$6.27 trillion required annually to mitigate six global risks: WEF

The World Economic Forum (WEF) said an investment of $6.27 trillion per year is required to mitigate six global systemic risks.

The organisation has established a governance framework to enable the investment community to address the investment gap.

The risks include water security, climate change, population growth, geopolitical uncertainty, negative interest rates and technology disruption.

The report named "Transformational Investment: Converting Global Systemic Risks into Sustainable Returns" was released on May 28 by the WEF.

It provides new insights to ensure that the long-term impact of non-traditional risks and opportunities can be better understood.

"The Covid-19 pandemic has altered the global economy in unprecedented ways," says Maha Eltobgy, head of investing, WEF.

"The pandemic has impacted capital markets, liquidity, the financial stability of entire industries and even challenged the fiscal solvency of governments. The Transformational Risk framework offers investors a new way to analyse systemic risks in the 21st century," she added.

The $6.27 trillion will be needed to address opportunities to invest in renewable energy, food production, infrastructure, education and more.

Governments, corporations and insurers are often the "funding entities" for long-term, diversified investment programmes.

So, challenges to the financial standing of these funding entities can alter the liquidity budget, risk tolerance and investment time horizon of the world's largest asset owners.

In the study of these complicated global risks, the World Economic Forum and Mercer, who collaborated together for this white paper, propose a six-step framework to help investors navigate these challenges.

"The same six-step framework that asset owners have been applying to other long term systemic risks has turned out to work well when applied to the Covid-19 pandemic and its associated impact on the economy, society and financial markets," said Rich Nuzum, president of Investments and Retirement at Mercer.