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.