Analysis and opinion
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Opinion PiecesInfra must adapt to meet pension goals
Looked at collectively, or even individually, the cashflow needs of Europe’s defined benefit (DB) and hybrid pension schemes are huge and potentially challenging given the scale of income generating assets needed to help service them.
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Opinion Pieces
The world is approaching an inflection point
Domestic challenges and US political developments have proved such a preoccupation recently that it has been all too easy to miss a key global shift. China’s rise to global prominence has accelerated markedly as a result of the past year’s events.
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Opinion Pieces
COVID-19 barely tested the financial system
The financial system seems to have coped well with COVID-19. This is despite the repeated recent warnings about a build-up of systemic risk. In turn this has been linked to the abundance of cheap debt and the growth of the asset management industry.
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Opinion Pieces
‘Close contact’ needed amid pandemic
Multiple lockdown restrictions have brought about a simpler way of working for some – remotely from home for most – but for institutional investors it also meant coming up with strategic models that could maintain the quality of asset managers’ due diligence – existing or potential.
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Features
The pandemic end-game
Overcoming COVID-19 and ensuring no recurrence is proving to be a formidable challenge for the global economy. The worst may still lie ahead. Even health systems in developed markets are creaking at the seams with the second and third waves of the pandemic. More transmissible mutations of the virus are making the task even harder.
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Opinion Pieces
Social purpose: the new dimension
Investors’ attention turned to human capital issues in 2020 as COVID-19 took hold – including the treatment of staff and other stakeholders, as well as dividend policy and executive pay in cases where companies have received taxpayer support.upport.
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Opinion Pieces
Japan is not that different
One of the abiding myths about Japan is that it is different from everywhere else. Not just distinctive in the sense that all countries have peculiarities but uniquely different.
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Opinion Pieces
The real meaning of engagement
Empirical evidence suggests that individuals are unengaged with DC pensions. This is demonstrated by the vast majority of DC members remaining in default funds and reluctant to increase contributions.
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Opinion Pieces
Uncertain conditions call for a steady course
The impact of COVID-19 has made long-term strategies that embrace resilience a high priority for pension funds to ensure there is a smoother ride during turbulent times.
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Features
Biodiversity can be measured
Last year was clearly the year of the pandemic. Perhaps the connection between zoonotic disease and biodiversity loss may explain why it has also been the year that biodiversity has become a theme of great interest for investors. Yet current environmental, social and governance (ESG) data and metrics do not cover biodiversity adequately.
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Opinion Pieces
Resilience: how investors can secure it
Back in March 2020 as the extent of the coronavirus in western Europe was becoming clear, Risto Murto, president and CEO of the €49bn Finnish pension insurer Varma, called for the creation of “healthcare buffers” to mitigate the effects of future pandemics.
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Opinion Pieces
Jobs crisis threatens pension provision
Hopefully one of the few benefits of the COVID-19 crisis will be to show that the impact of an ageing population is exaggerated. There are other key elements informing the ability of a society to provide decent pensions by whatever means.
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Opinion Pieces
Deleveraging is no free lunch
After temporarily shutting down the global economy, governments are pursuing a massive fiscal expansion in order to support struggling businesses and consumers.
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Opinion Pieces
Improvement required
Climate change will continue to be one of the most economically impactful events as it affects us all. It requires immediate and ambitious action to prevent the worst effects on people and biodiversity and it signals a message that nations need to build a more resilient and sustainable global financial system.
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Features
Is sustainability mispriced?
Living in the developed world over the past 50 years, life has been stable, even idyllic, for most people. That is certainly compared with their grandparents and previous generations who lived through two world wars and the Spanish flu. But, as COVID-19 has shown so cruelly, there are existential dangers that can lie hidden. These can rip the established world order asunder if not tackled beforehand.
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Features
Accounting Matters: Accounting for the Wedge
The reason why defined benefit (DB) scheme sponsors account for inflation is because International Accounting Standard 19, Employee Benefits, tells them that if they make a benefit promise that is linked to price increases, the effect of that commitment has to be accounted for. The starting point for what by any standards is a gargantuan actuarial task is to look at yields on inflation-linked bonds.
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Features
Biden signal is green for ESG
For many, US president-elect Joe Biden spells hope. From an ESG-perspective, there are two main aspects to this phenomenon.
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Opinion Pieces
The looming trust deficit
Once again, European pension systems – notably those of the Netherlands and Denmark – have scored most highly in this year’s Mercer CFA Pension Index. These successes are no accident, and among the key ingredients is years of pragmatic and consensual policy making.
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Opinion Pieces
COVID is not everything
For understandable reasons it has become commonplace to talk about the immense damage done by COVID-19. This probably makes sense as a kind of shorthand. However, careful reflection on the painful experience of recent months should show it is a one-sided way of understanding the pandemic’s devastating impact.
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Opinion Pieces
Talking to strangers
In his recent book, Malcolm Gladwell discusses how people’s natural lack of ability to detect lies can lead to unpleasant consequences.
