Big asset managers think global politics are making things worse for investing

Big investors would like to have a word.
Big investors would like to have a word.
Image: Reuters/Ian Langsdon/Pool
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Institutional investors are increasingly pessimistic about the state of economics and politics around the world.

Some 72% think those forces will be neutral or negative for investments during the next year, according to a survey of 101 respondents in 14 countries, by Edelman. Respondents think the backdrop was more positive during the previous 12 months.

Most big, developed economies are growing in unison, but the political landscape has shifted. The US administration has collided with long-time allies as well as long-time opponents, like North Korea, since president Donald Trump was elected in November. And while the EU seems remarkably stable given the UK, one of its biggest members, is leaving the bloc, tensions have risen from Spain’s Catalan independence referendum. Even chancellor Angela Merkel’s government in Germany, sometimes seen as the anchor for the (soon-to-be) 27-member union, has been undermined by swelling support for the right-wing, anti-refugee party.

Big investors are concerned the companies they invest in aren’t prepared to deal with emerging political risks, according to Lex Suvanto, global managing director of financial communication at Edelman. Nearly half of them think corporate executives don’t fully appreciate the current political uncertainty, according to the survey.

As political turmoil has risen, many large money managers also expect companies to take a public stand on social issues, according to Suvanto. Education, the environment, and free trade top the list of social concerns that investors expect companies to focus on.

Speaking out publicly on political issues can be risky for corporate executives, especially if they’re in opposition to powerful officials, but it does happen:  Business leaders disbanded their advisory groups (paywall) with the White House, protesting Trump’s failure to sufficiently denounce racism.​ They’ve also pushed back against Trump’s decision to withdraw from the Paris Agreement on climate change. Such moves don’t seem to have dented the public profiles of those executives, and may have even done the opposite.