SIMC20: Pandemic challenges and geopolitical uncertainty must not distract investors from long-term sustainable focus

Investors must remain focused on the long term and the investment benefits of sustainability, despite the short-term challenges caused by the pandemic and geopolitical uncertainty, attendees at Schroders’ International Media Conference were told.

This is despite many investors now acutely concerned about the investment impact of a global economic slowdown amid falling confidence levels, as evidenced by Schroders Institutional Investor Study earlier this year.

The study found that almost all investors (91%) feared Covid-19 would cause a major global recession.

Johanna Kyrklund, Schroders’ Chief Investment Officer, commented:

“Good investment is about cool-headed decision-making. The source of uncertainty will always be different but well-established investment processes are designed to cope with this. They enable active fund managers to step back and assess – and dispassionately search for opportunities regardless of the conditions.

“Good investment also involves deciding on a long-term strategy and sticking with it. Despite the ever-evolving situations investors face, investors need to focus on calm and rational investment decision-making.

“The result of the US election was big news for the world, for the economy and markets. But as an investor I’ve always considered the pandemic of far greater consequence.

“Is this the start of a major rotation? Quite possibly. We may finally have found the catalyst to spark a move away from the “stay-at-home” stocks that have benefited from lockdown, towards recovery stocks.

“News of a vaccine makes it less likely that we will need fiscal stimulus to plug the demand gap associated with potential lockdowns. We are optimistic that the uncertainty that has plagued us through most of 2020 has dramatically declined. Suddenly there is cause for optimism for 2021.”

Charles Prideaux, Schroders’ Global Head of Investment, commented:

“The inescapable truths faced by investors remain as important as they ever have been. The pandemic has only served to heighten the impact on record low interest rates, economies’ healthcare spending and the pace of technological change.

“The virus will reinforce the trends that were driving activity before the outbreak struck, by challenging the growth path, creating greater pressure on government finances and increasing inequality as technology becomes ever more pervasive. Investors will need to be more agile than ever to achieve their objectives in the face of these Inescapable Truths.”

Andy Howard, Schroders’ Global Head of Sustainable Investments, commented:

“The value of investments that we manage is being impacted by a wider range of challenges, on a bigger scale, and at a faster pace than we've seen before. Understanding which investments will be on the right or wrong side of those changes is becoming increasingly important to generating value and creating returns in a more complex world.

“Sustainability isn't a compliance exercise, it is fundamentally about trying to understand how the world is changing, the challenges it faces and ensuring that our investments are lined up to help tackle those issues.”