OECD Business and Finance Outlook 2020
Sustainable and Resilient Finance
The OECD Business and Finance Outlook is an annual publication that presents unique data and analysis on the trends, both positive and negative, that are shaping tomorrow’s world of business, finance and investment. The COVID-19 pandemic has highlighted an urgent need to consider resilience in finance, both in the financial system itself and in the role played by capital and investors in making economic and social systems more dynamic and able to withstand external shocks. Using analysis from a wide range of perspectives, this year’s edition focuses on the environmental, social and governance (ESG) factors that are rapidly becoming a part of mainstream finance. It evaluates current ESG practices, and identifies priorities and actions to better align investments with sustainable, long-term value – in particular, the need for more consistent, comparable and available data on ESG performance.
Environmental, social and governance (ESG) investing
ESG investing is attracting growing attention from investors and policy makers over its promise of utilising a range of non‑financial information to better align finance with long-term value and societal values. ESG practices, however, remain at an early stage of development, with challenges around consistency, comparability, and financial materiality. This chapter assesses current market developments, as well as the financial ecosystem and the key stakeholders shaping ESG practices related to disclosure, consistency of metrics, comparability of rating methodologies, and alignment with financial materiality. It scrutinises the performance of ESG approaches by exploring different ESG investment strategies of portfolios and investment funds, and their returns relative to traditional market benchmarks. The chapter concludes with a set of global recommendations to improve market confidence and integrity, so that sustainable finance can more effectively support resilient and inclusive economic growth.
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