"We are going to see capital allocation try to make sure that opportunity improves for all and the capitalism broadly is more inclusive. And so, I think this crisis accelerates that. I think that a crisis has a tendency to accelerate trends." David Soloman CEO Goldman Sachs (Businesswire interview)
We are all aware of how much Covid 19 has changed our own world and few people believe the world will continue exactly as before when we fully emerge from lock down.
Here are three signals that we see as pointing to the direction of that change.
Health, Health Technology and Data
Health-care has risen to the top of the global political and economic agenda. Covid 19 has dramatically shown the impact of a nation's health on it's GDP. The health of nations other than its own, has become a new and important dynamic driving change and investment opportunity.
Data and science have been at the forefront of the covid battle and both will become increasingly important. As the FT commented on 29 May, if we can collect 70 trillion data points a year from Rolls Royce aero-engines, we should be able to do this for humans through wearable technology, which could even act as an early alert system for future pandemics. It can also aid the personalisation of drug, early detection and prevention therapies.
This provides massive opportunities outwith the purely medical sphere, for the giants like Apple, Amazon and Google and the new entrants with new ideas and technologies.
The explosion in grocery deliveries has provided data to producers that had hitherto been only in the hands of the supermarkets, they will use this to disrupt and drive change.
Reallocation of Capital
Global financial institutions like Blackrock and Goldman Sachs are now publicly espousing the benefits and the essential need for investment to be in sustainable assets. Not to do so presents a real financial risk to a company and the opportunities in this growing sector are too great to be ignored.
It is now no longer good enough to be green, there are billions of investments being made into sustainable bonds, so businesses that are not considered sustainable will find it difficult and expensive to raise capital.
The financial giants recognise the dangers and opportunities of sustainable investment and are actively reallocating capital to areas where profit can be made by protecting the planet or its people.
Quite a seismic shift for capital markets.
Google this week announced that it would no longer custom build artificial intelligence and machine learning tools for fossil fuel extraction companies. A move driven by their own employees, whose voices and demonstrations have changed a policy of one of the world's super-companies.
We expect all voices for change and social improvement to be amplified in the months and years ahead. Companies who ignore this will be at risk of their value being eroded.
So what does this mean for Save & Invest and our clients.
It means that the changes we had anticipated are happening even faster than imagined. The nudges towards sustainable investment being brought about by legislation are now being accelerated by the priority changes that Covid19 has initiated.
Markets have sensed the opportunities the post-Covid world could create and there is a general lift in optimism as economies re-open. Our view, pre covid, was that we wanted our portfolios to move to a more ESG orientated position, to funds with new, not old world companies. New ESG funds are emerging, and traditional funds are adjusting, all of which takes detailed research before we can make our final recommendations to each individual as volatility continues to subside.
Our new look portfolios will not contain 100% of funds describing themselves as ESG funds (funds with Environmental, Social and Governance, wholly driving their decision making), but if you would like your portfolio to be comprised solely of these style of funds, please let us know, by responding to this email, as we can arrange suitable ESG portfolios for any client.
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