WSLondon19
Speech

Wealth and Society Chairman Gaeta’s welcome note on meeting the needs of investors, society and our planet

By Gordian Gaeta

At the intersection of rising financial wealth and the exclusion of a large part of society combined with continued depletion of our resources lies a growing eco-system with the aim to transform the world we share

The last decade has seen unprecedented increases in financial wealth driven by continued monetary growth and economic development. At the same time, growth in population combined with the living styles and resource usages in almost all economies have stretched the fabric of society and capacity of our planet to its limits.

At the intersection of rising financial wealth and the exclusion of a large part of society combined with continued depletion of our resources lies a growing eco-system with the aim to transform the world we share. Some call it ESG (environmental, social and governance), others calls it SRI (socially responsible investing or sustainable, responsible, impact). There is a whole new vocabulary out there. We call it responsible or impact investing.

Our Forum Wealth and Society is dedicated to the discourse on the issues and best in class approaches, projects or services that foster this eco-system. It concerns all of us.

Wealth has reached quite staggering proportions. Total assets under management at the end of 2017 range between US$75 and US$88 trillion, depending on the report. By comparison, world GDP in nominal terms in 2018 was almost exactly the same figure, US$85 trillion. Asset managers invest or advise the equivalent of one year’s economic activity and value of the world. This has led to a concentration of monetary power, influence and arguably abuse.

At the same time, inequalities in income and wealth, growing but unmet needs of multiple communities and the required reparations to our planets resources demand a reallocation of investment to the benefit of society as a whole. Increasingly, a wide range of investors understand that the funding supply side should take account of societies funding demand side. No longer are only the Millennials conscious of the social and environmental consequences of the decisions governments and companies make. According to various reports more than half of all investors would prefer to see their investment achieve more than only a good return.

The result has been a sharp increase in the demand to include ESG criteria into investment decisions. In 2018, around US$11 trillion of assets were under investment strategies or 1US$ in every 9US$ of managed investment.  Long gone are the days where informed investors believe that adopting responsible investment criteria necessarily lowers the return on their investment. Innumerable studies and research reports demonstrate that investing with a benefit to society generates competitive returns, reduces risks and provides a very attractive solution to our global problems. They are by no means mutually exclusive.

This new eco-system encompasses philanthropic investments but is not determined by giving for altruistic purposes. They play a smaller role. The difference to responsible investing is simply that philanthropic investments include investments made primarily for an emotional return while responsible investing is made primarily for competitive returns.

Engaging private capital markets for the benefit of society is now an accepted if not preferred model for many. Yet, it lacks profound understanding, better standards and an intense discourse on how best to foster this eco-system. Intelligent investors will always seek optimal returns but the financial industry and its myriad of players created tools and instruments that can meet the needs of investors, society and our planet at the same time.

Bringing together the best minds in this eco-system and fostering a growing discourse among all players and service providers is the objective of Wealth and Society. The better we engage decision makers and support organisations, the more we can contribute to transforming the world we share.  

 

Gordian Gaeta

Chairman, Wealth and Society



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