The currencies of countries that respect the environment, social rights and political freedoms are generally less volatile. Trading that takes all extra-financial risks into account helps in selecting currencies. The political risk remains preponderant in emerging countries.

Natural disasters are extra-financial risks that are still poorly understood by the financial markets.

Since the publication of the video of Russian opponent Alexeï Navalny on the supposed luxury hidden residence of Vladimir Putin, the ruble has lost more than 3%: the market cannot rule out a destabilizing political crisis for the government. The currencies of virtuous countries would be less risky and volatile than others according to JP Morgan Asset Management (JP AM). “Socially responsible” trading aware of these extra-financial risks could help banks and investors to better select and forecast the price of currencies. These are assessed on three criteria: respect for the environment and climate issues by its government, social rights in force in its country, and governance (independence of the central bank from political power, low level of corruption of elites…).

Polluters and autocracies