Systemic Risks – finance reset

Systemic Risks – finance reset: With economic losses piling up to USD4.1 trillion, financial systems around the world are facing COVID-19 systemic risk. But we all know that a larger climate crisis looms. New climate research doesn’t look good which means our capital is still at risk. So this month we spoke to global green finance guru Dr. Ma Jun about the future of finance, looked into ESG prepping for doomsday as well as trends in green investment and climate leadership to get us out of this hot mess.

And hot mess it is as 2020 is set to become the hottest year on record. If we continue on this path, climate crises will trigger losses of USD616 trillion by 2100 – that’s two COVID-19 outbreaks per year for the next 80 years! There’s no vaccine for climate and water risks and we worry – do banks and asset managers even realise their portfolios are at risk? We explore capital threats post-COVID and prescribe three steps to reduce risks.

Yes, the future of finance could look very different. Who better to speak to than Dr. Ma Jun, the Chair of Hong Kong’s Green Finance Association, NGFS’s Supervisory Workstream and member of PBOC’s Monetary Policy Committee. And so we asked him … What are the chances of a green recovery? Where is China re its green push? Do financial institutions understand their water and climate risk exposure? What should investors and bankers watch out for post-pandemic? Dr. Ma answers it all.

What about ESG – is its future still green and bright? Can it help prepare companies and finance for shocks ahead? ADMCF’s Alison Lee thinks so – ESG people are like “doomsday preppers”, the work may be tedious but stocks with high ESG grades outperformed their regions’ index throughout COVID-19. In APAC, this was as much as 9.6%, so who’s laughing now? Lee navigates us through ESG’s alphabet soup and zombies ahead.

Not convinced of the doom and gloom ahead? Too focused on COVID-19 news? We cover 8 risks you missed this year – from Antarctica and Greenland ice melt to droughts, floods and hurricanes around the world.

Did you know that our oceans have absorbed heat from climate change equivalent to dropping 3.6 billion Hiroshima atomic bombs for the last 25 years? That’s a shocking rate of 5 Hiroshima bombs per second. How on earth can we expect our oceans to survive? They are our lungs providing 80% of our oxygen. Catch up on new research now.

So side-step systemic shocks by going green now. If you don’t know where to start, check out Syntao Green Finance’s top 10 responsible investment trends in China for 2020. Find out how China’s financial industry is handling climate risks from disclosure and ESG in the primary markets to new emerging products, pilots and fintech.

If this pandemic has taught us anything, it is the need to be prepared. We clearly weren’t for COVID-19, but we can be for climate change. But worryingly, our default go-to in times of trouble, the G7 is woefully absent.

The G7 should have had a game plan for this pandemic; they did not. They should be doing better at fighting COVID; they are not with almost two-thirds of global deaths. So why on earth are we leaving our future to the G7? Surely, Asia should step up? It does appear to be better at planning ahead. Already, 87% of Chinese recently surveyed agreed that climate change is as serious as COVID-19

COVID-19 has also shown that we are only as strong as our weakest link. Climate threats will magnify social inequalities and so we must continue to put people first. We need to plan ahead – our financial systems need to be able to withstand climate shocks to come. Otherwise, why bother saving when our savings could be at risk?

The rich are not immune – tycoons – answer this … what’s the point of building empires that will kill your grandchildren? Everyone … start prepping to flatten the steep climate curve, assess risks, reorganise your portfolios and hit reset to save the world!