The asset-management industry plays many roles. An increasingly important one is contributing to the greening of the financial system. This means integrating environmental, social and corporate-governance (ESG) and long-term-sustainability issues such as climate risk into investment strategy, risk management, asset allocation, governance and stewardship activities. Investing in good corporate citizens can make a lot of financial sense. For instance, in the age of Twitter and consumer boycotts, it is worth thinking about all these issues before a company, which you may be invested in, is faced with a troublesome situation.
Financial regulators around the world are increasingly focusing on financial institutions’ capabilities, preparedness and actions to manage climate-change and broader sustainability risks. The idea is to support investment in low-carbon and resource-efficient technologies and to foster a longer-term outlook. This trend gathered momentum in September 2015 when Bank of England Governor Mark Carney described climate change as a threat to financial stability. The same year, the G20 created a private-sector taskforce led by Michael Bloomberg. It recommended how companies and financial institutions should improve climate-related financial disclosures.