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).

Such claims could arise well into the future, as the science and evidence of climate change hardens, though some are already taking action against companies on the grounds of failure to disclose the risks posed to their business models by climate change. 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4    Dependency on short-term actions given that the size of future impacts will, at least in part, be determined by the actions taken today; and    Uncertain time horizon which may stretch beyond traditional business planning cycles. The nature of these risks means that the biggest challenge in climate risk management is in assessing the resilience of firms’ strategies to transition risks. Part of the genius of the private sector-led TCFD is its recognition that disclosure needs to go beyond the static to the strategic. Markets need information to assess which companies can seize the opportunities in a low carbon economy and which are strategically resilient to the physical and transition risks associated with climate change. The Bank of England has also become increasingly active in such assessments, consistent with our financial stability and prudential mandates. As the supervisor of the world’s fourth largest insurance industry, we know that general insurers and reinsurers are on the front line of managing the physical risks from climate change.