ECONOMIC AND MARKET OVERVIEW
Global
The 26th United Nations Climate Change Congress of the Parties (COP26) has focused the world’s attention on the initiatives required to slow down global warming.
The overarching goal of the conference is to put measures in place to limit the global temperature increase to less than 1.5 ˚ Celsius by reaching “net zero” by 2050. This implies that, by the second half of the century, we should be producing less carbon than we consume from the atmosphere. This ambitious target will have far reaching implications for investment strategies as trillions of dollars of capital will be re-allocated to enable (and benefit) from this structural change in the way in which energy will be generated in decades to come. There are, however, 50 shades of green, and investors will do well to discern between investments that make a significant contribution towards a net zero target and those that are “green washed” merely to attract capital.
Coming back to more recent events, it is encouraging to see that the global economic recovery is continuing, even as the pandemic resurges in parts of the world. According to the latest World Economic Outlook, published in October by the International Monetary Fund, the global economy is projected to grow by nearly 6 percent in 2021 and just under 5 percent in 2022. These average growth expectations hide a lot of important detail though. The fault lines opened up by COVID 19 are looking more persistent near term divergences are expected to leave lasting imprints on medium term performance. Emerging and Developing Asia (still dominated by China’s economic growth) lead the recovery, and in 2020 had also not contracted to the same extent as other parts of the world. This relative economic outperformance has moved global economic power further (and faster) towards the east
