While it is difficult to sum up 2020 in a few short paragraphs, the year will forever be associated with one word and a number: COVID-19. The existence of the coronavirus was already known as we started the year, but few could have predicted the devastation it would wreak on lives, economies and, for a brief period, financial markets.
Ordinarily, we try to look beyond short-term events and their impact on investments; that became next to impossible at certain points this year given the need to consider all possible outcomes as the crisis played out in real time. This was particularly the case in March and April as most of the world went into lockdown. We tried our best to keep up through a dedicated COVID-19 content hub, where you can judge what we got right and wrong.
One of the most notable consequences of the crisis was an increased focus on the ‘S’ in ESG. Companies had long talked about their social purpose – COVID-19 has shone a light on those that live up to those values and those that don’t, as our global head of governance and stewardship Mirza Baig explained in this interview.
The pandemic has also had a profound impact on real assets, particularly the office sector as working from home – or living at work – became the norm. But does the relative success with which many companies and individuals have adjusted to this new working environment signal the end of the office, as some commentators claim? Not according to our head of UK real estate research, Jonathan Bayfield, as he argued here.
Staying with real assets, we also took the pulse of over a thousand decision makers at pension funds and insurers in our annual Real Assets Study, to see whether their appetite for real estate, infrastructure and private debt had changed as a result of the pandemic. The results suggest they are continuing to play the long game.
In a year where resilience was severely tested, we looked at why portfolio construction is key to resilient investment outcomes. Appropriately enough, the theme of our second AIQ edition of the year was risk; we considered what might cause the next big global crisis, from cyber threats to ecological disasters. Unsurprisingly, one of the articles looked at whether we will learn the lessons from this year to avoid another pandemic in future.
As governments and companies tried to get to grips with the pandemic, it seemed as if the urgent response required to tackle the biggest long-term threat facing the planet – climate change – had been put on the back burner. Latterly, however, finding solutions to the climate crisis has again focused hearts and minds. In the climate edition of AIQ, we considered whether one of those solutions could come from a technology with a controversial past - nuclear power; later in the year, we explored whether a more nascent option could work, carbon capture and storage.
The integration of ESG considerations into the investment process for credit is a relatively recent phenomenon. With contributions from our portfolio management, ESG and credit research teams, we explained why ESG scores provided by third-party research firms don't tell the whole story.
Another of the big ESG stories of the year was the growing problem of hate content on social media platforms. To date, the commercial impact on platforms has been limited. However, as regulatory and public scrutiny intensifies, this could be set to change as this article explains.
Finally, no look back at 2020 would be complete without considering the Black Lives Matter movement. Although investor engagement has helped drive change within companies on many fronts in recent years, from climate change to gender diversity, it has had far less impact on racial inequality. In a two-part feature, we looked at how engagement on the issue needs to change and why the industry must get its own house in order first if it is to have credibility.