Philipp Hildebrand, BlackRock Vice Chairman, speaking at Davos on climate change
“Clients have been telling us for a while that this is an important issue. They’ve recognised that climate risk is investment risk. Sustainability risks are, ultimately, investment risks, whether that is due to physical events such as flooding or regulatory developments. Clients have understood this and they’ve been calling on us to help them get ahead of these trends…We’re at the very beginning of a significant shift in finance and we hope, as a large firm, that we can make a difference, that we can be an accelerator, an amplifier.”
“For company CEOs, this is an opportunity and a risk, like all big changes. With few exceptions, it’s very clear that almost all CEOs recognise that this is a reality and are asking how they adapt their business model to the changes. In some cases, it can be a great opportunity, in others it will be a challenge. There are very few people who feel they can simply ignore this.”
“We want to be much more transparent in how we engage with the companies and in how we vote. Also, we’ve made it clear we expect companies to live up to disclosure responsibilities, making sure that the market has the information it needs to judge where companies are with regard to climate risk.”
“In the very long-term there may be a watering-down of the return potential you have in sustainability, but this is a major shift that’s just about to happen. This is no different to the shifts we’ve seen related to the baby boom, for example. This is a fundamental reshaping of finance that will entail significant reallocation of capital and relative price changes.”
Week Past
UK inflation (December) – UK inflation fell to its lowest level in more than three years in December. Consumer prices were 1.3% higher than a year ago. Expectations had been for a rise of 1.5%, in line with the previous two months. [1]
UK retail sales (December) – Shoppers stayed cautious over the Christmas period, with retail sales volumes falling by 0.6% from November. This was the fifth month in a row without growth, with food stores hit hard. [2]
UK wages and employment – The UK labour market continued to show strength in the three months to November, adding 208,000 jobs compared to the previous three months. Average weekly earnings, including bonuses, rose 3.2% year on year, unchanged from the previous three months. [3]
US-China trade deal – The US and China signed their much-awaited ‘phase one’ trade deal. Critics said the deal lacked substance, but the deal offers a way for both sides to claim victory and has proved supportive for markets. [4]
China Gross Domestic Product (GDP) – China’s economy grew 6.1% in 2019 as the trade war with the US and domestic pressures took toll. This was the lowest economic reading since 1990, as weaker consumer spending, rising unemployment and problems in the financial system weighed on growth. [5]
US manufacturing production (December) – December manufacturing data confirmed that the sector was in a mild recession for all of 2019, shrinking 1.3%. It was the worst year for manufacturing since 2015. [6]
Week Ahead
Interest rate decisions – rate decisions are expected from the European Central Bank and Bank of Japan. In both cases, interest rates are expected to remain on hold, but markets will be looking out for any change in tone from the central banks. [7]
German flash manufacturing and services Purchasing Managers Indices (PMI) (January) – manufacturing data is expected to show some recovery from a dismal 2019 in German manufacturing, rising from 43.7 to 44.0. However, services are predicted to fall from 52.9 to 52.5. [7]
UK flash manufacturing and services PMI (January) – UK manufacturing is expected to rise from 47.5 to 48.4, as the US/China trade deal eases pressure on global trade. Services are expected to fall from 50 to 49.5.
US flash manufacturing and services PMI (January) – In the US, manufacturing is expected to fall from 52.4 to 52, with services predicted to fall from 52.8 to 51.7.
References
- UK inflation slips to three-year low, FT, January 2020
- Retail sales fall sharply in December, BBC, January 2020
- UK jobs market strengthens ahead of Bank of England rate decision, FT, January 2020
- US-China trade deal: Winners and losers, BBC, January 2020
- China’s GDP grows at slowest pace in 29 years, FT, January 2020
- US manufacturing was in a mild recession during 2019, a sore spot for the economy, Washington Post, January 2020
- IG Index, week ahead, January 2020
The opinions expressed are as of January 2020 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative only.