Coronavirus, Brexit, and Climate Change
The Economics of a Pandemic: Coronavirus…
It’s like déjà vu
With the coronavirus being declared a global health emergency by the WHO this past week, it’s hard not to be reminded of a similar event that began in China 17 years ago.
In 2003 (yes, 2003, is now 17 years ago), Severe Acute Respiratory Syndrome (or SARS for short) killed almost 800 people. It also hit the global markets where it hurts. The 2003 SARS pandemic cost the world’s economy a whopping $40 billion.
Yikes. So, what about the coronavirus and its potential economic costs?
Well, economists are predicting an even bigger hit to the global markets.
It’s estimated that the outbreak will cost China’s already weak economy $60 billion. This is bad news for China since their economic growth was the weakest in the last three decades due to rising debt and the fallout of the USA trade war. China might have to cut taxes, slash interest rates, and increase spending to protect the economy.
This doesn’t look good for the rest of the world either.
China is the world’s 2nd largest economy. In the 2003 SARS outbreak, China’s GDP only accounted for 4% of the world’s GDP. Now, China’s GDP is 17% (four times more!) of the world’s GDP. Economists are predicting that the coronavirus outbreak is going to hurt a whole lot more as panic over spreading continues.
The Dow and the S&P 500 dropped by 1.6%, the Nasdaq dropped by 1.9% and certain sectors such as tourism and luxury brands have been hit harder. Oil prices have also fallen due to reduced travel demand.
But some good news – unlike the 2003 SARS outbreak, China has been more open and transparent when the virus was first reported in December 2019. This has helped other countries to be better to deal with the outbreak and manage the spread of the virus.
Many Chinese-Canadian communities remember the racism and hate during the 2003 SARS outbreak and now again are facing the same racism and discrimination due to the coronavirus.
While the panic and uncertainty are warranted and fears of contracting the coronavirus are understandable, this is no justification for racism.
Please take care to ensure that information about the coronavirus is fact checked and credible to prevent misinformation.
So Brexit Finally Happened
Welp, it’s official.
After literal YEARS of intense opposition, multiple general elections and an overwhelming feeling of frustration from Britons on either side of the debate, Britain has actually left the European Union (EU).
UK Prime Minister Boris Johnson, who won election on the promise of “getting Brexit done,” made good on his campaign slogan. He managed to draft a Brexit plan which was passed by the British House of Parliament earlier in January, ending Britain’s 47-year membership within the now 27-state EU.
Its’ been a contentious issue since the UK voted in favour of Brexit in 2016 – the day was met with both OTT celebrations and tearful vigils from both Brits and Europeans alike.
So what happens next?
Basically, a whole lot of nothing for the first year. The UK and EU have entered an 11-month transition period where all trade rules and regulations will remain in place for Britain, allowing ample time for new deals to be made in a post-Brexit world.
It’s tough to say how Brexit will directly impact us in Canada, but experts are already speculating that the wheat industry will be impacted in some way, shape or form. Alberta’s top export to the UK in 2018 was wheat, so lobbyists will be hard at work persuading our government to strike up a trade deal with the UK.
We’ll update you on Brexit’s impact on Canada as soon as we all know what that may look like. But for now, GODSPEED OUT THERE BRITAIN.
Green is the New BLK…
BlackRock shifts to Adjust to Climate Change
BlackRock (BLK (NYSE)), the world’s largest asset manager, is going to make more of its decisions based on climate change. Founder and CEO Larry Fink announced in his annual letter to CEOs that he believes we are on the edge of a “fundamental reshaping of finance,” and that “in the near future, and sooner than most anticipate- there will be a significant reallocation of capital”.
The firm has the largest number of assets under management globally, at 7 Trillion USD. So, this is a big deal.
BlackRock has previously been criticized for not addressing social issues. An increased focus on sustainable funds has been taking place over the past several years, which CBC attributes to interest from both investors and fund managers. At the same time, “ESG” investing (environmental, social and governance) is becoming more common.
The firm will now begin diverting funds from coal-related investments and ask clients to disclose their climate-related risks, which will soon be mandated by the “Task Force on Climate-Related Financial Disclosures” (TFCD), created by Democratic candidate Michael Bloomberg and Mark Carney, Governor of the Bank of England.
This means transparency around environmental business impact will be required, allowing space for companies to further invest in sustainability, and both encourage and facilitate shifts in how other financial institutions consider sustainability.
Oil and gas is considered risky to transition out of, however other global asset managers have made fossil fuel divestment a target. For our O&G industry, BlackRock’s bet on a transition away from carbon is sure to have a future impact.