In June, we thought we’d already taken an interesting journey in our H1 look back, but much larger questions about the macroeconomic outlook have since arisen. We’ve had the US-China trade war, a hard Brexit, wavering Italian fiscal discipline and oil markets under the cosh. Rapid technological change and digitalisation have continued, meanwhile, to disrupt industry and challenge established business models. In this last NOYM of 2018, we offer highlights from our thematic topics this autumn, which have all touched upon one or more of these issues.
ESG: Money talks
Our September NOYM explored the commercial reasons for corporates to focus on sustainability and score strongly within ESG, as doing so has been associated with equity and bond market outperformance for several years. In addition, our updated analysis shows that costs faced by corporates for ESG incidents are soaring, providing an additional strong incentive to avoid such incidents.
The cost of inequality
The October NOYM explored how income and wealth inequality has risen sharply since the 1980s. Our sensitivity analysis based on an OECD study shows that greater inequality has caused a negative impact on economic growth. We also noted a rising pay gap among corporates, with Nordic CEOs now paid 40x the annual pay of an average employee, and we suggested that companies should be mindful or remuneration could become an ESG issue.
Corporate investments: Capex running to stand still
In November, we revisited our December 2017 analysis of global capital spending by listed corporates. Contrary to last year’s consensus forecasts, global capex has increased strongly in 2018. We acknowledge that the macroeconomic outlook is more uncertain now than last year, but we continue to see strong structural drivers for investments – including sustainability and technology – in the medium to longer term. We do not believe 25-year low capex/sales ratios are sustainable.
In addition to our NOYM reports, we conducted a survey of our Nordic large corporate customer base in June, asking how digitalisation would shape the corporate treasury of 2025. Our study shows treasuries expect to remain a highly strategic function in the future, despite expected higher levels of automation in their activities. Treasuries will need to engage much more with the business functions of companies to avoid becoming bypassed by new digital transaction solutions.
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