CIO OUTLOOK 2021 From Resilience to Resistance - February 2021 - Alternative Views | Tikehau Capital
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CIO OUTLOOK 2021 From Resilience to Resistance February 2021
CIO Outlook 2021 From Resilience to Resistance
TABLE OF CONTENTS
06
Resist a roll back
12
North America:
CIO OUTLOOK 2021:
FROM RESILIENCE
TO RESISTANCE
on sustainability – can a green
it is our present, new deal resist
not just our future economic upset? When the Covid-19 pandemic took
hold in 2020, the economic fallout that
followed highlighted the vulnerability of a
08 14
world relying on short-term growth. The
pandemic may have been the catalyst for
the crisis, but the conditions were already
in place: a large global debt pile and highly
Resist the Leading power or stretched valuations.
temptation to resistance fighter?
overpay – there Opportunities Exceptional public policy measures implemented on a global
are other ways abound in Europe scale in 2020 created the conditions of resilience. It helped
governments, societies and financial markets get through the
greatest shock of a generation.
10 18
These measures will have consequences, however, which
are likely to stretch out through this year and beyond. This
means we, as investors, must develop a strategy and ethos of
resistance to tackle them. We need to resist the temptations
of excessive valuations and considering abandoning our
Why is Asia Conclusion: The sustainability commitments. We also need to examine how
regional economies will find their own way to resist.
already resisting role of asset
the economic management on Finding the balance between resilience and resistance is the
downturn? the path to 2022 only path to 2022, and, as asset managers, we will have a key
role to play in meeting the challenges that lie ahead.
2 3
CIO Outlook 2021 From Resilience to Resistance
2020: a time for resilience Unlike in 2008, these measures are not aimed at holding up Inflation Equities – either listed or private – ordinarily come under
the banking sector, but instead to support businesses that In an economy that is being propped up by generous monetary pressure from inflation, but companies that are asset light and
In their quest to achieve growth, companies have pulled all of have suffered during the pandemic. While cash injections have and fiscal stimulus measures, inflationary risks are high. Just as are good at capital allocation tend to be resilient. Companies
the available levers in recent years, leaving them with little room been imperative to keep companies across a wide spectrum these policies were gradually unwound following the financial with good organic growth often have resistance to “multiple
for manoeuvre in the event of even the faintest downturn. This of sectors going, there is a strong danger of this emergency crisis, the same could happen this time, but it is not yet clear compression” in inflationary periods, and those that have asset-
included moving production to cheaper locations, squeezing capital either being misallocated or wasted. if this will be straightforward. light business models could be much more agile in renewing
supply chains, and boosting share price performance, share their asset base.
buy-backs and debt issues. US companies bought back $5tn All of this is taking place in a corporate landscape that presents The potential for inflationary pressures in the months and
of shares over the past five years and there has been a record plenty of challenges both for businesses and investors. The years ahead exists. In the current geopolitical environment, Overall, the picture for 2021 and beyond appears, at first
issuance of debt. recovery in 2021 is likely to be more of a catch up to pent- we may see a further retreat of globalisation that will increase glance, to be challenging. Structurally, there are obstacles to
up demand created by lockdown measures rather than the prices through trade tariffs and higher costs of production overcome and it is not certain all sectors and regions will move
We also saw instances of ‘creative accounting’, which enabled emergence of a new trend – and the debt overhang could be as companies choose not to source labour and production through the next period at the same pace.
companies to focus on adjusted earnings largely deviating significant. High levels of sovereign debt could be a drag on overseas. Meanwhile, the technological advancements that
from GAAP standards or using EBITDA add-ons in private growth, while the number of companies unable to afford their helped to force prices downwards may also be brought to heel by Yet, we believe there is significant opportunity for investors
markets, along with a focus on optimising fiscal models by debt servicing costs could rise even higher. In 2016, the Bank for increased government regulation. In parallel, a contracting global who can perform in-depth fundamental financial and extra
securing profits in low-tax jurisdictions. In 2019, 50% of International Settlements estimated that 12% of all companies working population could have long-term inflationary effects. financial research and source deals locally in order to remain
US profits generated offshore were in jurisdictions with low were so-called debt zombies. selective and disciplined.
levels of taxes. Given the prospect of inflation, investors must reassess
This landscape is likely to prove challenging for investors, their portfolios as each asset class will behave differently in Looking long term and considering sustainability at every juncture
By January 2020, global debt levels had reached 300% of GDP with plenty of value traps that will only be avoided through such an environment. Real assets, including real estate and is going to be key to investor portfolios and we are eager to be
and many securities were enjoying extremely high valuations. careful selection. infrastructure, usually behave well during times of inflation. part of their success. We believe sustainability is going to drive
As we have moved through the pandemic, it has become profitability, and environmental, social and governance factors
more obvious than ever that our economic model needed to On a more positive note, the coronavirus rescue packages Private debt instruments, which are generally issued as floating are going to be among key sources of long-term financial value
evolve towards more sustainability. have the potential to effect transformative change in the rate instruments, provide investors with exposure to almost creation, as well as important risk mitigators.
global economy by strengthening health systems, enhancing pure credit risk with limited duration risk.
digitalisation and accelerating the transition to a carbon neutral
2021: a time to resist? economy. As an example, the EU plans to dedicate 30%
of its €750bn Covid-19 recovery plan to climate-change
Quantifying the support related measures.
Exceptional public policy measures on a global scale helped
douse the economic flames that spread during the Covid-19 Dispersion is the new correction
outbreak. The rescue packages focused on investment and Long-term interest rates have reached a floor after falling for 35
recovery and dwarfed those implemented in the 2008 financial years. Lower interest rates helped the reign of beta acting as
crisis. By the start of 2021, the cost had exceeded $10trn in a tail wind for risky asset valuations across the board. During
the G20 alone. this time, it was possible to generate attractive returns in a
portfolio through straightforward asset allocation decisions.
The US government’s $3.7trn fiscal response is about We believe this is no longer going to be the case.
20 times that spent on the Marshall Plan and four times the
cost of the Vietnam War, after adjusting for inflation. This With stable long-term interest rates, value creation in asset
means its debt is 125% of its GDP, which is above the peak management is rotating from asset allocation decisions to
of the Second World War – and there is more to come. asset selection. In 2020, we already observed a massive
The People’s Bank of China injected more than RMB3trn dispersion between expansive quality sectors and value
($460bn) into the banking system towards the start of the sectors but also inside sectors or geographies.
pandemic, along with other financing support measures
added along the way. To generate returns in this environment, we must therefore
seek value in quality sectors and quality in value sectors.
4 5
CIO Outlook 2021 From Resilience Expert
to Resistance
Insight
RESIST A ROLL BACK ON
SUSTAINABILITY – IT IS OUR
PRESENT, NOT JUST OUR FUTURE
When the way forward is uncertain, it is easy to revert to ways that Tikehau Capital has already made huge strides in this mobilization
were successful in the past. Yet, for a key part of our economy, effort – we believe we are well ahead of the curve. Since 2018,
this is neither possible nor preferable – and increasingly we with the launch of our fund dedicated to energy transition, we
believe it will soon no longer be profitable either. have put our own capital and investment talent to work.
According to the Intergovernmental Panel on Climate Change, We believe economic growth and fighting climate change go hand
we have less than 10 years to stop or even slow the impact in glove. For us, being profitable means being sustainable. You
greenhouse gasses are having on our planet. That means we can see this in our investment approach and deployed capital.
must cut emissions by half by 2030.
We provide growth capital to private companies whose business
As a global community, we have been trying to make a it is to have an immediate and positive impact on lowering
difference, through agreements, global organisations and greenhouse gas emissions. By providing €100m to launch the
treaties, but despite best intentions, the world currently emits energy transition fund, we not only aligned interest with our
more greenhouse gases than it did five years ago. investors but also showed industry leadership by establishing
new investment priorities.
We need to move more quickly. The time for gestures is over.
The fund has already invested more than €400m in six small
To meet the climate challenge, the global economy needs and mid-size companies that employ more than 3,000 people
a profound shift away from fossil fuels towards low-carbon and are committed to transitioning our energy supply.
alternatives. We must realign our economy with the trajectory laid
out in the Paris Agreement, which starts with investing through Other firm-wide initiatives guide our investment approach and
a model that better respects our environment. ensure our portfolio companies avoid close to a million tons
of CO2 emissions over their life cycles. We believe this is just
We need rapid, massive investment in low-carbon energy the beginning.
production and other technologies that will enable our energy
transition. The International Energy Agency estimates that Investing in amazing companies that are changing our economic
financing needs for such a transition will exceed €7.5trn over model to a low and, eventually, zero-carbon future is the key to
the next 10 years. opening the door to a sustainable economy.
Those who are responsible for investment capital are integral There is a certain irony that we are the first generation to
to this happening. We can create investment strategies that experience the effects of climate change and the last that can
address the climate emergency. Our industry is uniquely still make a difference.
positioned to mobilize part of the €80trn held by the world’s
major institutional investors to empower that transition. We The clock is ticking. Let’s go.
need to allocate less than 10% of these assets to energy
transition to succeed.
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CIO Outlook 2021 From Resilience to Resistance
RESIST THE TEMPTATION TO OVERPAY
– THERE ARE OTHER WAYS
When the figures for 2020 are finalised, they could show global These numbers might be remarkable on their own, but when
GDP to have contracted by between 3-5%. The fall in output we acknowledge that 52% of high yield issuers in the US were
in the US will be between 5-7%, while Europe is expected to downgraded by rating agencies in 2020, versus the previous
shrink 8-10%. high of 45% in 2009, they are even more astounding.
All the while, China will have been growing by around 2%. In Yet, it is worth noting that thanks to the support from
fact, China could be the only major economy that spent 2020 governments and central banks, the US trailing 12-month
in growth mode. speculative-grade default rate sits at 8%. In 2009 it peaked at
14.2%. This is the consequence of massive support policies:
Entering 2021, the world is carrying a lot of debt. Its ratio to despite a deteriorating credit quality (downgrades), default rates
GDP is at an all-time high of 365%. remain lower than in the previous trough.
A lot of this debt pile is very low yielding, but perhaps more Equities are also costly as global stock markets hit record highs
shockingly is that some $17trn actually offers a negative yield in spite of the pandemic and an actual on-the-ground disaster.
- an all-time high that does not warrant celebration. After its March collapse, the S&P500 reached a record high in
2020, growing 69% from its nadir by the end of the year. The
As has always been the case, the safer the asset, the lower the index now trades around 28 times 2021 earnings, knowing that
yield. As 2021 began, around 90% of government debt was those earnings are themselves estimated 35% higher than 2020.
paying its holders less than 1%. More broadly, 80% of all fixed
income securities were yielding less than 2%. Private assets valuations are not immune from these high
valuations. Private equity transactions are going through at
Most startling is the 10-year US Treasury. In the 10 years to the more than 10x EBITDA, another record. Private debt issued
start of the Covid-19 pandemic, it averaged a yield of 2.4%. In by industries that are relatively shielded from Covid-19 is also
2020, however, it collapsed to 52 basis points, more than three subject to competitive pricing. Real estate and infrastructure are
standard deviations below average. The market had never seen priced up too in sectors that are not impacted by the pandemic.
anything like it before, nor had it seen the knock-on impact to
other securities. The good thing is that dispersion is also very high. This provides
opportunities for investors who manage concentrated portfolios
Liquid credit yields are also at near record lows. Europe-issued using in-depth financial and extra financial research. Now is the
high yield credit is trading at around 2.8% - close to its all-time low time to be disciplined on asset selection.
of 2.4% - with US high yield trading lower than its previous historic
tight at 4.5%. Extraordinarily, half of all European investment
grade bonds were trading at negative yields as 2021 dawned.
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CIO Outlook 2021 From Resilience to Resistance
a whole range of goods and services blossoming. The shift
from these economies being led by exports to consumers is
speeding up.
As an example, the Indonesian middle class has grown from
making up 5% of the population in 2005 to 20% today. This
group is expected to be 35% by 2030 – or around 90 million
people. This signifies huge numbers driving sustainable growth.
All this is helping the region to build an environment of
self-sustainability, as a significant share of Asian trade
is done between its constituent countries. External trade
makes up just 20% of China’s GDP and Beijing’s top trade
partner for the first nine months of 2020 was the Association
of Southeast Asian Nations. The superpower’s trade with this
10-member bloc totalled roughly $481bn, which was more
than it exported to the US in 2019.
In fact, Vietnam absorbed 29% of China’s exports in 2020
WHY IS ASIA ALREADY
– leading its ASEAN neighbours – and contributed nearly one-
quarter of its imports from Southeast Asia.
RESISTING THE Aside from pure trading, however, the sophistication of the region’s
investment markets has also increased. We have been seeing
ECONOMIC DOWNTURN? traditional asset classes, such as listed publicly traded equities and
debt, giving way to a larger range of alternatives instead. Private
equity and debt, along with real assets are growing in availability
Discussions about Asia are too often dominated by China and better-paid workforce in China is saving more, meaning the and popularity with Asian investors throughout the region. The
its progress to becoming the number one global economy domestic investment sector is growing quickly to meet demand. inclusion of Chinese equities in major international indices has
within the decade. While an enticing story, to concentrate on also seen their popularity strengthen significantly.
one country misses much of the promise of the surrounding These northern countries also managed the Covid-19 pandemic
region that investors should be eager to hear. better than their southern neighbours, leaving them less of a Helping to facilitate this growth is the rapid increase of the
long-term economic and societal fall out to tidy up. Asian ultra-high-net-worth population, which has developed in
By 2050, Asia could be home to two thirds of the world’s step with significant institutionalisation and professionalisation
population, and the face and personality of this group of In South Asia, the picture is also more mixed. of investment activities.
people is changing rapidly. Improvements in living standards,
education and expectations, mean the region’s requirements Generally, however, the region has a relatively young population Previously concentrated in US and European markets, Asian
and, therefore, economic growth trajectory are accelerating. that is benefiting from improving standards of education to sovereign and pension funds are investing more domestically
However, for the moment, at least, we still need to make a bolster an increasingly sophisticated workforce. Yet, there than ever before.
distinction between North and South Asia, as the stories remain is evidence of rising social tensions in some areas, with
quite different. some governments failing to manage the covid-19 crisis Importantly, as this region’s investors are growing in
particularly well. significance and sophistication, they are also showing an
For example, the population in Northern Asian countries, such awareness of ESG trends and their potential impact on
as China, Japan and Korea, is ageing – in some cases quite One element that binds both South and North Asia is the investment decisions. The “E” element is of particular
quickly. This phenomenon impacts a country’s workforce, rapid development of the middle class. Outside of Japan and focus, as this increasingly important group of investors
output and spending power, which are important factors in Korea, which have established this tranche of society, China, are taking a greater focus on social responsibility and
its economy. Yet, alongside this, a more sophisticated and India and Indonesia are seeing strong domestic markets for sustainable development.
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CIO Outlook 2021 From Resilience to Resistance
Focus on US private assets – the
what, why and how of resilience
As a function of being the dominating economic superpower with
the biggest asset pool, the US is the world’s largest market for
private assets – but it has also taken the lead due to structural
reasons. The country’s largest investors are much more comfortable
with holding private assets than their European or Asian peers,
which has led to a healthy supply and demand paradigm.
However, as the hunt for yield by global investors has grown
substantially over the past decade, so too has the international
demand for US private assets.
The right private assets provide what long-term investors need:
regular, predictable, often high-yield-level returns. We have
seen this trend move into Europe and other markets that have
previously not been hot spots for private assets as demand and
NORTH AMERICA:
methods of accessing capital change.
CAN A GREEN NEW DEAL
As we face an even longer period of low interest rates, we
expect this to increase further. We believe the impact of the
pandemic will also attract investors around the world towards
RESIST ECONOMIC UPSET? private assets of all types. Despite the trillions released through
support packages, there is clear evidence it has not always
reached the real economy. This means there are plenty
With the appointment and inauguration of President Biden, However, it is important to note that despite the Trump of opportunities to support good, healthy mid-market
we can expect a very different White House. The incoming Administration’s efforts to undo measures taken to combat companies that have not received central support and do
administration campaigned on levelling out inequalities and climate change and other environmental protection policies, not have the size to access capital markets.
taking action on climate change. investors all around the US did not universally follow his lead.
We are also seeing our sector bifurcating between the low-cost
The new president has already announced a range of policy Indeed, institutional investors and smaller savers, too, have approach of aggregating assets and managing by volume and
issues he will target during his first term. We expect to see more been following a clear path towards sustainable investment the specialist method of curating portfolios in specific regions or
generous stimulus packages as the nation continues to battle strategies in both public and private markets. While this has led sectors. This bespoke approach to collating portfolios – favoured
the Covid-19 pandemic, with the largest US companies less to some high valuations, we believe the trend towards these by Tikehau – not only helps investors see and understand the
likely to be awarded any more tax breaks. ESG strategies is set to continue. market to which they are allocating capital, but it also helps
align investor and manager interests.
Importantly, this administration has laid out its intent to re- One thing we think is unlikely to change, however, is the US’s
green the US through its policies. One of the first acts has stance on China. While the approach and rhetoric may change Along with demonstrating how different these approaches can
been a recommitment to the Paris Agreement, followed by the a little, the same issues remain between the world’s greatest be, this bifurcation has enabled us to target a different selection
appointment of John Kerry as a special advisor on the issue, superpowers – namely the tussle for global economic, monetary of deals to the much larger players. It also allows us to get closer
surrounded by a large team, to drive the US into holding a and strategic leadership. to each potential company and thoroughly investigate their
leading role once again. We expect one key element of this sustainability criteria and if there is possibility for improvement.
to take the form of a New Deal or infrastructure plan that is
grounded in green technology. We believe this approach can ensure our portfolio companies
are aligned with our views on the profitability of sustainability –
and empowers us to lead the way in this sector.
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CIO Outlook 2021 From Resilience to Resistance
The European opportunity
While the first year of the Covid-19 pandemic will be marked by
recession across Europe, the agreement of the €750bn recovery
fund, which is partially financed by debt mutualisation, signalled
a major step for the region. The deal significantly reduces the risk
of a currency blow up and brings stability for long-term investors.
There are around 180,000 mid-market companies in Europe,
which are responsible for one third of employment and
value add, so providing them with long-term financing is
vital to supporting the region’s economy.
There is also huge promise for the not-too-distant future too.
The stability brought by the deal should help Europe take
the lead in high-growth sectors such as energy transition.
This, and other forward-looking industries, are set to take off
rapidly thanks to international political buy-in.
LEADING POWER
Establishing a leading position on such future-focused sectors
should help Europe and its investors to be positioned to
OR RESISTANCE FIGHTER?
capture important opportunities in the current low growth/
high debt environment.
OPPORTUNITIES ABOUND IN EUROPE While Brexit remains a “special situation” for the UK market,
due to its proximity – geographically and economically – with
Europe, we believe it still has strong investment opportunities.
Europe at the end of 2020 is a region in recession. Europe’s Over its history, Europe has developed a deep investment
cyclical and value bias – its main sectors are industrial and financial culture, drawing on its academic background and political Opportunities in private equity: Aerospace
– make it vulnerable to the global cycle and to flat yield curves. stability. Furthermore, its steady legal system has produced laws The megatrends of globalisation and a growing emerging-
that have evolved over time encourage businesses to flourish. market middle class that had been fuelling the massive growth
The region’s economy is also still mainly financed by banks, of aerospace were crudely cut short by the pandemic.
which are facing increased regulation and competition from Thanks to its idiosyncrasies, investors who have developed
institutions both inside and outside the region. local knowledge and networks and boast strong, Manufacturers of original equipment (OEMs) received support
disciplined asset picking capabilities can unearth a range from governments, but their supply chains remain fragmented
Additionally, Europe is more exposed to globalisation of opportunities. One of our mantras is that “good deals have and lack patient long-term capital.
than the US and China, which both boast homogeneous no wheels”, by which we mean nothing can replace being close
domestic markets. to our partners and companies in Europe. We see a significant opportunity to strengthen the capital base
of performing mid-market companies in the sector, not only
Yet, the bloc does offer the advantage of being the only These are all reasons why we have seven offices in the region, to allow consolidation but also accelerate the transition of the
sizeable alternative to the US in a global asset allocation – and the eighth to open in 2021, and are confident Europe will perform sector toward more efficient, greener planes.
more besides. well for investors.
By accessing private capital, these companies can make the
changes they need to pivot to a new, sustainable industry. The
challenge for investors is selecting from a range of extremely
high-tech companies, which are sometimes family-owned.
There is significant complexity meaning deep understanding of
the technicalities and dynamics of this business is fundamental.
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CIO Outlook 2021 From Resilience to Resistance
We believe the future lies in consolidation through the injection of Inside the category of core real estate, we have seen dispersion
stable investor capital, enabling the strongest players to perform between good assets and those deemed ‘less quality’. Offices
at the highest level. We aim to combine our best practice in and retail are excellent examples of this, as those in ‘good’
private equity with strong technical knowledge of the sector to locations, such as within mixed residential and city centre areas,
create value for investors. often have more value that those on the periphery.
Opportunities in credit: Banks What has not changed within the real estate asset class,
Over the past decade, European banking stocks have traded however, is the value within redevelopment projects. One
at deep discounts to their book value thanks to a combination particular area of interest for us, is the value that can be
of factors. Tough post-crisis regulation, low European GDP unlocked in the conversion of full retail or office space into
growth and interest rates, have sat alongside competition from entirely residential or mixed residential-office premises.
both neighbouring state and international banks and an M&A
cycle that has taken chunks out of their value. Opportunities in private debt
Private debt has become very popular in Europe and the US
For a quite some time, the return on equity for these relatively over the past five years, with a once-concentrated market in
cheap banks has been structurally low, while, in parallel, sections France and the UK now spreading through Italy, Spain and the
of the debt issued by these same institutions have performed northern part of the continent.
relatively well.
We are seeing an acceleration of a trend that had begun before the As an industry that
Subordinated debt instruments have offered investors a way pandemic of companies refinancing to extend maturity by shifting
to capture some of the upside created by the banking sector from a bank pool to private debt funds. This allows flexibility to allocates capital, we have
a responsibility to those
while carefully managing the risk. Those instruments benefit from borrowers at crucial moments, of which they are likely to have seen
harmonised banking supervisory, clear documentation, high many during 2020. Even Germany, where the economy was heavily
capital buffers, low systemic risk in the sector and a high-risk
premium despite the low probability of default by a major bank.
financed by banks, has become an active market for private debt.
who will be impacted by
Financial subordinated debt instruments are complex and
This shift also enables lenders to assess borrowers against
their ESG or impact investment criteria, and potentially our decisions. Yet rather
require in-depth financial analysis by an experienced team
who has a deep and up-to-date understanding of the banking
work with a company to help it become more sustainable
in the long term. than it laying heavily upon
sector. Whoever is researching and selecting these instruments
also needs to fully appreciate the European landscape and the Investors are increasingly focusing on non-financial criteria. us, we believe we can
bank’s local specifics. Europe has been leading on this, but the US is catching on to
the trend, too, so investors need real answers and solutions
use this responsibility to
We have an expert team and, since 2011, have been managing
a dedicated “subfin” fund. We see a strong relative value
from their managers. Also, each investor has different ideas
about what sustainability means and which elements are the
help create the resilience
opportunity in this space. most important, so managers need to be able to define and
illustrate how their approach can meet their needs.
the world and our global
Opportunities in real estate
Covid-19 has taken its toll on most asset classes and created While there is growing appetite in Asia, it remains an asset
economy needs while
clear price disparities. With real estate, however, the asset price
dispersion is even more distinct.
backed loan market, concentrating on special situations funds.
However, the private debt market is accelerating through
aiming at generating
Having significantly changed the way we live and work
consolidation between large global players and historical Asian
focused funds and, we think this will lead to a very interesting
better, sustainable
overnight, the impact of Covid-19 on the real estate sector
will be felt for a long time. Hotels, retail and offices have been
value proposition for investors looking for significant cash yield. long-term returns.
largely hit but here again, asset performance varies across Even though it is generally expected that there could be a rise
location, geographies and depends on local specificities. in default rates over the next year, we believe there is enough
Logistics assets and some parts of the residential segments flexibility, value and opportunity for direct lending to continue
have benefited from the crisis. to offer an attractive risk-adjusted premium in a likely continued
low-yielding world.
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CIO Outlook 2021 From Resilience to Resistance
CONCLUSION: THE ROLE OF ASSET
MANAGEMENT ON THE PATH TO 2022
If banks were viewed as the enemy in the 2008 crisis, asset managers have an opportunity
to become an ally in 2021. The post-Covid-19 environment should provide an opportunity
for asset managers to position themselves as systemically important by not only working
to produce returns for clients, but also being financiers of the real economy.
The disconnection between financial markets and the real With their deep sector knowledge and direct connections to
economy is a massive social issue for governments. This had investors, asset managers can play a pivotal role in this process
already been brewing before the 2008 financial crisis but was by providing the financing solutions that governments need.
further fuelled by extraordinary quantitative easing efforts by With €80trn, the industry can play a crucial role to empower
central banks. Such measures benefited corporations but left the climate transition, but we must not waste any more time.
much of society behind. For example, the market capitalisation
of the top five technology stocks accounts for around 20% of As an industry that allocates capital, we have a responsibility
all listed companies in the US, but these giants create few jobs to those who will be impacted by our decisions. Yet rather
themselves and threaten jobs in other sectors. than it laying heavily upon us, we believe we can use this
responsibility to help create the resilience the world and our global
If governments do not address this mismatch, they risk falling economy needs while aiming at generating better, sustainable
out of favour with influential sections of the voting public. It is long-term returns.
the smaller, often unlisted companies that provide the most
employment opportunities and are the true engine of global Our time is now.
growth and prosperity, therefore governments will probably
consider placing a strategic priority on financing the real economy.
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