What shape will the recovery take? Will ESG investing come to the fore? Will alternative data help? Post-COVID-19 investment trends were put under the spotlight in a Refinitiv-hosted LinkedIn discussion featuring experts from across the business world.
- During the LinkedIn discussion, the experts gave their views on the pace and shape of the post-pandemic recovery. Forty-four percent believe it will be a ‘W’-shaped recovery.
- In the post-COVID-19 landscape, new consumer trends will emerge. These trends include a shift to online shopping and working from home, while videoconferencing will grow in popularity.
- The first-half of 2020 has seen record levels of investment in ESG. This focus on sustainability will be a key investment trend in the future. Meanwhile, alternative data will become an important tool in analyzing future investment trends.
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The entire world sits in anticipation, waiting to see what the ‘new normal’ of the post-crisis era will look like and how we can adapt and rebuild our economies.
As part of our efforts to uncover the key trends that will shape the world post-COVID-19, Refinitiv asked the expert community a series of questions and encouraged them to share their predictions.
We explored the following post-crisis investment trends:
- What pace and shape of economic recovery do you expect to see?
- What economic or consumer trends do you see emerging in the post-COVID-19 world?
- What are the key data sets you will use to validate the emerging trends in the post-crisis data?
- Will investors introduce significant changes to their strategies as a result of the global crisis?
- What is the key to building a successful ESG strategy in the post-crisis era?
What kind of post-COVID recovery can we expect?
A LinkedIn poll was used to gauge the opinion of experts on the expected pace and shape of economic recovery.
The results were as follows:
According to 44 percent of our community, we are most likely to have a W or swoosh-shaped recovery. Just under a quarter expect a U-shaped recovery, with the remainder expecting V and L-shaped recoveries.
The recovery will be largely influenced by how the pandemic progresses and whether there is a second wave.
In general, we can expect the pace of recovery to be different across the world. Sneha Sanghrajka Shah pointed out that countries that managed to proactively handle the health crisis, prioritize innovation, and reimagine the ‘new normal’ will bounce back more quickly.
Government interventions like tax incentives and fiscal policies will also influence recovery speed, said David Doughty, Chief Executive of Excellencia.
Those countries that will fare better will depend on the industries they rely on. Refinitiv’s Adam Baron noted that tourist-heavy countries will likely struggle, while those with tech-focused industries will weather the storm.
While recovery can be localized to a certain extent, our economies are connected by international trade. The pace of recovery will, therefore, be limited by economies that take longer to bounce back.
Richard Bistrong, founder of Front-Line Anti-Bribery LLC, expects a W-shaped pattern recovery. He said: “As this crisis has taught us, we are far more interconnected than we thought, by supply chains, transportation hubs, etc. And the relationship between developed countries and the developing world is also more connected than we have thought.
“I think our global recovery will be related to what might be the ‘weakest links’ in any part of the world that is struggling with their health-care systems.”
David Doughty predicts a U-shaped recovery. He said: “Unlike previous recessions, this one was not caused by failures in the financial system — so the cash is still out there and customers are keen to get back to ‘normal’.
“But it will be a new post-COVID normal, with winning and losing business sectors and a shift away from China’s dominance in terms of economic growth as more countries are incentivized to onshore production, with much more consideration for ESG factors.”
The experts agreed that whatever the shape of recovery, we need to make sure we’re rebuilding on better foundations than what we had before.
New consumer trends will emerge after the crisis
The experts identified these emerging consumer trends:
- A shift towards online shopping and a spike in e-commerce sales. Read more in an article by Refinitiv’s Jharonne Martis on shifting consumer behaviors.
- The growing popularity of videoconferencing versus telephony.
- A shift towards working from home, which will have an impact on inner-city office real estate and commuter transport providers, and create a heightened sense of cybersecurity.
- Enhanced focus on innovation.
Guillaume Mascotto said: “Whether it’s automated driving in autos, smart grids in utilities, renewables in energy, digitalization in banking and retail, or robotics in industrials, most sectors of the economy are seeing paradigm shifts in the way business is conducted.”
Influences on the growth of self-sustaining virtual communities will include greater environmental awareness, which has led to a growing interest in green solutions, and an increased focus on health and wellness.
Christian Deseglise, Head of Sustainable Finance and Investments at HSBC, said: “The COVID-19 crisis is accelerating a few trends, which were already at work: the move to online, streamlined supply chains, and increased interest in locally-sourced and sustainable products that are respectful of biodiversity. The health crisis is also giving greater priority to concerns about hygiene and personal care.
“In addition, and as we are rethinking the way we travel and work, we are likely to see renewed interest for cleaner forms of transportation and urban infrastructure.”
Watch: What now? The impact of COVID-19 on households
ESG investing will be big in the post-COVID-19 era
The experts agreed that COVID-19 is a wake-up call for all businesses. which has revealed that our markets and supply chains are fragile and easily disrupted. This will result in an increased focus on sustainability — something we have already seen happening with the high level of investments in the first quarter of 2020.
Andrew Droste, of Russell Reynolds Associates, said: “COVID-19 has exacerbated inequities and underscored the importance of companies expanding the strategy and risk management processes to include key stakeholders beyond shareholders.
“Long- (and short-) term value and profits to shareholders are diminished and cannot thrive over the long term if there is an erosion that occurs among employees, customers, supply chains, governments, or society at large.”
According to Christian Deseglise, policymakers and businesses are committing to building back better and aiming for a green recovery. “A possible silver lining of this devastating crisis would be an accelerated transition to a more circular, resilient, inclusive and sustainable economy,” he said.
Julia Wilkinson, CEO at Imvest, believes that impact investing is set to grow. She has seen an increased interest in funding racial justice causes and projects in health, education, FinTech, and climate action.
Meanwhile, Alzbeta Klein , Director and Global Head, Climate Business at IFC — International Finance Corporation, said that investors will start focusing on less traditional data sets, such as ESG performance and climate risk data, to inform their decisions about future investment trends.
Examples of growing adoption of ESG can be found everywhere. For instance, International Finance Corporation (IFC) has become the first issuer to formally integrate ESG considerations into its underwriter selection process.
Creating successful ESG strategies
Based on learnings from the crisis, our experts have identified the key factors to a successful post-pandemic ESG strategy.
- Make ESG a core driver of growth for your organization, said Alessia Falsarone, Head of Sustainable Investing at PineBridge Investments.
- Build a multi-dimensional ESG strategy, said Helene Li.
- Move away from a focus on values to a focus on value, said Christian Deseglise. “This will make it clearer that ESG integration helps both reduce risks and capture business opportunities linked to the transition to a more sustainable economy.”
- Focus on integration, from management KPIs to reporting, said Andrew Droste.
- Boards and C-Suites must proactively educate themselves and commit resources, said Marie-Josée Privyk, ESG Advisor at FinComm Services.
- Business leaders must show real ESG leadership by taking care of their employees, especially during difficult times, said Curtis S. Chin.
- Acknowledge that innovation is uncomfortable, and operationally complex, but necessary and that it requires organizational changes, said Alex Struc, CEO of GoalsFirst.
Guillaume Mascotto said: “The bottom line is that we think we’ll see a movement towards a circular economy mindset, where the environment, public health, and the global economy all intertwine. And as a result, we think investors are going to look for ways to align their investments with the long-term safeguarding of the planet and people’s lives.”
Listen to the podcast with Helene Li: ESG and Long-Term Planning Can Play a Pivotal Role in the Post-Crisis Recovery
Alternative data in post-COVID-19 world
The participants in our LinkedIn discussion see the rise of alternative data sources as a major post-crisis trend in investment.
Sneha Sanghrajka said: “Alternative data is becoming increasingly relevant. Data like the smart thermometer fever-tracking information from Kinsa being used to predict the location of the next outbreak, in addition to sentiment analysis, satellite imagery and consumer spending insights. Data is being used more and more to discover and validate emerging trends and opportunities.”
Xavier Gomez, COO at INVYO, said: “The use of alternative data is just awakening and relevant.”
During the COVID-19 pandemic, data from credit card use, e-commerce figures, and consumer habits on sports and gaming platforms could be used to identify shifts in consumer trends. These insights could then be extrapolated to spot investment trends.
Adam Baron suggested that alternative data may serve as a great tool to gain insights into a company before sell-side analysts pick up on it.
He said: “For example, I’ve participated in several webinars and blog posts where LinkUp Job Postings showed drastic decreases/increases in active job postings a few weeks before I/B/E/S Consensus Revenue Estimates changed in the same direction.
“It’s not necessarily that job postings directly impact revenue, but more that they reveal the future business expectations of the company.”
Refinitiv’s interactive infographic has more information on assessing COVID-19’s impact on key economic sectors by using job postings data.
Finally, the news and social media can also be incredibly useful sources of alternative data.
For further information about how alternative data can be used to predict investment trends, read How does news sentiment data aid investors?