3 years ago

Blue Chip Journal - January 2020 edition

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EDITOR’S NOTE A burning issue Gregory Penfold, Editor Catastrophic bushfires in Australia and the threat of war between Iran and the USA – January 2020 certainly got off to a respectably apocalyptic start. The repercussions will be felt everywhere, not least in the financial services, where a dramatic sea change has just taken place. As the smoke from New South Wales and Victoria loops back to where it began, forming a circuit of the Earth, Larry Fink – CEO of BlackRock, the world’s biggest investment fund – placed climate change at centre stage of the world’s financial theatre. In his annual letter to executives, entitled “A Fundamental Reshaping of Finance”, Fink reminded his readers of their obligation to create long-term value and stated that “climate change has become a defining factor in companies’ long-term prospects”. To put the matter plainly, Fink stated, “Climate risk is investment risk.” Burning issues are pressing to the forefront of consciousness with questions that cannot be postponed or denied: “Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage – a key building block of finance – if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas? What happens to inflation, and in turn interest rates, if the cost of food climbs from drought and flooding? How can we model economic growth if emerging markets see their productivity decline due to extreme heat and other climate impacts?” When the world’s largest megafund prioritises climate change, expect rapid changes in asset allocation. How long before fossil fuels turn into stranded assets? However much Australian PM Scott Morrison may love coal, it’s hard to see a future for the black stuff. What changes will Australia have to implement to reshape its economy – and how will asset location patterns reflect those changes? How long will coal-guzzling South Africa bow to the pressure of vested interests and cling to carbon against the long-term interests of every private and corporate citizen? It is time for asset managers to take a sharp look at where their clients’ assets are located and take decisive action in the interests of preserving value in the long term. Blue Chip Journal – official publication of FPI Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip carries contributions from FPI, carrying FPI branding, and other leading industry figures, covering all aspects of the financial planning industry. A total of 10 000 copies of the publication are distributed directly to every CERTIFIED FINANCIAL PLANNER® (CFP®) in the country, while the Blue Chip e-newsletter (launch date January 2020) reaches the full FPI membership base. FPI members are able to earn one non-verifiable Continuous Professional Development (CPD) hour per edition of the print journal (four per year) under the category of Professional Reading. Blue Chip is also distributed at key FPI events including the FPI Professionals Convention, the Financial Planner of the Year Awards Dinner and regional FPI Masterclasses. Special advertising packages in Blue Chip are available to FPI Corporate Partners, FPI Recognised Education Providers and FPI Approved Professional Practices. 6

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