19 and none can predict all of the changes this crisis will set in motion. In COVID-19: The Great Reset, authors Klaus Schwab and Thierry Malleret set out to the explore the transformations that are occurring at all levels, from the macro to…

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From ESG Integration (Sustainable Finance 2.0) to Impact (Sustainable Finance 3.0)

For the last eight years, we have tracked the progress of ESG in our biannual State of Sustainability in Capital Markets report. In that time, we have seen ESG go from the periphery of investment management to a core component of 21st century asset management. From a focus of niche players and discrete investment products, ESG is now central to the investment strategy of many of the world’s largest asset managers and a key component of investment stewardship. Essential to the rapid growth of ESG in investment management has been the concept of ESG financial materiality and the notion that…

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What is the Private Sector’s Responsibility to Democracy?

From the January 6th attack on the U.S. Capitol to the protection of voter rights to supporting Ukraine by pulling out of Russia, business is increasingly being looked to not only to support social issues such as transgender rights and anti-racism but also to engage directly in defending the institutions of democracy. In the wake of the Capitol attack, for example, Twitter banned Donald Trump and PayPal suspended payments through his website and many companies blocked funding for Republican politicians who spoke in support of the attack. This engagement is welcomed by many but also criticized, with Senate minority leader…

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Accountable Sustainability

The announcement in March of this year that the International Financial Reporting Standards Foundation has created an International Sustainability Standards Board is, I believe, a watershed moment in the history of investment. It signals that sustainability reporting has come of age. Moreover, it suggests that the nature of accounting has changed. In 1990, only a handful of “responsible investment” research pioneers systematically gathered to analyze the CSR (corporate social responsibility) data of publicly traded companies. I plead guilty to having been among those few. By the mid-1990s, spearheaded by the Global Reporting Initiative, others joined an increasingly crowded field. By…

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Beyond ESG: Corporate Activism and Moral Leadership

“With great power comes great responsibility” is an old adage that frames well the moral and political leadership challenge now confronting business leaders. Large firms are among the most successful global institutions we have, with over half of the world’s top 100 economies by revenue now global corporate and financial firms with an impact, reach and resources exceeding that of many nations. It is not surprising that in this environment, society is looking to business to take greater leadership and responsibility. Sixty-eight percent of respondents in the 2021 Edelman global survey believe that CEOs should step in when the government…

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Beyond ESG – Collaborative Governance the Next Challenge to Business

The pandemic and growing climate crisis have thrown into sharp relief the critical role large firms now play in society, not just as economic entities, but as key social institutions expected to work with and alongside government to address the myriad of systemic challenges now facing us, from climate change to inequality. In his 2018 letter to CEOs, Larry Fink, CEO of BlackRock, the world’s largest institutional investor globally, summarized this new role for business well: “We… see many governments failing to prepare for the future…As a result, society increasingly is turning to the private sector and asking that companies…

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Some Thoughts on the Future of Responsible Investment

For almost 50 years now, I have been active in the world of responsible investment (otherwise known as sustainable investment, ESG integration, and impact investment, among other things). Its growth, especially since 2010, has surprised me. Assets under management in this once obscure discipline are estimated at as much as $37.8 trillion by year-end 2021.[i] Around the world, the field is exploding with new products, a deluge of data and heightened recognition from regulators. I am particularly surprised at these developments given that since its earliest years, its practitioners have faced a barrage of criticism. The three prongs of these…

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Credit Markets – The Elephant in the ESG Room

To read the headlines, you could easily be forgiven for thinking that ESG integration in capital markets is now fully underway, as the value of global assets applying environmental, social and governance data to drive investment decisions has soared to $40.5 trillion and now represents more than a third of the $95 trillion equity market in 2020.

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