Inequality, Climate Change Major Risks To Financial Markets - IEFA
(Kitco News) - Although financial markets are awash in short-term uncertainty, investors and companies need to pay more attention to long-term issues like climate change and growing social and economic inequality.
In a panel discussion at the 24th annual International Economic Forum of the Americas in Montreal, Canada, Glenn Hutchins, co-founder of North Island and co-founder of Silver Lake, two significant technology investment firms said that financial markets are currently discounting the recent bout of uncertainty because there is a low probability of the turmoil escalating into real problems.
“Geopolitics is being discounted by the markets fairly quickly he said. “Just because there are risks doesn’t mean you can’t manage your way through it.”
However, Philippe Zaouati, CEO of Mirova, said that the world is facing an event with a “high probability and catastrophic consequences: climate change.”
Along with the environment, Lynn Forester de Rothschild, chair of E.L. Rothschild and founder and CEO of the Coalition for Inclusive Capitalism, said that inequality is creating a rise in populism around the world, destabilizing important foundations and markets.
Rothschild added that the rise in populism isn’t surprising as many people are upset and feel left behind in an ever-evolving global economy.
“The system we have believed in hasn’t worked for all people,” she said. “This rising populism sentiment is totally understandable. People are willing to throw a Molotov cocktail on the system because they want change.”
Vijay Advani, CEO of Nuveen, said that financial markets are starting to shift and companies are being recognized for their effort to address environment, social and corporate governance issues (ESG).
In a changing social environment, Advani said that companies are being rewarded with investor capital by addressing issues of climate change, employee retention and supply chain protection.
He added that in a few years, the idea of highlighting ESG policies will be redundant as companies will automatically incorporate these ideas. Companies that fail to embrace these important issues will ultimately fail, he said.
“The idea of maximizing profits for shareholders is not sustainable anymore,” said Rothschild.