[2021 Asia Financial Forum] Michael Sheren: "Among ESG, G (Governance) is the Most Important"

Michael Sheren, Senior Advisor of the Bank of England, is giving a lecture at the '10th 2021 Seoul Asia Financial Forum' hosted by Asia Economy on the 25th at the Grand Ballroom of Westin Chosun Hotel in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Song Seung-seop] “Harvey Weinstein treated employees and customers carelessly and committed unfair acts. The board of directors knew Weinstein’s wrongdoings but took no action. Ultimately, the company went bankrupt and the stocks became worthless.”

Michael Sheren, Senior Advisor at the Bank of England (BOE), emphasized the role of governance during a panel discussion at the ‘10th 2021 Seoul Asia Financial Forum’ held on the 25th at the Westin Chosun Hotel in Sogong-dong, Jung-gu, Seoul. Sheren, a former investment banker in New York and London, has served as co-chair of the G20 Sustainable Finance Study Group.

Senior Advisor Sheren stated, “Each element of ESG may have different importance depending on the industry, but G (Governance) is the most important because it concerns how a company makes decisions.” He meant that in a governance environment where a CEO cannot demonstrate leadership, like Harvey Weinstein who triggered the MeToo movement, neither E (Environmental) nor S (Social) can be properly achieved.

Regarding how the Bank of England manages climate-related financial risks, he said, “Top executives have consistently signaled that climate change poses risks to UK citizens and deposit-taking banks,” adding, “This year, stress tests will be conducted on all major banks in the UK to assess the extent of their risks.”

He also conveyed, “We are trying to mitigate risks together with other central banks and stress testing institutions, and we would like to cooperate with the Bank of Korea as well.”

As the background for ESG and green finance becoming hot topics among companies, he cited ‘profitability.’ Sheren explained, “According to a study conducted at the Bank of England, companies that actively engage in ESG management have generated high profits globally. ESG activities as a company greatly contribute to profitability.” He noted that green finance companies have much lower bankruptcy rates and better performance, while companies with poor governance have experienced bankruptcies or stock price crashes.

Conversely, he pointed out that coal-based economies will face structural decline, and industries with high carbon emissions have “already become stranded assets.”

He advised, “Coal usage will decrease going forward, and stock prices have fallen significantly. Banks and governments should fund renewable energy in the future and avoid investing in assets that have already become stranded.”

This content was produced with the assistance of AI translation services.