A new report by Mercer, COVID-19 – Investment Governance and Strategy to Navigate a Pandemic-Driven Market Crisis, examines how large asset owners are finding ways to pursue attractive risk-adjusted investment returns while also taking investment actions to help mitigate and address the impact of the COVID-19 pandemic through investment governance.
COVID-19 has had one of the most significant impacts on the global economy in the last century, affecting liquidity, market volatility, valuation adjustments across asset classes and significant changes to forward-looking return expectations for many asset classes.
It has also driven down nominal and real interest rates and lowered oil prices, and it has damaged the fiscal solvency of some governments and the private sector.
The report is linked to Mercer’s ongoing, multi-year “Transformational Investment” collaboration with The World Economic Forum (WEF), which explores investment and governance practices for global systemic risks.
These global system risks confront the global economy, society and the planet, and include climate change, water security, geopolitical stability, technological evolution, demographic shifts and zero or negative real long-term interest rates.
Related to this effort, the WEF recently issued “Transformational Investment: Converting Global Systemic Risks into Sustainable Returns,” which provides new insights to help asset owners address the long-term impact of non-traditional investment risks and opportunities.
Through this collaboration, the WEF and Mercer provide institutional investors with a six-step governance and decision-making framework to pursue attractive risk-adjusted returns. Mercer’s white paper demonstrates how the framework is applied to the pandemic.
In this context, Mercer’s paper has two objectives for institutional investors:
- Evaluate governance strategies developed to address systemic risks, in terms of addressing the COVID-19 pandemic-driven market crisis, and
- Consider practical investment actions by long-term investors that support economic recovery and generate attractive risk-adjusted returns. Investments that support economic recovery and resurgence are considered “transformational.”
The report can be accessed below