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.
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.
Summary
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.
