Addressing the challenges of transformation through sustainable investment

Abstract

For much of the post-WWII era, financial crises flowed from the periphery of the global economy to core financial markets, disturbing equilibrium and challenging established practices (Barro, 2006). Over the last couple of decades we have witnessed a new phenomenon: systemic risk emanating from core financial markets of the global economy and propagating around the world. Settled expectations, the rules of investment management and the virtues of tried-and-true recipes for asset allocation have been turned upside down. Research linking financial uncertainties with social and environmental trends of the twenty-first century is attracting increasing attention among some investors. Macroeconomic imbalances, ageing Western societies leading to increasing dependency ratios, and a political impasse where rules and regulations ‘solve’ past problems but do little to address larger, structural issues such as degradation of the environment, resource scarcity and climate change all contribute to drastically changing the landscape of global financial markets.