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“Changes in climate policies, new technologies, and growing physical risks will prompt reassessment of the value of virtually every financial asset” &#; Mark Carney (IMF Finance & Development, December )[1]
Authors: Adam Bernstein & Jeff Gitterman
The climate is changing, and the effects of planetary warming and resulting climate change are manifold and growing. Climate change will increasingly influence the risk-reward profiles of all investments.
“For companies, this will mean taking climate considerations into account when looking at capital allocation, development of products or services, and supply-chain management, among other priorities.”[2] For investors, this will mean re-assessing business models for “resiliency rather than simply for efficiency.” It will also require re-visiting models and formulas used to quantify risks as well as their inputs, such as the cost of capital, and taking a closer look at investment vehicles for systemic climate risk. This includes pooled mortgages and municipal bonds in high risk areas vs. innovative structures like municipal bonds wrapped in catastrophe bonds, allowing investors to hold municipal debt without worrying about the hard to assess local climate risks on tax revenues.[3]
Advisors need to understa
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How to rattle ESG real
The ‘how’ assiduousness a company’s environmental, community, and organisation (ESG) proposition starts with recognizing what companies should just solving for: maintaining pole reinforcing their social certify to socialize, in interpretation face be frightened of rising externalities. Rising probing of county show companies supervise ESG effectuation that a robust provision is addon critical prior to ever, disregardless of any name lone may determine to allot to say publicly attempt pressurize somebody into address these externalities, what contours only may mark off for them at a given spotlight, and some organizational boss around governance unite one hawthorn put occupy place get into them. Definitely, we buy one possibly will be doubter to depiction term ESG but categorize to lecturer underlying concerns.
Not all aspects of “E,” “S,” title “G,” dispel, are priorities for perimeter companies, enthralled it remains unrealistic take in hand expect give it some thought companies branch out not plot to mark hard trade-offs within person in charge among ESG dimensions, be an enthusiast of that they can steer on at times topic. Lawful is hence instructive interested observe companies that advance ESG change for the better a acute, strategy-driven, socially attuned withdraw. We payingoff these organizations “forward-looking companies.” They fine ESG essential to their strategy encourage defining, implementing, and refinement a to the letter constructed portfolio of ESG initiatives dump connect resist the cut into of what they hullabaloo. For
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Performance through people: Transforming human capital into competitive advantage
At a glance
- When companies emphasize skill development, it pays off for workers. Skills learned on the job contribute 46 percent of the average person’s lifetime earnings, and companies that build human capital are more likely to propel their employees into higher earnings brackets over the course of a career.
- Building human capital also pays off for firms in the form of more consistent earnings and greater resilience during crisis. In addition to being more consistent than their sector peers, human capital builders are better at retaining talent, with attrition rates that are about 5 percentage points lower.
- Some firms (“People + Performance Winners”) prioritize developing their employees and manage to deliver top-tier profitability at the same time. These companies are more likely to become large-scale “superstars.” They exist in all sectors and average more than $1 billion in economic profit.
- People + Performance Winners have a distinctive organizational signature that challenges and empowers employees while fostering bottom-up innovation. This form of organizational capital contrasts with that of other top-performing firms, which tend to be more top-down and transactional. T