June 11, 2020
Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, and a business of Marsh & McLennan (NYSE: MMC), today released its “Navigating a pandemic-driven market crisis: Investment governance and strategy” report.
The report 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 our 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. These principles include:
In this context, Mercer’s paper has two objectives for institutional investors:
“As illustrated by the COVID-19 pandemic, our economy, society and planet face numerous long-term, global systemic risks, which need to be mitigated,” said Rich Nuzum, Global President of Mercer’s Investments and Retirement business. “As our report shows, institutional investors have the ability to respond to these challenges and continue to seek positive investment outcomes, while mitigating the effect of these systemic risks. This is especially true when it comes to governance, as sound and robust investment practices can benefit the economy and broader society through periods of market volatility and economic uncertainty.”
Ms Janet Li, Wealth Business Leader for Mercer Asia said, “We have seen an increased appreciation of the importance of good governance among institutional investors in Asia, but progress in the region towards international standards has been mixed. The six-step governance and decision-making framework put forth by the World Economic Forum in collaboration with Mercer equips long-term investors with a governance process and set of actions intended to transform global systemic risks into sustainable return opportunities. This is timely given the effects of COVID-19 and increased demands for improved governance. We find that the growth opportunities in Asia are likely to present more rewarding outcomes for institutional investors who are willing to take proactive steps on transformational investment. This disciplined approach will ultimately distinguish them from other investors.”
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 83,000 colleagues and annual revenue of over $20 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.