large_Territoire  Corpo - Paysage 17.jpg

medium_Territoire  Corpo - Paysage 17.jpg

small_Territoire  Corpo - Paysage 17.jpg

thumbnail_Territoire  Corpo - Paysage 17.jpg

Territoire  Corpo - Paysage 17.jpg

![Territoire  Corpo - Paysage 17.jpg](/uploads/Territoire_Corpo_Paysage_17_f492e25a81.jpg)

### Inflation erodes savings
European households allocated an additional €3tn in cash deposits between 2016-21, which accounts for around 38% of their total financial wealth. While bank deposits increased significantly since 2016, the real purchasing power of this collective has actually gone down!

![chart1.jpg](/uploads/chart1_1c7ae582ff.jpg)


*Figure 1 – Amundi Institute on EFAMA Market Insights data, ECB and European commission June 2022. 2022 estimate based on European Commission’s spring 2022 estimation of inflation in the European Union for this year (6.8%).*

At the end of 2022, the cumulated loss in purchasing power since 2016 has been estimated at €1.4tn. It appears investing for income is becoming a top priority in the current economic and financial market backdrop. However, we believe that for investors looking to maintain their purchasing power or generate income from their savings, inflation presents a meaningful challenge.

### The drivers of inflation
The sharp increase in inflation we experienced over the past year and a half was driven by a combination of factors. Covid-19 played a significant role by triggering supply disruptions as the pandemic initially took hold, followed by a surge in demand as restrictions were ultimately lifted. The war-induced energy crisis only further exacerbated the inflationary conditions.²

While we believe that inflation may be on a decelerating path going forward³, we expect it to remain elevated compared to the pre-Covid-19 status quo. [Click here for more insight into the drivers behind inflation](https://www.amundi.com/globaldistributor/Local-Content/Amundi-Convictions/Inflation-remains-above-Central-Banks-targets).

![chart2.jpg](/uploads/chart2_fe3118beb0.jpg)


*Figure 2 - Source: Amundi Institute on IMF data and forecasts. Latest data and forecasts available as of 14 November 2022.*

### A historic market response presents a significant opportunity 
Spiking inflation combined with high uncertainty across the economic, market and geopolitical environment may lead to a historic response in financial markets. In 2022, both the S&P500 index and the 10-year US Treasury bond market simultaneously posted double-digit negative returns for the first time in the last 100 years⁴.

While such downturns can be detrimental for many investment portfolios, they could present opportunities as well. In particular, yields have risen across the board - offering a potentially appealing entry point. This is especially true for bonds, but also for cross-asset allocations that may benefit from a range of opportunities across assets (e.g. government bonds, corporate bonds, emerging market bonds, equities). Notably, yields in these classes have risen considerably relative to the last decade.⁵

![chart3.jpg](/uploads/chart3_4d17390f8f.jpg)

*Figure 3 - Source: Amundi Institute, Bloomberg. Data is as of 16 December 2022. Govt bond average= average of 2 government bond indexes yields for US and EMU (from JPMorgan GIB US and EMU Indexes); Equity average = average of 3 Div. Yield from the S&P Aristocrats, MSCI Europe High Dividend and MSCI EM High Dividend Indexes, Cross-asset = average across yields from 10  indexes (the 3 equity indexes, the 2 govt bonds,  2 IG & 2 HY credit indexes for Europe and US (from Bloomberg Barclays) and 1 EM bond index (the J.P. Morgan EMBI Global Diversified Blended).*

### Restoring the balance with higher yields
As inflation rises and general market uncertainty abounds, many investors may be forced to reconsider their investment portfolios. Investors that rely on income from their investments can look to target higher income opportunities to meet their needs and provide resilience in the face of inflation.

Consider an investor with a portfolio value of €100,000 who aims to withdraw €3,000 on an annual basis (inflation-adjusted, and with no further capital appreciation).⁶

If inflation is at 2% and income yields stand at 3.5%, this investor can maintain their income goals for 18 years before dipping below the original €100.000 mark.

However, if inflation rises to 5% and the income remains unchanged… the portfolio value will fall below €100.000 in 8 years, and draw-down to €0 in 29 years!

In order for investors to sustainably maintain their income goals and general standard of living, a higher income yield is needed to counter-balance theeffects of inflation. Crucially - the longer the period of inflation persists, the more important this consideration becomes.⁶

### The problem spawns the solution
The historically negative market response to inflation has, at the same time, generated the solution for income investors. At a time when protecting one’s income and savings with high yields are most relevant, the steep drops in bond and equity markets have arguably created one of the best income opportunity backdrops in the last decade⁵.

Amundi provides a wide array of relevant inflation-resilient income opportunities across a variety of investment horizons⁷ to capitalize on the current market environment.

![chart4.jpg](/uploads/chart4_9fe7a0ae40.jpg)


Sources:

1. Amundi Institute on EFAMA Market Insights data, ECB and European commission June 2022. 2022 estimate based on European Commission’s spring 2022 estimation of inflation in the European Union for this year (6.8%)
2. Amundi Institute, Inflation is here to stay, as of 7 April 2022
3. Amundi Institute on IMF data and forecasts. Latest data and forecasts available as of 14 November 2022.
4. Amundi Institute, Global Financial data. Data is as of 31 October 2022. Past performance is no guarantee of future results.
5. Amundi Institute, Boomberg. Data is as of 31 October 2022.
Govt bond average= average of 2 govt bond indexes yields for US and EMU (from JPMorgan GIB US and EMU Indexes); Equity average = average of 3 Div. Yield from the S&P Aristocrats, MSCI Europe High Dividend and MSCI EM High Dividend Indexes, Cross-asset = average across yields from 10 indexes (the 2 govt bonds + 2 IG & 2 HY credit indexes for Europe and US (from Bloomberg Barclays) and 1 EM bond index (the J.P. Morgan EMBI Global Diversified Blended).
6. Amundi Institute for illustrative purposes. The simulation assumes that the annual withdrawal rises in line with inflation, no capital appreciation and that the portfolio capital increases at the income rate.
7. Amundi Institute, as of November 2022


Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management S.A.S. and is as of end of November 2022. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management S.A.S. and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results.

Date of first use: 18 January 2023
Doc ID: 2680853




Discover how income could act as a possible source of resilience

small_picture.png

thumbnail_picture.png

picture.png

![picture.png](/uploads/picture_bb4107355e.png)

#### What we mean by active investing at Schroders – why it’s important for investment performance and our priority themes.

![KimberleyLewis.jpg](/uploads/Kimberley_Lewis_5948f68b99.jpg)
**Kimberley Lewis**
Head of Active Ownership

[As custodians of our clients’ assets, we have a duty to ensure that the companies we invest in are managed in a sustainable way. But what does that mean in practice? How do investment teams, clients and the sustainable investment team come together to influence holdings and drive positive change and why is it so important?](https://www.schroders.com/en-sg/sg/individual/insights/active-ownership-in-2023-our-engagement-blueprint-in-action/)

### Why is active ownership so important?
Approached thoughtfully and with focus, we believe that active ownership can strengthen the long-term competitiveness and value of our investments and at the same time accelerate positive change towards a fairer and more sustainable global economy. We see it as crucial to delivering value to all stakeholders.

### What do we mean by active ownership at Schroders?
We’re really talking about three things – dialogue, engagement and voting.

1. **Dialogue:** These are fact-finding interactions where we’re getting to know the companies. Often they’re led by the research teams or individual fund managers.

2. **Engagement:** This is where we aim to specifically influence change. It is important that we can articulate to clients the impact our engagement has had on companies and wider society so we focus on setting robust SMART objectives (i.e. specific, measurable, achievable, relevant and time-bound).

3. **Voting:** Equity investments give shareholders a vote and we vote on behalf of many of our clients. The right to vote can be a “sweet carrot” or a “strong stick” and we use it strategically, tactically and pragmatically to drive the change we would like to see.

### From climate change to modern slavery to auditing scandals, ESG issues are very broad. How do we decide what to engage on?
Launched in February 2022, Schroders’ Engagement Blueprint outlines our ambitions, priorities, approach and expectations, and we send these to companies ahead of voting season.

We have identified six broad themes for our engagements: climate change, human rights, diversity and inclusion, natural capital and biodiversity, human capital management and corporate governance.

[We are proud our Blueprint was awarded ESG Engagement Initiative of the Year at Environmental Finance’s Sustainable Investment Awards 2022, and judges noted its “successful focus on outcomes as an integral part of the engagement process”.](https://www.environmental-finance.com/content/awards/sustainable-investment-awards-2022/winners/esg-engagement-initiative-of-the-year-schroders-engagement-blueprint.html)

One of the rewarding parts of our job is collaborating with our investment teams and the wider sustainable investment team and assessing the material ESG risks facing an investment. We draw on the insights provided by our own proprietary tools, as well as external sources such as corporate reporting, research and the news agenda. The goal is to assess and boost factors material to investment performance and the needs of our clients.

As reinforced by our Institutional Investor Study 2022, this can vary by region. Governance and oversight was the most popular engagement theme for two thirds of investors (64%), which is not surprising as it underpins all ESG themes and companies’ ability to address relevant risks. The second most popular theme was human rights (62%) – the impact companies are having on workers, communities and consumers, followed by climate action and transparency (61%).

Climate was particularly important for investors in Asia Pacific (65%) and the UK & Europe (64%) while human rights and governance came up top for North America (64% for both), and in Latin America human capital management came first (58%).

### How does it work in practice?
Firstly, at Schroders our active ownership activity is really investor-driven. Engagements are not conducted by a siloed team sitting in a corner. Secondly, we speak with companies not at companies.

Our investors know their companies, have a relationship with the management team and usually speak to them regularly. They’re most often in the best position to influence change, so we work with them to accelerate and coordinate their activity. Another key element of the active ownership team’s role is organising collaborative engagements, where we partner with external organisations and other investors to strengthen our collective voice on issues where we share a common goal.

We will generally escalate our activity where we have engaged repeatedly and seen no meaningful progress. This could mean voting against management or even divestment.

To give a few examples of active ownership in practice, in 2022 we continued to engage with Amazon on the issues of health and safety and workers' rights, and with around 500 priority companies over climate transition plans.

Schroders pre-declared its intention to vote for shareholder proposals relating to climate change at three oil & gas majors – Chevron, ExxonMobil and Shell – to encourage a faster shift towards net zero. This followed supporting similar resolutions at BP, ConocoPhillips, Occidental Petroleum and Phillips 66 earlier in 2022.

Meanwhile, Schroders has engaged with Amazon for seven years to improve the firm’s workers’ rights, and at this year’s AGM we pre-declared that we would vote in support of three shareholder resolutions on the issue.

We pre-declared that at Meta and Alphabet’s AGMs, we would vote in support of shareholder resolutions aimed at improving their approach to digital rights – including exploitative content, misinformation and privacy.

As for overall levels of engagement activity, we are focused on the increasing proportion of engagements that are seeking to drive change. It is not just about volume. 

### What’s new?
We have updated our Blueprint and expanded on our expectations of companies. In a landscape of constant change – whether through new regulations, data, government action or research – we cannot stand still.

The main changes for 2023 include a greater focus on the Just Transition, increasing our expectations of companies over biodiversity loss and natural resource constraints, outlining our approach to shareholder resolutions with a new Shareholder Resolutions Framework and outlining our efforts to make impact-focused engagements.

Our increased emphasis on tackling harmful deforestation is in response to our own research, evolving market guidance and firm-wide commitment on this issue. For example, in 2023 we are developing our deforestation engagement strategy which will support our commitment to end agricultural commodity-driven deforestation by 2025.

We will continue to review our priorities as our understanding of material issues and market best practice evolves to make sure we are pushing for meaningful outcomes and change.


Active ownership in 2023: our Engagement Blueprint in action

small_LiteracyMonth_20_Buckets 650_Large.png

thumbnail_LiteracyMonth_20_Buckets 650_Large.png

LiteracyMonth_20_Buckets 650_Large.png

![LiteracyMonth_20_Buckets 650_Large.png](/uploads/Literacy_Month_20_Buckets_650_Large_84002786a3.png)

Author: Carole Hodorowicz

It can be a challenge for investors just getting started to learn how to tackle debt, start saving, or find the best ways to pay off loans. Compounded by the coronavirus pandemic, addressing your financial situation can seem even more daunting when trying to learn the basics. 

We surveyed some of Morningstar's[ Generation Z and millennial employees ](https://www.morningstar.ca/ca/news/202904/generation-z-has-the-right-attitude.aspx)to hear their thoughts around money. Here are five lessons they learnt: 


**1. Paying Down Student Loans**

At the start of the pandemic, [the Government announced](lhttps://www.canada.ca/en/services/benefits/education/student-aid/notice-covid-19.html) measures to help students, including payment freezes.

There are pros and cons to continuing payments, and many good ways to make use of the money, like creating or building an emergency fund. If you contributed to your loans anyway, you reduced your principal. Paying down student loans is typically approached in one of two ways: [the snowball method and the avalanche method](https://www.morningstar.ca/ca/news/206124/how-to-paydown-debt.aspx). The snowball method prioritizes paying off the smallest loans first, while the avalanche method focuses on paying off the loan, no matter its size, with the highest interest rate first.

Here's how one employee took advantage of the grace period:

"As the pandemic happened and the government decided to set student loan interest rates to zero, I prioritized paying off as much as I could each month. I felt that I should try to pay the principal down since I will not have any interest eating away at my overall bill."


**2. Tackling Credit Card Debt**

With fewer ways to spend, some may turn their attention to paying down debt.

When approaching any kind of debt, you may be asking yourself the same question: Where do I even begin? Morningstar's director of personal finance Christine Benz recommends taking these steps first:

1) Buy yourself some time. Does your bank offer any options to extend a grace period or reduce your interest rate?

2) Make a list. How much do you owe, who do you owe, how much time you have, and what are the interest rates?

3) Pick a strategy. Do you want to go with the snowball method or the avalanche method

Here's a takeaway from one employee who focused on credit card debt:

"It's given me a new respect for that feeling of 'getting ahead' on payments. It's given me a chance to think more about my long-term savings goals--when I was so caught up in day-to-day spending, I didn't think as much about what I should be saving that money for instead." 


**3. Creating and Maintaining an [Emergency Fund](https://www.morningstar.ca/ca/news/206579/morningstar-money-challenge-day-7.aspx)**

The pandemic helped highlight the need to be financially prepared for the unexpected.

Our investment specialists recommend these tips to get a solid footing in the event of any unforeseen circumstances:

1) Tally up your monthly living expenses, from rent to groceries. Leave out the nonessential purchases.

2) Multiply these costs by three months. This is the minimum amount you should try to squirrel away.

3) See how much you currently have and set a savings goal.

During this time, many readjusted their focus to their emergency funds. Here's what one employee realized during this time:

"I believe that having a more holistic approach to budgeting is essential. Pre-pandemic, I was only focused on one aspect of my financial plan: paying off debt. Since the pandemic, I realized the importance of building up my emergency fund and having a backup plan in case of an unexpected occurrence." 


**4. Increasing Retirement Contributions**

The pandemic pushed some of our colleagues to look long term and consider how to stay on track for their retirement. Another effective use of the extra time and funds on your side is to focus on investing in your retirement plan. The earlier you invest, the more growth potential your retirement account will have.

Here's how one employee's priorities changed:

"After graduating from college during the pandemic, my biggest concern was finding a way to earn money. Now with a job, I am leaning into more savings, including a six-month emergency fund instead of a three-month and reaching my RRSP contribution limit."

It's never too early to plan for retirement.


**5. Cutting Back**

With office closures and stay-at-home mandates, several employees who responded to our survey said they are rethinking their spending habits during the pandemic. 

Here is how an employee embraced Morningstar's mission to think and invest with the long term in mind:

"I have been spending a lot less in areas that I would have normally spent on and putting more in savings. One thing I hope to do is work on finding a better balance between savings and investing and spending while not feeling like it restricts my lifestyle." 


5 Financial Lessons for New Investors

For direct exposure to multidecade and sustainable urban development projects in Asia.

Sustainable Asian Cities Bond Strategy

large_AdobeStock_221559119.jpeg

medium_AdobeStock_221559119.jpeg

small_AdobeStock_221559119.jpeg

thumbnail_AdobeStock_221559119.jpeg

AdobeStock_221559119.jpeg

![AdobeStock_221559119.jpeg](/uploads/Adobe_Stock_221559119_1041ac32b4.jpeg)




![writer.jpg](/uploads/writer_246719c9d7.jpg)

**Sandy Kaul**
Head of Digital Assets and Industry Advisory Services
Franklin Templeton


## Introduction
I am in the process of completing a three-part series of papers about technology megatrends impacting society and what to expect with the Web3 revolution. This article recaps the innovation cycles that gave rise to these megatrends featured in my first paper—“Evolution of commercial technologies and impact on business delivery.” It also offers a preview of the five megatrends that I will discuss in more detail in my second paper coming out in the first quarter of 2023.


## Tech-driven innovation cycles create new business approaches
Since the 1960s, commercial enterprises have benefited from a rapid evolution in the technol- ogies available to them—adapting many innovations originally designed for the military and previously deployed only to large universities. As these new commercial technologies have emerged, they alter what is possible for businesses and their customers. The push to adopt new capabilities requires enterprises to rebuild their delivery infrastructure. This cycle of new technology changing business abilities, and thus prompting upgrades to an organization’s platform, has now happened three times since the 1960s, and we are on the verge of a fourth innovation cycle.


### Waves of Commercial Technology Innovation
![Waves of Commercial Technology Innovation.png](/uploads/Waves_of_Commercial_Technology_Innovation_82de1f594a.png)

The first cycle, automation, was when computers became more compact, resulting in more efficient business tasks and more centralized data processing. In the 1970s, the second cycle of digitization began with the emergence of personal computers as well as commercial off-the-shelf software. Networking also progressed, with the internet becoming publicly available in the late 1980s and websites exploding by the early 2000s. We are currently finishing up the third cycle, virtualization, that features the introduction of cloud computing, APIs and big data. These new technologies have allowed for the embedding of our social interactions into digital networks and have fostered new commercial platforms that allow individuals and businesses to interact at-will across a range of business activities.

The fourth cycle on the horizon is decentralization, where peer-to-peer interactions shift away from intermediated platforms to commercial protocols where users and resource providers are incentivized to share in the ownership of the networks they use most frequently and participate in the financial rewards those networks generate. For more in-depth information on these four cycles, please explore our recent in-depth report “Evolution of commercial technologies and impact on business delivery.”


## Megatrends being enabled by tech-driven innovation
As these tech innovation cycles unfold, the impacts of continual innovation are becoming more cumulative—resulting in the emergence of five megatrends that reflect broader changes about how society operates. An introduction to these megatrends is provided here, and a more in-depth exploration of these trends and how they are likely to alter society will be forthcoming in our new report due out in first quarter (Q1) 2023.

These megatrends have already profoundly changed the power that individuals wield in society and the value drivers of commerce. The emerging fourth cycle of innovation might witness the culmination of these changes and prove to be the most disruptive yet. Indeed, society may be on the cusp of an even more dramatic evolution than the advent of the internet.

#### Megatrend #1: Democratization of access
The first megatrend relates to how the rails of commerce are becoming increasingly democra- tized. Commerce has become more open, offering individuals and enterprises unprecedented access and control over their buying and selling channels.

•	During the age of automation, proprietary computer systems were built to enhance the efficiency of commerce—increasing the velocity at which transactions could take place and allowing for economies of scale in terms of pricing.

•	The digitization era began to open these proprietary systems, exposing processes and data that had only been available to employees and allowing individuals to access and arrange their own commercial transactions via the web. For example, buying airplane tickets directly instead of using a travel agent.

•	With virtualization, processes have moved beyond the company perimeter and are becoming distributed via platforms and networks that allow individuals and businesses to not only access and initiate transactions, but to contribute and leverage their own resources. For example, allowing others to rent your home on Airbnb.

•	As the decentralization cycle takes hold, these commercial platforms are evolving into commercial protocols. Just as individuals can call up a website using web protocols, such as HTTP, new offerings will allow individuals to access process-focused protocols via the web that allow them to initiate their own contracts, create and collateralize their own assets and earn financial incentives that position them to be owners of the networks they use most frequently.

#### Megatrend #2: Decomposition of business value
The second megatrend shows how the drivers of business value are changing, moving from the in-house manufacture and distribution of tangible goods that can be measured by capital expenditures to a more intangible set of differentiators that increasingly rely on a broader ecosystem to fulfill key processes.

•	Automation placed the focus on enhanced manufacturing abilities, with enterprises able to quantify how much they were investing to improve their throughput and scale.

•	A shift away from tangible to intangible enterprise value began in the digitization cycle as automation shifted from the manufacturing plant to the front office. This allowed for a surge in the creation of innovation and intellectual property—the delivery of which
became a differentiator—thus positioning knowledge-based services as a new value driver.

•	In the current age of virtualization, business value is increasingly tied to powerful platforms that drive network effects. Successful businesses either foster or rely on these network effects by connecting into the ecosystems they enable, allowing the platform provider to fulfill key parts of their business process.

•	As the coming decentralization cycle unfolds, affiliations with a network are likely to evolve with processes from diverse providers becoming embedded into the network, as enter- prises distribute their business value by turning their processes into open-source code that can be accessed by developers and inserted into any relevant transaction flow.

#### Megatrend #3: Expanding power of the crowd
The third megatrend focuses on evolution in the communication channels that individuals utilize to share their experiences around commercial transactions and how use of these channels has given them a voice that allows them to impact, and perhaps ultimately shape, business offerings and messaging.

•	Interactive voice technologies and call centers emerged to support consumers in the automation cycle, allowing them to report feedback and concerns, but in a one-on-one manner that left consumers uncertain about the impact of such engagement.

•	The emergence of bulletin boards, online forums and blogs during the digitization cycle provided consumers asynchronous feedback mechanisms that could be viewed and shared among many potential and actual buyers, as well as viewed by targeted enterprises. This marked the first steps toward the emergence of a crowd voice.

•	Social media—the hallmark of the virtualization cycle—has created a synchronous feed- back loop between consumers and commercial enterprises, elevating in many instances the views and opinions of individuals over the official brand messaging and advertising of the company itself and encouraging the engagement of a new class of influencers to shape opinions.

•	The coming decentralization cycle marks the emergence of a peer-to-peer economy and directly involves consumers via new governance processes that incentivize the most active participants of a network to become owners and a part of the community that sets the business strategy for the commercial protocol.

#### Megatrend #4: Institutionalization of the individual
Institutions use their organizational resources to pursue long-term goals for their underlying members, accessing many financial and social opportunities to achieve their success. The fourth megatrend explores how individuals have been gaining access to these same levers to optimize the use of their personal resources to meet their own long-term goals.

•	The automation cycle supported a massive improvement in record-keeping that allowed for the creation of the credit card that could be issued at scale—allowing individuals to purchase items on credit and extend their buying power, just like institutions.

•	Digitization provided individuals a powerful new tool—the personal computer—and created new channels for individuals via the internet, allowing them to access and engage experts and transact directly with suppliers via their online websites, giving individuals more abilities that were previously reserved solely for institutions.

•	Virtualization has allowed individuals to become part of far-reaching online communities and commercial platforms, which in turn has allowed them to shape their own personal brand via social media, connect to allied networks, and utilize their personal assets to earn revenues—all activities that institutions have traditionally pursued.

•	Decentralization should close any remaining gaps between individuals and institutions as participants in commercial protocols will be able to raise capital directly by issuing NFTs that encapsulate their personal assets and by using their broader set of digital holdings as collateral to borrow against, loan or stake without needing the approval or facilitation of an intermediary.

#### Megatrend #5: Quantification of behavior
The final megatrend explores how each tech-driven innovation cycle has resulted in the creation and storage of a growing set of transactional and process-related data and how the mining of these data have helped to enhance commercial outcomes and become increasingly targeted and personalized.

•	Executive information systems emerged in the automation cycle, pulling together informa- tion from all the various branches and departments of an enterprise to give the C-suite insights into their business activities to enhance their decision-making.

•	Growing use of specialized systems in the digitalization cycle—such as customer relation- ship management, enterprise resource management and point-of-sale transaction processing—allowed information to be gathered at a process level and analyzed to enhance service delivery and improve outcomes.

•	Powerful new data processing techniques and artificial intelligence have been deployed in the virtualization cycle to target how individuals behave at each stage of a process and compare their activity to actions taken by similar cohorts with the goal of tailoring a user’s experience and increasing the likelihood that the user will engage or transact.

•	The decentralization cycle is likely to see algorithms extend beyond how individuals engage in a process to modeling the individual themselves across multiple processes and tying together insights about their activities and behavior to build customized offerings that are based on the individual’s unique profile.


### Impact on society
Collectively, the megatrends previewed in this piece have been gaining ground as each new tech-driven innovation cycle unfolds. The megatrends emerged as the impacts of automation were being fully understood and transitioning to digitization. They became amplified as digitization progressed through the 1980s into the early 2000s and virtualization took hold, and they are likely to find their fulfillment in the coming cycle of decentralization.

If the megatrends progress as we anticipate, in the space of 60 or so years, consumers will have gained tremendous agency and become powerful drivers of commercial activity able to use their resources collectively or as individuals to direct and manage their own lives and livelihoods; while at the same time, commercial enterprises will have shifted from being powerful monoliths that manufactured and distributed their own goods and services

#### Development of Megatrends Across Innovation Cycles
![DEVELO~1.PNG](/uploads/DEVELO_1_4c735087e4.PNG)

to become increasingly enmeshed in a broad networked ecosystem that brings together vast resources and efficiencies in a manner increasingly designed to appeal to the end-user’s experience.

These concepts will be explored in more depth in our upcoming piece due to be released in Q1 2023.





WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Investments in fast-growing industries like the technology sector (which histori- cally has been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. The opinions are intended solely to provide insight into how securities are analyzed. The information pro- vided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. This is not a complete analysis of every material fact regarding any industry, se- curity or investment and should not be viewed as an investment recommendation. This is intended to provide insight into the portfolio selection and research process. Factual statements are taken from sources considered reliable but have not been independently verified for completeness or accuracy. These opinions may not be relied upon as investment advice or as an offer for any particular security.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any partic- ular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.



IMPORTANT LEGAL INFORMATION
This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. This document may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
Any research and analysis contained in this document has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. Any views expressed are the views of the fund manager as of the date of this document and do not
constitute investment advice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole.
There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein.
The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance.
Copyright© 2023 Franklin Templeton. All rights reserved.
Issued by Templeton Asset Management Ltd, Registration Number (UEN) 199205211E.














Evolution & revolution: Five technology mega- trends impacting society

large_ESGenius_Cementing-a-greener-future-in-China.jpg

medium_ESGenius_Cementing-a-greener-future-in-China.jpg

small_ESGenius_Cementing-a-greener-future-in-China.jpg

thumbnail_ESGenius_Cementing-a-greener-future-in-China.jpg

ESGenius_Cementing-a-greener-future-in-China.jpg

![ESGenius_Cementing-a-greener-future-in-China.jpg](/uploads/ES_Genius_Cementing_a_greener_future_in_China_576dd77aa9.jpg)


Cement is one of the dirtiest industries for greenhouse gas emissions and China pours more than half of the world’s new concrete each year. The sector’s vast carbon footprint means there’s scope for even small adjustments to have an amplified impact in the real world, and we see huge environmental value in helping to set a top Chinese cement producer on a greener path.

By **Alex Dong**, Research Associate <br/>
**Binyu Zhao** <br/>
**Yi Hu**, Investment Writer

Driverless trucks are humming about in this eastern China factory, where high levels of automation, swaths of greenery and a sparsity of workers all ooze with vibes of a tech firm. Yet this is a cement plant owned by Anhui Conch, a top Chinese producer of the building material, which Fidelity International analysts recently visited to carry out research into sustainable investment practices.

Since 2020, we have been engaging with Conch as one of our investees, advising it on how to improve across several environmental, social and governance (ESG) factors. In our most recent dialogue, Fidelity analysts met Anhui Conch CEO Qunfeng Li in Wuhu city in November.

The cement industry is one of the world’s worst polluters. Production of this key ingredient in concrete contributes about 7 per cent of annual global greenhouse gas emissions. China, in turn, pours more concrete each year than the rest of the world combined, with an estimated output of 2.1 billion tonnes of cement in 2022 compared with a global total of 4.1 billion tonnes.

But new innovations in production mean that cement may start to be a bit less polluting - or potentially someday start to bring net environmental benefits. In Europe, new technologies are emerging as scientists seek to revolutionise how concrete is made. Novel processes are being developed that could not only reduce cement’s carbon footprint, but could potentially turn it into a carbon negative material.

In China, cutting emissions in the cement industry is crucial to the national drive towards net zero. Chinese leaders have pledged to hit peak carbon emissions by 2030 and to achieve neutrality by 2060. In line with these priorities, Fidelity analysts began speaking to Anhui Conch’s management about emissions targets in November 2020.

Even before our engagement started, Conch’s management had shown a strong desire to improve the company’s ESG practices, and progress has become more tangible over the last two years. Reflecting some of the improvements, MSCI raised Anhui Conch’s sustainability rating to B in July 2021 from CCC and further raised it to BB in August 2022.

More recently, Chinese cement prices have been trending down this year, with demand from homebuilders slowing as the property market slumps. Meanwhile, rising coal prices are putting another squeeze on the profit margins of cement production. These industry headwinds add to the difficulty of pushing through a decarbonisation agenda, especially for China’s smaller or more weakly capitalised producers. However, Anhui Conch has indicated that it aims to stay the course on cutting emissions and sticking to its sustainability targets, aided by a balance sheet that is among the strongest in the sector.

“Even in a downturn, we as an industry leader will try to maintain industry stability as well as our good image,” Anhui Conch CEO Li told our analysts in the November meeting. “In the current downcycle, our ESG spending will only increase, and this will add to our competitive edge,” he added.


### Hard gains

Cement production relies heavily on coal-fired power plants, with each tonne of output typically emitting 0.6 tonnes of carbon. In addition, the mining of lime, a key cement ingredient, can be highly pollutive, and cement itself, once turned into concrete structures, can contribute to urban heat effects.

To cut its own emissions, Anhui Conch has focused on limiting the use of coal and electricity per tonne of cement, as well as boosting its overall operating efficiency. It is switching to biomass fuel, capturing carbon dioxide, and reusing waste heat to generate electricity. As a result, emission density has dropped to 839 kilograms per clinker tonne in 2021 from 855 kilograms in 2017. Clinker, the main material for making cement, typically contributes to 80 per cent of cement’s weight. Anhui Conch has set a very specific target - 6 per cent total reduction in emission density in the five years through 2025, when it aims to achieve 790 kilograms per clinker tonne. Currently, the world’s biggest cement producer, Lafarge Holcim, emits about 743 kilograms of carbon dioxide per clinker tonne.

![chart-1-anhui-conch-plan.png](/uploads/chart_1_anhui_conch_plan_5829cb7025.png)

In addition, Anhui Conch plans to follow Lafarge in adopting more biomass fuel, which could eventually help to cut emissions by another 10 to 20 per cent. The company’s first biomass plant began operating in late 2020, with a capacity to consume 300,000 tonnes of plant material each year, which can replace 75,000 tonnes of coal and help reduce some 200,000 tonnes of carbon emissions. A second and larger biomass plant is under construction.

Pursuing sustainability at the expense of short-term margins, the company has bumped up its annual environmental spending to 2 billion renminbi (around $300 million). Domestically, the company has achieved the lowest emission density among large cement producers when measured by unit of output.


###  Open dialogue

Anhui Conch was already working to improve its sustainability performance before Fidelity’s engagement began. But as our analysts drilled into the details, they realised that the cement maker was selling its efforts short based on how it was disclosing and benchmarking its emissions data, and that some global sustainability rating agencies had been judging the company based on its emissions per million dollars of revenue. This ignores one of the basic dynamics of the global cement industry: prices are highly localised because of the high costs of shipping such a heavy material over long distances. The result in China is that cement is typically 40 to 50 per cent cheaper than in the West.

Fidelity analysts realised that applying revenue-based emissions metrics would by nature severely disadvantage the Chinese company when compared with its global peers. Anhui Conch took our advice that it would be more accurate for making cross-border comparisons - and a better reflection of its efforts to reduce carbon footprint - to switch to volume-based metrics that capture emissions per unit of actual cement production.

Moreover, the company has taken it upon itself to find new ways to reduce its emissions of carbon and other harmful greenhouse gases. For example, it has developed an efficient system to curb nitrogen oxide emissions, which in many cases could cause more global warming than carbon emissions. Based on an old technology known as selective catalytic reduction, the system uses special catalysts to convert nitrogen oxide into harmless nitrogen gas and water vapour that can be safely released into the atmosphere.

To reduce its reliance on electricity from coal-fired plants, which still account for most of China’s power supply, the firm has started building solar power plants with a total planned capacity of 1 gigawatt. The solar plants would be able to meet nearly one tenth of Anhui Conch’s electricity needs, based on its power consumption in the last two years.

Anhui Conch also recently formed a dedicated ESG committee to supervise decarbonisation and other sustainability issues, while Fidelity’s own engagements with Anhui Conch have also extended beyond environmental issues to include areas such as corporate governance.


###  A crucial front in decarbonisation

While Chinese cement producers are making some progress in cleaning up their act, the industry remains a huge polluter and one of the most difficult to decarbonise. Cement production still accounts for some 12 per cent of China’s total carbon emissions, compared with an estimated global ratio of about 7 per cent, given the outsized role that the sector plays in the economy.

Times may be changing. Over the last few years, China has carried out supply-side reforms to its cement industry, shutting down numerous small and pollutive plants, or directing state-owned cement giants to acquire them as part of an industry consolidation. In the autumn of 2021, nationwide power curtailment driven by soaring coal prices and other bottlenecks in the energy supply chain further reduced cement output.

There are signs that other large cement makers in China are starting to follow Anhui Conch’s lead in ESG commitments, as the government pushes ahead with nationwide decarbonisation targets. We believe the drive toward net zero, combined with serious engagement by investors, will help eventually firm up a greener path for China’s cement industry.

**[ Learn more about Fidelity’s sustainable investing approach](https://www.fidelity.com.sg/sustainable-investing)**

This publication is prepared on a general basis for information only. It does not have regard to the specific investment objectives, financial situation and particular needs of any specific person who may receive it. You should seek advice from a financial adviser. Past performance and any forecasts on the economy, stock or bond market, or economic trends are not necessarily indicative of the future performance. Views expressed are subject to change, and cannot be construed as an advice or recommendation. References to specific securities (if any) are included for the purposes of illustration only. This advertisement has not been reviewed by the Monetary Authority of Singapore. FIL Investment Management (Singapore) Limited (Co. Reg. No.: 199006300E). Fidelity, Fidelity International, and the Fidelity International Logo and F Symbol are trademarks of FIL Limited.













ESGenius: Cementing a greener future in China

large_LIT banner.jpg

medium_LIT banner.jpg

small_LIT banner.jpg

thumbnail_LIT banner.jpg

LIT banner.jpg

# About the Initative

Let’s Invest Together! (LIT!) is the culmination of significant cross-industry effort, with IMAS’ Gamification workgroup, collaborating with MoneySense, CPF Board, and the SGX Group, to accelerate Optimai, our fintech partner discovered through the IMAS Digital Accelerator Program (DAP). By leveraging on technology, and the mechanics of gamification, we have created a prototype of a fast-moving investment education game, available on iOS and Playstore, readily accessible to the investing public. 


<iframe width="560" height="315" src="https://www.youtube.com/embed/TRBCZukn7yo" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>

Given the evolution of the investor base, many of whom have become more digitally savvy, the IMAS Education Committee saw the opportunity in 2020 to leverage on gaming technology and the IMAS DAP to create a fun and exciting utility to help build investment knowledge amongst the investing community.

Utilising real data to simulate actual events, the game is uniquely able to help investors better understand how the various asset class interact, their risk profile and how their investment decisions can impact their portfolios, thereby improve their ability to asset allocate and build resilient investment portfolio for themselves.

##### Download the game now:

1. [Google Playstore](https://play.google.com/store/apps/details?id=com.Optimai.LetsInvestTogether)
2. [Apple Store](https://apps.apple.com/app/lets-invest-together/id1576667625)

Let's Invest Together! (LIT!)

small_US stock market trader article.jpg

thumbnail_US stock market trader article.jpg

US stock market trader article.jpg

![US stock market trader article.jpg](/uploads/US_stock_market_trader_article_d88fc966e8.jpg)

Author: Valerio Baselli

Looking at the market today, it's easy to forget where we were at around 15 months ago. Many of the market declines of the past decade or so, including the stock market crash of 2008, are fast becoming faded memories for most of us. But it is the investors who endured these difficult times came out in perhaps the best shape, and as is often the case, those who had the nerve to stay invested were richly rewarded.

And yet, the decision about whether to change your investment strategy or sell a fund is usually not clear-cut, even in hindsight. After the dust has settled on a decision and the investment has performed well or poorly, the “right” answer is wholly dependent on the individual. Selling criteria are not a one-size-fits-all list that fit every investor, but there are some situations when selling is particularly ill-advised. Christine Benz, director of personal finance at Morningstar, picks these three key examples.

**Poor Short-Term Performance**
 
It’s almost never a good idea to sell a fund based on weak performance alone, especially over the short-term. You might have been tempted to sell in last year's market sell-off for example, but we now know the Covid crash was the shortest in history. Instead, if a fund is lagging its peers or an index, your first move should be to investigate why that is. It could be that the manager is simply sticking with an investment strategy that happens to be out of favour, as has been the case with many value-leaning funds in recent years. But weak performance may also be a sign that something more serious is afoot - Morningstar's own research has found that many active funds fail to beat the market over the long-term.

Researching an investment’s fundamentals can be time-consuming, which is why you don't want to get too caught up in investigating short-term bouts of underperformance. Most funds, especially those that are using truly active strategies, will trail their peers at times, often for very good reasons and sometimes for a few years or more (that could be the case with some perfectly solid, defensively positioned funds during a market rally, for example).

Instead, save your energy for checking up on funds when they've underperformed over longer stretches of time or in a period when you would have expected them to perform well. If, for example, you selected a fund because of its low-risk tendencies, but it lost far more than its peers in 2020, that's a legitimate reason to ask whether something about its strategy changed or its risk controls weren’t what you thought they were. And even if the fund isn’t bad, it may not be a good fit in your portfolio.

**Inconsistent Performance**

On a similar vein, investors often get themselves worked up when a fund’s relative returns are inconsistent on a year-to-year basis. Sure, it can be comforting to see a fund land in its category's top half like clockwork—and a small handful of funds has actually managed to generate return rankings that have been remarkably consistent from year to year.

But holding all of your funds to that standard would cause you to kick out some fine offerings that, while not consistent performers on a calendar-year basis, are consistent where it counts: they employ their strategies with discipline and don't waver, even if the market isn't rewarding them in the near term.

It's also important to remember that a calendar year is a fairly short and arbitrary time period, and a fund that has looked erratic over January-December time periods may appear perfectly consistent when measured over a different 12-month time frame—say, from April to March of each year. Investors shouldn't get too hung up on year-to-year performance consistency when deciding what to hold in their portfolios. Looking at annualised returns can be a better way to judge long-term performance, as these smooth out good and bad periods to indicate what average return an investor has received each year. 

**Macroeconomic News**

Macroeconomic news - whether it's the direction of interest rates, rising inflation or GDP growth in China and India - often appears right alongside news about the market's trajectory. And it's true that what's in the headlines has the potential to move the markets up or down on a daily basis, or even over longer time frames. The trouble is that by the time a certain news item makes its way into the headlines, other market participants have already digested it and priced it in.

If you decide to sell your fund based on that news, you're likely to be too late. Instead, a better tack for investors, at least as it relates to their portfolios, is to keep their heads down and focus on factors that they can control: their savings and spending rates, the quality of their investment holdings, and the total costs they pay for those investments. There is much virtue in tuning out the noise when it comes to managing your portfolio.





*©2021 Morningstar. All rights reserved. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided as of the date written, solely for informational purposes; and subject to change at any time without notice. This content is not an offer to buy or sell any particular security and is not warranted to be correct, complete or accurate. Past performance is not a guarantee of future results. The Morningstar name and logo are registered marks of Morningstar, Inc. This article includes proprietary materials of Morningstar; reproduction, transcription or other use, by any means, in whole or in part, without prior, written consent of Morningstar is prohibited. This article is intended for general circulation, and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Investors should consult a financial adviser regarding the suitability of any investment product, taking into account their specific investment objectives, financial situation or particular needs, before making any investment decisions. Morningstar Investment Management Asia Limited is licensed and regulated by the Hong Kong Securities and Futures Commission to provide investment research and investment advisory services to professional investors only. Morningstar Investment Adviser Singapore Pte. Limited is licensed by the Monetary Authority of Singapore to provide financial advisory services in Singapore. Either Morningstar Investment Management Asia Limited or Morningstar Investment Adviser Singapore Pte. Limited will be the entity responsible for the creation and distribution of the research services described in this article.*

3 Bad Reasons to Sell a Fund

Ed Perks, Chief Investment Officer of Franklin Templeton Investment Solutions discusses how rapidly changing economic and market conditions could lead to a shift in strategy for income investors.

Increasing Yields: Strategy Shifts for Income Investors

Does investing in ESG hurt investment returns? Are ESG portfolios only concerned with saving the environment? AllianceBernstein's Aditya Monappa tackles these myths and answers investors' burning questions.

Beyond catchy taglines: Navigating ESG investing with AllianceBernstein

In the second episode of a four-part series, we explore briefly how the pandemic has prompted Singaporeans to kickstart retirement planning. 

"Rethinking Retirement" is a study commissioned by Fullerton Fund Management to find out what Singaporeans think about retirement, as well as how digital technologies and COVID-19 have altered their approach to it. 

A joint initiative of IMAS and LIA