World Economic Forum releases framework to help investors address six global risks

10x Industry

Mita Srinivasan
10x Industry
Published:

World Economic Forum releases framework to help investors address six global risks

Combined, the six challenges have an investment gap of $6.27 trillion per year in capital to adequately address

The World Economic Forum has identified six systemic risks and established a governance framework to enable the investment community to address an investment gap of $6.27 trillion per year required to mitigate these risks. The risks include water security, climate change, population growth, geopolitical uncertainty, negative interest rates and technology disruption.

“Transformational Investment: Converting Global Systemic Risks into Sustainable Returns”, provides new insights to ensure that the long-term impact of non-traditional risks and opportunities can be better understood. It’s particularly important for investors to consider these ongoing risks now in order to have good responses to address the current economic crisis. The six systemic risks for asset holders, drawn from the Forum’s Global Risks Report 2020, will require over $6.27 trillion of investments per year to address. These include opportunities to invest in renewable energy, food production, infrastructure, education and more.

Maha Eltobgy, Head of Investing, World Economic Forum, said, “The COVID-19 pandemic has altered the global economy in unprecedented ways,” says. “The pandemic has impacted capital markets, liquidity, the financial stability of entire industries and even challenged the fiscal solvency of governments. The Transformational Risk framework offers investors a new way to analyse systemic risks in the 21st century.”

Governments, corporations and insurers are often the “funding entities” for long-term, diversified investment programmes. So, challenges to the financial standing of these funding entities can alter the liquidity budget, risk tolerance and investment time horizon of the world’s largest asset owners. The framework recently developed for evaluating and incorporating global systemic risks into investment programmes can also act as a guide when addressing the risks created by the COVID-19 pandemic, or to help mitigate the risk of future pandemics.