The United Nations Environment Program UNEP published the inquiry into the design of a sustainable financial system in January 2014.
The initiative’s primary goal is to figure out and highlight policy options that can improve the financial systems so that the capital for a green and inclusive economy can be mobilized and establish how it will help accelerate sustainable development. The inquiry published a final report called The Financial System We Need in October 2015.
This paper, titled The Value of Everything Authored by Cary Krosinsky, aims to provide a detailed assessment of the total value of global resources and assets and how they can be utilized for the progress of a sustainable financial system.
With that, the UNEP inquiry also extends its heartfelt gratitude to several scholars and individuals who contributed their thoughts and valuable feedback in the final draft of this report.
The publication isn’t under any endorsement by UNEP or for any trade or commercial purposes mentioned within. The entire report and its analysis solely reflect the views of the authors and not necessarily the views of UNEP.
We often forget to discuss the total value and impact that the global financial system may lack. The report titled The Value of Everything aims to figure out the value of the global assets that we have and evaluate how the financial system can be transformed to support sustainability goals.
The following discusses the key sections that the novel report talks about:
- The key highlight of this report was public equity, which outlined that 67 trillion USD represents shares of trade on global stock markets as of 2015, with the values experiencing constant fluctuations on a daily basis.
- The second top highlight of the paper was the fact that the largest asset class globally worth 100 trillion USD as of 2014 encompasses the municipal security’s corporate bonds and sovereign debts.
- The report also said that global real estate properties are estimated to be 95 trillion USD, incorporating both commercial and residential properties owned by companies, individuals, and institutions.
- At number 4, we have state-owned Enterprises. Not only this but it has also got government-owned resources and companies which are valued at 35 trillion USD. However, it is difficult to quantify them because of their nonpublic nature.
- Number 5 is the privately owned companies, which have a value of 4 trillion USD as of 2014. this section includes both venture capital investments and private equity.
- At number 6, we have infrastructure representing 35 trillion USD in depreciated value, which includes water systems, energy facilities, and transportation networks.
- Number 7 is the most popular real asset valued at 10 trillion USD, which includes a broad scope of Lands, forests, public markets, gold, commodities outside state ownership, and many more.
- We are in the final three categories, where we have global cash reserves with an estimated value of 75 trillion USD across money market funds, foreign exchange reserves, and bank deposits.
- At number 9, we have derivatives and other instruments with a nominal value of one quadrillion plus USD globally. However, the approximate underlying value of it is roughly 30 trillion US.
- The last one at number 10 is black market banking. The report highlighted it as an underground and hidden financial activity that is still unquantified. The report showed concerns about transparency in determining the global asset valuation.
The report also advised on crucial obstacles that individuals may face in accurately figuring out the value of certain asset classes. A few of them are:
- The first one is about the lack of transparency in state-owned Enterprises
- The second challenge that may show up is when the individuals start working on quantifying the black market banking activities
- Hindrances can also be observed when it comes to estimating the true underlying value of derivatives due to limitations and the shortage of public data and leverage.
The report also talked about institutional investment, which highlighted that institutional investors get to handle about half of the total Global asset value, which is 225 trillion USD.
Now, this incorporates a majority of fixed-income instruments, public Institutions, and companies. Institutional ownership has grown significantly over recent years and actually has the potential to fill up the financial flows and get it utilized for the sustainability project.
Figure Highlights
- Total Global Asset Value: Approximately $450 trillion
- Real Economy Assets (e.g., property and infrastructure): $225 trillion
- Institutional Investments: Account for half ($225 trillion) of global asset management
Lastly, the report calls for action to research more and more to get updated and refined valuation and methodology to determine it. Also, it concludes with an end note to incorporate sustainability metrics and practices when dealing with the financial decision-making process.
Not only this, but the report also talks about the urgent need to increase transparency in the financial market by sharing accurate asset values and not using underground financing.
