Millennials, keenly focused on company values and sustainability, are set to inherit $ of wealth in the US alone over the next 15 years and will seek the investment opportunities to match.22 Already, assets are moving to ESG strategies at 20 per cent annual growth.23 A review of over 200 sources on ESG performance by Oxford University and Arabesque showed that in the overwhelming majority (88%) of companies that focused on sustainability, operational performance was improved, translating to higher cash flows.24 And meta-analysis of over 2000 studies confirms that the responsible, as well as the economic case for ESG investment is tangible. 90% of studies find that there is no penalty on return on ESG investment, and the majority suggest that focusing on ESG criteria generates a positive return.25 The outperformance of strong ESG companies is uncorrelated with underlying factors such as return on equity or capital employed, and reflects greater earnings stability and lower share price volatility. While “screening” - excluding poor ESG performers - is still the most common tool among investors, some research finds that a more proactive consideration of ESG factors may pay off. 26,27, 28 “Tilt” strategies, which overweight ESG stocks, and “momentum” strategies, which focus on companies that have improved their ESG rating, have outperformed global benchmarks for close to a decade.29  22  Deloitte. (Nov 2015). The future of wealth in the United States. Available: https://www2.deloitte.com/content/dam/insights/us/articles/us-generational-wealth-trends/DUP_1371_Future-wealth-inAmerica_MASTER.pdf 23 The Cerulli Edge, Global Edition, Issue 206 (Apr 2018). Available: https://www2.deloitte.com/content/dam/insights/us/articles/usgenerational-wealth-trends/DUP_1371_Future-wealth-in-America_MASTER.pdf 24 Clark, G, Feiner, A, and Viehs, M. (March 2015).

One example is the work involved with preparation for the Millennium date change, in which the Bank was heavily involved in ensuring that the UK financial system was ready; this work certainly brought home to me the reliance on IT and the huge variety of interconnections between different systems. While IT networks and improvements in communications have allowed provision of financial services more cheaply and efficiently, they have also brought financial markets around the world closer together. This trend to globalisation has been beneficial to the UK. Net investment income and profits from overseas make an increasingly large contribution to the UK balance of payments, going some way to offset the deficit on traded goods. However, with global markets, shocks in one part of the world are transmitted more quickly to other financial systems. The most recent example was the Asian crisis, starting in the summer of 1997 in Thailand; and spreading to Korea which had to seek outside support in December of that year. As turmoil spread through financial markets in the region, within a year equity markets had halved in value with a similar depreciation in exchange rates. Conditions were further exacerbated in August 1998 by the default on Russian government debt, fuelling further fears about emerging market debt. The flight to quality this prompted contributed in turn to the collapse of one of the large US hedge funds, Long-Term Capital Management. The events of 1997 and 1998 brought home the complex linkages between financial markets in a global economy.