A number of forces have the potential to radically reshape the investment landscape over the next decade. After the first decade of this century brought 9/11, the “tech wreck” and the global financial crisis, the taper tantrums, polarized politics and trade wars of the 2010s seem quite benign. However, the puzzles facing investors in the coming decade are far from harmless: negative yields on more than a fifth of global bonds, stubbornly low inflation in the developed world, central banks running out of ammunition to stimulate growth, growing wealth inequality, and high public debt levels. The effects of climate change are also becoming clear: CO2 emissions are higher than ever and climate-related activism is accelerating. Change is on the horizon and you need to be ready.
Be clear on your timeframe, be prepared for business as unusual and position your portfolio for climate change — all of this requires a clear understanding of how related risks and opportunities could develop over time. For most investors, this means extending focus beyond current events, such as geopolitical risk and slowing economic growth, to bigger-picture issues, such as potential shifts in economic regime, the impact of evolving structural trends and increasing market recognition of environmental, social and governance (ESG) issues, particularly climate change. To succeed in the coming years, you must reconcile all these issues and their different timeframes.
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