The coronavirus pandemic is highlighting many trends in group retirement and investment programs, pushing the industry to be flexible and quick with some of the newer offerings.
As plan sponsors review their group retirement plans in the coming months, they may want to consider some, or all, of these four trends.
1. Financial wellness becoming a must.
A survey published by Manulife earlier this month found 80 per cent of U.S.-based employers are planning to offer a financial wellness program by 2023. Currently, fewer than half of these employers said they have a financial wellness program.
Employees are becoming more interested in employer assistance with their current financial situations as well as long-term retirement planning. In the short term, student debt is on the minds of many young employees. Manulife estimated about 40 per cent of students will have difficulty saving for retirement because of debt payments. Some record keepers are now offering plans that assist in paying down debt while contributing to group retirement at the same time.
Plan members are also asking about registered education savings plans offered through the workplace. Typically, insurance companies weren’t willing to offer a group RESP because of heavy administration. But recently, some have been able to overcome these hurdles and offer the option.
2. Investment choice assistance prevalent in these uncertain times.
Many plan members are uneasy about the uncertainty caused by the coronavirus. They’d like to speak directly with an advisor and appreciate feedback about risk tolerance and asset mix. This can be done alongside a review of investments in an employer-sponsored plan, which is available to most plan sponsors via their advisor or plan provider.
3. Virtual offerings are a requirement during social distancing.
Virtual platforms have gained much traction over the last few months. During the pandemic, face-to-face meetings and member education sessions have been replaced by webinars, voiceovers and links to educational websites. In the recent past, many of these meetings were conducted in person out of respect and courtesy. But where it may have been an insult in the past to conduct a Skype meeting, the virtual mode is now preferred.
4. The rise of socially responsible investments.
With social issues at the forefront of our minds and demographic changes in the workforce, we’re seeing a rise in the demand for socially responsible investments in fund lineups. Some insurance companies have started developing their own socially responsible pooled funds, as well as adopting third-party funds to fill the needs of contemporary investors. For many, the rate of return is no longer the only issue of interest; they are interested in how those investments reflect the values of current societal pushes.
The development and adoption of some of the above offerings is accelerating due to the current extraordinary social climate. While many of these offerings have been available for some time, they weren’t being offered by plan sponsors as quickly as the market thought they might be. But that’s now changing and I’d encourage plan sponsors to consider these industry trends.
Green Power to Draw $11 Trillion Investment by 2050, BNEF Says – BNN
Green power is set to draw around $11 trillion of investment in the coming decades as the cost of renewables plummets and more of the world’s energy comes from electricity.
That’s the latest analysis from BloombergNEF in its annual New Energy Outlook report. It’s further evidence of how cheap renewable power sources will continue to push aside fossil fuels in the energy mix.
Despite the massive sum, BNEF said the pace of building out new renewables will need to increase further to limit global warming to less than 2 degrees Celsius by the end of the century.
The projected increases in renewable energy and battery technology — wind and solar will grow to 56% of global electricity in 2050 — are set to cause emissions to peak in 2027 and then fall 0.7% annually until 2050, BNEF said.
That would lead to a warming of 3.3 degrees Celsius by 2100, well short of the 6% annual emissions reduction needed to keep warming below 2 degrees and the 10% reduction required to achieve 1.5 degrees of warming.
Below are four key takeaways from this year’s report:
The only fossil fuel to increase its share of demand over the coming years will be gas. That’s largely driven by its use in heavy industry and to heat buildings. A key reason for the growth of gas to warm buildings is the weak economic argument for using heat pumps. BNEF doesn’t see cost parity with gas boilers until 2040. In the U.S., an abundance of cheap gas will delay the energy transition, but renewable power will still overtake the fuel by 2041.
The future of oil demand will be shaped by the uptake of electric vehicles. BNEF sees primary oil consumption peaking in 2035 and then gradually declining.
Meanwhile, the thirst for oil in road transport tops out in 2031, according to BNEF. The fall will be sped up by EVs reaching price parity with traditional engines before 2025, at which point people will start buying plug-in cars at a faster rate, offsetting oil’s growth from aviation, shipping and petrochemicals
. By 2050, some 65% of all passenger-vehicle kilometers will be made in electric vehicles. The current fleet of EVs is displacing 1 million barrels of oil a day.
Governments, energy companies and lobbyists have been touting hydrogen as a way to decarbonize vast swathes of the world’s economy.
If that is realized with hydrogen made by machines powered by renewable energy, the world will need a lot more of it. For so-called green hydrogen to provide just under a quarter of energy in 2050, it would require 38% more power than is currently produced globally. Making all that hydrogen with wind and solar farms would require a land area the size of India.
Air travel will continue to be one of the most difficult sectors to decarbonize. Aviation emissions are up 80% since 1990 and they’ll double again by 2050. It’s one of the few sectors, along with shipping, that struggles to electrify. Heavy planes and ships that need to travel long distances would require batteries to significantly improve in order to make them commercially viable for the sector. Sustainable fuel alternatives and ammonia would need more government support than currently expected to make them cost competitive with fossil fuels in the coming decades.
©2020 Bloomberg L.P.
Global foreign direct investment halved amid pandemic, but China remained resilient – UN News
FDI includes cross-border mergers and acquisitions, international project finance, and corporate investments in new “greenfield” projects abroad, and it can be an indicator of the growth of the corporate supply chains that play an important role in world trade.
Worse than expected
“This was due to the lockdowns around the world, which slowed existing investment projects, and the prospects for deeper recession which led the multinationals to reassess new projects. And that’s the current mood of the investors – they try to be very conservative at this stage”, he said at a press conference in Geneva.
All major forms of FDI and all regions suffered from the slowdown, although developed economies were worst hit, with FDI flows of $98 billion in the six months – a 75 per cent reduction from a year previously.
China holds course
However, China was bucking the trend, with FDI flows relatively stable at $76 billion in the first half of the year, while Hong Kong bounced back as an FDI destination after a weak 2019.
“Overall investment flows into China remain at a high level and this is partly because China was one of the very few countries, among the first, to control the pandemic and to resume its production system in the country.
“In the meantime the Chinese government put in place effective measures to retain investment, to service operations of the multinationals operating in the country, and also put in place new measures to attract investment”, Mr. Zhan said.
Most of the FDI heading to China went into high-tech industries. The value of Mergers and Acquisitions transactions into China, grew by 84 per cent, mostly in information services and e-commerce industries, while several multinational companies also expanded their investments into China, he added.
Global outlook highly uncertain
The global outlook remains highly uncertain, with question marks over the duration of the pandemic and the effectiveness of the policy response, but prospects for the full year remain in line with UNCTAD’s earlier projection of a 30-40 per cent decline, Mr. Zhan said.
The rate of decline in developing economies is expected to flatten because of the signs of impending recovery in East Asia, but the global decline is expected to continue, with a further reduction of 5-10 per cent foreseen in 2021, the UNCTAD official added.
FDI is the most important source of external funding for developing economies – outstripping remittances, bank loans and overseas development assistance.
The current value of FDI invested in projects around the world is equivalent to 42 per cent of annual global GDP, said Mr. Zhan.
Microsoft announces biggest investment in Taiwan – Anadolu Agency
The US-based Microsoft Corporation has announced its biggest investment in Taiwan amid faltering US-China trade ties.
In a news conference on Monday, Microsoft Taiwan CEO Ken Sun said the company will build a data center in Taiwan, creating over 30,000 jobs with an investment of over $10 billion until 2024, daily Taipei Times reported on Tuesday.
The investment in four digital projects also include research and development of artificial intelligence hardware. It has been the first time in last 31 years that Microsoft announced such a big investment in the island nation.
Taiwan President Tsai Ing-wen said in a tweet: “I am proud to be part of reimagining Taiwan with @Microsoft & welcome their investment. Our collaboration is yet another step forward for the Taiwan-US partnership, as we reimagine supply chains & create business opportunities for a better tomorrow.”
The huge investments come amid weakening US-China relations which have hit the bottom rock. Washington has increased its relations with Taiwan which China claims a “breakaway province”.
Beijing has warned against hobnobbing with Taipei arguing it violates “One China Policy”.
Microsoft said it will also train more than 200,000 “digital talents” to serve its ventures.
“We have been increasing our investment in Taiwan every year for the last five years,” Microsoft Taiwan Corporation General Manager Ken Sun said. “And now we are making the biggest investment in Microsoft’s 30-plus-year history in Taiwan.”
Tsai said Microsoft’s investments came at a “critical time”.
“As the world’s supply chains are rapidly reforming in the wake of COVID-19, this is the most powerful moment for us to take our trade relations with the US to a new level,” Tsai said.
Green Power to Draw $11 Trillion Investment by 2050, BNEF Says – BNN
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