Do you feel lucky Punk?
With political pundits divided in their assessment of Joe Biden’s first 100 days (already receding in the timeline) there is remarkably broad consensus on many of the issues he faces: National division around both race & opportunity, climate change and and dealing with the consequences of the COVID pandemic.
As a sub-heading - but a very BIG one - it also has to deal with the massive infrastructure problems across this vast country - which his Administration has to combat with a near empty purse.
And it is not a surprise to many, that those areas are intermingled in the ‘Build Back Better’ mantra uttered by some whose ambitions for a fairer, better world are growing by the day. But what exactly does that mean and are these issues all about cost or are there opportunities to be had as well?
On the issue of gender and ethnic equality, it’s a def yes to the opportunity it offers those with the commitment and money to make a difference. Indeed, you can choose the carrot or stick, as evidenced by increasing Shareholder successes in another direction regarding environmental progress which we saw in the success they had in moving Exxon and others to do their bidding. If applied to the increasing pressure on companies to improve ethnic and gender diversity on their boards ahead of the annual meeting season it could be the single thing that moves the dial exponentially in this important area. The message to boards is clear: the choice is yours; do it voluntarily or be forced to do it and risk the negative PR that will come with that.
Frankly, it seems like a no=brainer because when it comes to gender diversity, research shows that more gender diversity on the board of directors impacts firm risk by contributing to lower variability of stock market return. The higher the percentage of female directors on the board, the lower the variability of corporate performance.
Harvard Business review said this: After examining tens of thousands of VC investments, Gompers has found that diversity significantly improves financial performance on measures such as profitable investments at the individual portfolio-company level and overall fund returns. And even though associating with similar people can have social benefits for people who do so, it can lead investors and firms to leave a lot of money on the table.
Which leads us on to climate change, what investment opportunities could Investors expect to see there through shareholder action? On their white paper looking at Megatrends earlier this year, PGIM have said ‘The implications for investors lie as much around innovative and transformative technologies to further the transition to a lower-carbon world as they do around identifying and mitigating hidden vulnerabilities across their portfolio.’ Read the full white paper here.
Given that the UK’s freedom day, formerly set for Monday the 21st of June, has been shunted down the road for a month, many may find it hard to believe there are any opportunities but Cannacord Genuity have predicted 6 here starting with
1. New lifestyles lead to new technology trends through to the highly understandable
6. The rise of healthcare with 4. ESG set to become a core investment theme. Read the full report here.
But it doesn’t end there, not by a long shot. Anyone who has driven a newly inflated tire on Britains road’s can often be heard complaining bitterly about the potholes and general state of disrepair our highways are in. Arguably down to climate change and the old materials used to repair them, it’s a challenge faced around the globe in both developed and developing countries. In the USA, where infrastructure has been both enormous in both its size and ambition playing a key role in its dominant on the world stage, the challenge is even greater. Bridges have collapsed, huge swathes of land are being consumed by either fire or floods with railways linking the East & West coast of America falling into serious disrepair forcing the Biden Administration to commit over $2 trillion to addressing the situation within months of taking office.
Texas, long embedded in global minds as being the embodiment of ‘Bigger is Better’ thanks to shows like Dallas and others as it became intrinsically linked with wealth and success, had floods in March which saw nearly 400,000 of its citizens left without drinking water. In May, Tornadoes, flash floods, and hail have caused extensive damage throughout the south of the United States. The region has been battered by four days of storms and the dangerous weather is predicted to continue.
Assuming it survives the assault of these appalling and unseasonable weather events, the underlying infrastructure will have been fundamentally damaged and by association therefore, so has humanity. Even slight errors in measuring the state of a system - or its knock-on connection to other key elements - we can say, with some confidence, that it will be amplified dramatically, rendering any prediction useless. Since it is impossible to measure the effects of all the butterflies in the World, it is therefore impossible to make accurate long-range weather predictions, leaving us with the only other option - Hope. Which begs the classic Clint Eastwood question: Do you feel lucky Punk?
That is surely where ‘Build Back Better’ becomes more than a mantra. Where developers take long term investment views, rebuild structures we know can withstand the worst effects of climate changes and comes to the pragmatic realisation that no one is safe until everyone is safe, whether through vaccine programs, inclusivity & diversity or understanding - not just collecting - the implications of the data we collect and developing - collaboratively - solutions will address everything in the round and not just for individual benefit.
That is surely where the global financial community can demonstrate its outstanding skill in thought leadership, can create investments which measurable impact and help deliver a brighter future for all.
One very large apple pie perhaps, but one worth making.
