The Resilience Manifesto: Integrating ESG and Risk Management, in Investment Portfolios and Organizations

Nowadays, two major pressures that investors must face are: 1) the need to account for environmental, social, and governance (ESG) factors in their investment processes; and 2) the need to manage risk at multiple timescales (e.g., short, medium, and long terms simultaneously). Integrating ESG and risk management is one way for investment organizations to address both of those pressures. Yet a cohesive framework for doing so has so far been absent. In this manifesto, we introduce Portfolio Resilience as a paradigm by which investors might jointly manage ESG and risk, both in their portfolios and own organizations. We provide a framework (the DARLing decomposition) for examining Resilience in a principled manner. We also supply a template for exploring how useful a given dataset might be for revealing the Resilience of assets and organizations. To demonstrate the utility of the Resilience paradigm, we present a case study of a major investment organization that has successfully aligned its risk and ESG operations by using Resilience concepts.