2 !{ArticleDetails-ReadTime} 22 Dec 2020
ESG integration

How ESG integration in the financial sector can help build resilient systems of the future

!{LinkedContent-author-by} Chaitanya Kalia

EY India Climate Change and Sustainability Services Leader

Committed to sustainable development, a climate change expert, advisor on non-financial reporting. Digitally savvy and a nature lover. Amateur cyclist, swimmer and an ornithologist.

2 !{ArticleDetails-ReadTime} 22 Dec 2020

The world has an opportunity to reset and build an improved economic system that works for both people and the planet, and no sector is better placed to drive this transition to sustainability and a stable future than the finance sector itself.

As the world grapples with the COVID-19 pandemic, nations face a daunting task to re-build their economies in addition to handling a global health crisis. Businesses have been hit hard and the effects have been felt by the stakeholders. The road ahead is indeed fraught with challenges and calls for a change from business as usual to risk-resilient businesses of tomorrow.

Managing all stakeholders has been the biggest challenge for businesses in this ongoing time of uncertainty which is proof that economic health cannot be built in isolation. Society and environment are equally important for businesses to flourish and going ahead all the Environmental, Social, and Corporate Governance (ESG) risks will have to be managed to build resilience into the system. As we re-examine the future of work and travel, we can choose to build an improved economic system that works for both people and the planet. No sector is better placed to drive this transition to a sustainable economy and a stable future than the finance sector itself.

ESG integration in the financial sector will pave a path for all stakeholders being considered in the decision-making process, which will result in real world impact benefiting everyone. This paper talks about the changing financial landscape from an ESG lens. It discusses the drivers which have made it an imperative for all stakeholder groups, from investors to asset managers, to consider ESG factors in investing and analysis process. As we transition into the last decade of action for achieving the Sustainable Development Goals, it’s time we take actions that bring in resilience into the system.

Intangible assets represented 7% market value in 1975, having risen (in some sectors) to 87% by 2015. 

— The Institute of Chartered Accountants in England and Wales (ICAEW), 2017

As the financial sector envisions the now, next and beyond in the face of an uncertain economic environment, it is imperative for the sector to develop resilience and response to risk management.
Chaitanya Kalia
EY India Climate Change and Sustainability Services Leader

The COVID-19 pandemic has de-shaped the global economy in a span of weeks. There has been a shift in focus of many businesses and investors from profits to people as the pandemic unrolled. It soon became an established fact that environmental and social issues have a profound and direct impact on economic stability. The financial system, which acts as a backbone of the system by providing the resources to run businesses, must act responsibly and realize how crucial its role is in bringing about these systemic changes. The pandemic has acted as a wake-up call for businesses, highlighting the need for embedding ESG into their corporate strategy for managing risks and returns, while ensuring that we build resilient systems for long-term value creation. 

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Prior to the COVID-19 pandemic, ESG factors were often considered a choice between positive impact returns and investing goals. During the pandemic, ESG funds have actually outperformed classic indices, and ESG factors emerged as major indicators of resilience in this crisis. The pandemic has offered an opportunity for the financial sector to manage risks, improve returns and build a resilient economy for crisis-resilient long-term value creation.

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!{LinkedContent-author-by} Chaitanya Kalia

EY India Climate Change and Sustainability Services Leader

Committed to sustainable development, a climate change expert, advisor on non-financial reporting. Digitally savvy and a nature lover. Amateur cyclist, swimmer and an ornithologist.