A perspective on the election
With the two turkeys who voted for Christmas well and truly roasted, the question is: where does this leave investors?
Boris was gifted exactly what he asked for. Nonetheless, after the euphoria has died down the hard-yards still have to be walked to secure the necessary trade deals. There will be losers amongst UK companies but any fund manager with a pulse will have positioned their holdings in anticipation of this risk. Most investors are very well diversified globally so whilst there will be losers they should not affect portfolios significantly. Markets like certainty and whilst the deals have yet to be done Boris has a majority that will allow him to take a robust position with his party and with trade negotiations.
Many bold and ambitious (some would say outrageous) manifesto promises were being made by all sides as part of their electioneering. Not many people seemed to care or hold feet-to-the-fire on these claims, presumably because the elephant in the room was always that this was a de facto referendum. 5 years may be a long time in politics but it is a critical period of time for one area where the Tories did not pledge a huge commitment: climate change. The Conservatives trailed some good sound-bites on cleaning up the oceans and continuing a moratorium on fracking. But there were no meaningful thoughts on the big issues that certainly need to be addressed urgently on transport, oil, power, and agriculture. One way or another these need to be confronted and positive investment has to be made. Our prediction for the next 5 years is that investors will put pressure on their pensions and fund managers to abandon supporting companies that are harming the planet and instead will flock in droves to those that are making meaningful strides towards net-zero targets and who are in carbon capture technologies. Savvy investors are already seeing much stronger gains in sustainability “impact” funds than traditional funds where old and soon-to-die technologies like oil and coal are acting as an anchor on performance. Our advice is that investors must ignore the political noise and align their long term interest with the planet’s long term interests. This is a common-sense win-win that will play out in the near future. In all likelihood, it will be business as usual for tax and personal financial planning perspective but the smart money will be looking “under the bonnet” at what is driving their savings. We think that this is where opportunity and threat are to be found from an investment perspective.
The founder of The Path – the UK’s first impact-only IFA commented: “If governments won’t act the investing public surely will. I predict a wall of capital moving to cleaner and more sustainable companies as capitalism fixes itself to fix the planet. A huge majority is not a mandate to abrogate responsibility on climate change but an opportunity to step up and lead the world, it’s an opportunity I hope this government will embrace”