Corporate governance and responsible business conduct for more sustainable economies


The global economy relies on efficient, open and resilient markets to effectively allocate capital and stimulate innovation, productivity and growth. The private sector is indeed essential to global prosperity: across OECD countries, over 80% of workers are employed by the private sector*, and businesses contribute 72% of GDP**.

A challenging global context for investors

Investors play a very important role, by providing the capital businesses need to grow and create value. However, investors are sensitive to uncertainty, and the current economic and financial context is particularly challenging.

The recent market turmoil in both the United States and Europe has revealed weaknesses in financial markets and in regulatory and supervisory oversight of financial institutions. We should remain vigilant, as risks across the global financial system have increased. Bank failures and the higher cost of capital now faced by some banks could result in a further tightening of bank lending standards. This would weaken credit growth and economic activity.

Another issue of concern is the increasing stress in corporate debt markets. Corporate bond issuance decreased sharply in 2022 as borrowing costs surged, due to increasing inflation and tightening financial conditions. With higher borrowing costs and a long-term growth in lower-grade issuance, significant amounts of relatively high-risk debt will need to be refinanced in less accommodative conditions than previously, with possible financial stability concerns.

Developments in ESG and sustainability practices across financial markets

Investors and market participants are also increasingly focused on sustainability issues, including environmental, social and governance (ESG) issues. Indeed, beyond the near-term uncertainties, the global economy continues to face the triple challenges of climate change, biodiversity loss, and pollution. In addition to the existential threat to populations around the world, climate change is considered as a financially material risk for listed companies that make up 65% of global market capitalisation1.

Action is urgently needed. Investors and financial markets can and should play a central role in the orderly reallocation of capital to support the transition to net zero. Thankfully, we are already seeing a rapid development of sustainable finance and ESG investment practices. Over the past decade, the use of ESG approaches to assess investment risks and opportunities, and drive investment decisions, has become a leading form of sustainable finance. As of 2021, portfolios influenced by ESG investing approaches, such as ESG Integration, exceeded $40 trillion in assets under management2 .

In parallel, stock exchanges across advanced and emerging market economies have increasingly called for disclosures of ESG factors, and more than 80% of the market capitalisation of listed companies has an ESG score by at least one prominent ESG rating provider3. And we are seeing a multiplication of pledges and target-setting across the corporate sector to address ESG risks.

OECD efforts to drive best practices on corporate governance and business conduct

In this context, it is crucial that standards for corporate governance and business conduct remain fit-for-purpose, to drive tangible climate action, and support the resilience and sustainability of financial markets and a healthy corporate sector. The OECD has two leading global standards in this space.

First, the G20/OECD Principles of Corporate Governance are the global standard on corporate governance, and are adhered to by all OECD, G20 and Financial Stability Board members, together representing over 90% of global GDP4 . The Principles provide the global benchmark for corporate governance policies and practices that underpin the health of the corporate sector, and ultimately the wider global economy.

The Principles have been reviewed in light of the recent evolutions in capital markets and corporate governance policies, including the increasing attention devoted to sustainability issues, the growing role of institutional investors and the rise in ownership concentration. More broadly, the revision aims to improve corporate resilience and further facilitate companies’ access to capital markets. This can contribute to greater financial stability, and to funding the emergence of innovative businesses that support the green and digital transitions.

The revised Principles include a new chapter focused on sustainability, to better reflect the growing challenges corporations face in managing climate-related and other sustainability opportunities and risks, and to offer guidance in this respect.

The second key standard, focused on responsible business conduct, is the OECD Guidelines for Multinational Enterprises. The Guidelines provide a framework for businesses to address the impacts of their operations on people and the planet, and to contribute to sustainable development throughout their value chains. The OECD is also reviewing the Guidelines, to provide updated recommendations for responsible business conduct in key areas such as climate change, biodiversity, technology, business integrity and supply chain due diligence. This also comes in the context of increasing expectations for due diligence and responsible business conduct around the world, as seen for example in regulatory initiatives in the European Union5.

We are in the final stages of revising these two key global standards, which are due to be adopted by OECD Ministers in June, then endorsed by the G20 in the case of the Principles of Corporate Governance. Following the adoption, the OECD will continue to work closely with policymakers and regulators to ensure effective implementation around the world. We will also engage further with investors, boards of directors, stock exchanges and other industry stakeholders, to raise awareness and understanding of the changes.

Yoshiki Takeuchi, Deputy Secretary-General, OECD

*OECD Report Government at a Glance 2021. See page 101, which reports that the public sector employs 17.9% of the workforce across OECD countries: deliver/1c258f55-en.pdf?itemId=/content/publication/1c258f55- en&mimeType=pdf
** GDP = Gross Domestic Product. Source: McKinsey research (2017 data): capabilities/strategy-and-corporate-finance/our-insights/a-newlook-at-how-corporations-impact-the-economy-and-households
1OECD report Climate Change and Corporate Governance 2022. See page 21. pdf?itemId=/content/publication/272d85c3-en&mimeType=pdf
2Global Sustainable Investment Alliance review (2021): https:// pdf
4Internal OECD calculation, as of 30.04.2023
5See for example the proposed Corporate Sustainability Due Diligence directive:


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