The winners and losers from Biden’s first 100 days in office
Joe Biden Jr was inaugurated as the 46th President of the United States in January after a tumultuous few weeks on Capitol Hill. Covid-19, the climate and resetting America’s foreign policy will all be high on the President’s to do list for his first 100 days in office, and no doubt some sectors will be winners and some losers as a result.
Biden’s to-do list
Now Biden has entered the Oval Office he will have a long-list of issues he needs to deal with. First and foremost is America’s response to the Covid-19 pandemic, which continues to spread aggressively in the States. US$20bn has been dedicated to the production, dissemination and administration of vaccines, on top of over US$400bn targeted directly at fighting the virus.
Once the vaccine programme is sufficiently developed, attention will turn to the ‘American Rescue Plan’, which comprises a number of hawkish policies, including increases in corporate and personal income tax and a record high capital gains tax, alongside a US$2tr spending package representing 9% of GDP.
Then there’s the small matter of resetting America’s foreign policy after the Trump administration. The world today is politically, socially, and economically less stable than it has been in decades, and Biden will have to chart America through a more stable course while navigating Iran’s nuclearization programme, North Korea’s ongoing hostilities and the disinformation threat from Russia in the East.
Who will be the winners from Biden’s first 100 days in office?
Healthcare looks set to benefit from a Biden presidency. Many businesses in the sector have strong balance sheets with sufficient cash reserves to pay dividends this year and engage in M&A activity. Positive long-term demographic trends are on the sector’s side, including an aging population and a growing middle class in emerging markets.
Due to the significant impact of Covid-19 on economies around the world, governments will choose to spend significant sums on vaccine allocation and Covid-19 mitigation supplies. Furthermore, a number of new and potentially game changing cancer drugs are entering early trials, including the much-anticipated KRAS drugs.
However, this does not remove the threat of government intervention in the healthcare sector and we could see Biden reform prescription drugs and allow Medicare to negotiate lower prices with drug manufacturers, or penalize drug price increases over the inflation rate.
Alternative energy funds investing in solar, wind and water are already seeing stellar inflows this year, in contrast with dramatic outflows in those funds dedicated to fossil-fuel intensive energy. President Biden has advocated for $2tr to be spent on a climate plan to achieve a carbon pollution free energy sector by 2035. Once more, Biden’s presidency will reinforce investor sentiment that the global direction of travel is going one way, and with America on board, others will follow suit.
However, it is important investors remember that the sector has rallied dramatically over 2020, and valuations are extremely high. Major legislation, like the Green New Deal, may be difficult to pass even with a Democrat majority-controlled government, and any major blow to the positive sentiment could knock the wind out of the sector’s sails.
President Biden has already expressed his conviction to resume America’s role as a global leader in international trade, and has shown interest in reconsidering America’s membership of the Trans-Pacific Partnership. Emerging markets with exposure to US trade should benefit from the increased openness of US markets, as well as increased stability in the international trade market.
Reduced geopolitical tensions may lower international volatility and result in the influx of foreign capital into emerging markets. Once more, increased infrastructure spending in the States may result in increased commodity demand, which is historically a major sector of emerging market economies.
And what about the losers?
Utilities are generally regarded as an important defensive sector given their stable revenues. However, valuations are high relative to the sector’s historical average, which potentially dampens the sector’s defensive characteristics. Once more a potential economic recovery in the States will make the sector much less attractive relative to other sectors who can take advantage of the recovery play. High interest rates on the horizon will also dampen utilities attractiveness.
Companies that provide consumer staples tend to have limited pricing power in a low-inflation environment and while they have been the beneficiaries of government stay-at-home orders, an improving economy and strong stock market have historically made the sector relatively less attractive to investors.
Additional government fiscal stimulus and the future availability of Covid-19 vaccines could further support the economy and reduce stay-at-home food and staples demand.
About AAM Advisory and Quilter plc AAM Advisory is a Singapore-based financial adviser business with 5,500 clients and circa S$1.1bn AuA (as at 30 June 2020). Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow. Quilter plc oversees £117.8 billion in customer investments (as at 31 December 2020). It has an adviser and customer offering spanning financial advice, investment platforms, multi-asset investment solutions and discretionary fund management. The business is comprised of two segments: Advice and Wealth Management and Wealth Platforms.
Charting the rise of the chief sustainability officer
There has been a dramatic increase in the hiring of the chief sustainability officer (CSO) role among Fortune 500 companies, with demand for CSOs growing 228% in corporate America over the last decade, according to the latest report from CSO recruitment firm the Weinreb Group.
There were more first-time CSOs recruited by Fortune 500 companies in 2020 than the previous three years combined, with numbers of CSOs in corporate America soaring from just 29 in 2011 to 95 today, demonstrating the importance corporations are placing not just on reducing their environmental impacts, but also in supporting issues of social justice.
Businesses are increasingly under pressure to assume more responsible practices with customers, regulators and investors demanding increased transparency of business ESG performance.
And the past year in particular has been seen great upheaval, with increased new attention brought to “social justice, climate change, and an ever-widening political divide”, according to Ellen Weinreb, founder and CEO of the Weinreb Group, which has tracked the rising role of CSOs over the past decade.
CSO role is expanding and shifting
But it’s not just the number of CSOs that have changed, sustainability teams are getting bigger, with the average team size increasing from five professionals in 2011 to 15 today, according to the report.
This is in part due to the fact that the CSO role has expanded beyond simply ‘sustainability’ to incorporate social justice too. Sustainability isn’t exclusively about the environment anymore. The role has also come to incorporate social justice, especially with the rapid growth of, and increased attention on, environmental, social, and governance, or ESG.
And many roles recently have been renamed as such with Head of ESG or ESG Officer becoming increasingly prominent.
Women make up over half of CSO roles
What's also changed over the last decade is the percentage of women holding the title of Chief Sustainability Officer.
A decade ago, in 2011, the majority of CSO roles were held by men (72%), with just 10 of the 29 then CSO roles held by women. A decade on, in 2021, the percentage of women in CSO roles has almost doubled, now accounting for more than half (54%) of CSO positions.
However, according to the report ‘The Chief Sustainability Officer 10 Years Later’, despite the movement toward gender balance within the role and its expanded focus on social justice, in particular, in 2021 the CSO position remains overwhelmingly ‘white’.
Probably not surprising considering there are just three black CEOs at Fortune 500 firms.
How the chief sustainability officer role has grown
The first-ever named chief sustainability officer in a US publicly traded company was Linda Fisher for Dupont, who joined the chemical giant in 2004 as CSO, just at the time when innovative companies were looking at sustainability as a driver for business growth. Joining from the Environmental Protection Agency where she spent 13 years, Fisher was a corporate sustainability trailblazer, spending more than a decade as CSO here, and leading DuPont’s efforts to establish its first set of market-facing sustainability goals.
By 2006, a slew of firms had joined the CSO movement, including Mastercard, Nissan and Microsoft; and Kellogg’s became the first firm to replace a CSO with Dianne Holdorf taking over from Celeste Clarke. And by 2011, a decade ago, Coca-Cola, Verizon, AT&T and P&G had appointed their first CSOs.
In fact, it was in 2011 when Virginie Helias invented her idea of the perfect CSO job – to make sustainable consumption not only possible, but ‘irresistible’ – and pitched it P&G’s then CEO. A decade later, in 2021, and Helias is still in the job she first created.
The majority of CSOs have been internal hires, such as Peter Graf of SAP, who joined the software giant in 1996, and served as EVP for Marketing before being named CSO in 2009. The same is true at UPS, whose first-ever CSO, Scott Wicker, started at the package delivery giant 34 years before being named CSO in 2011. Increasingly, however, external hires are being made with organisations increasingly searching for more high-profile leading voices in the ESG forum.
In February 2021, JP Morgan hired former British high-profile Labour politician Chuka Umunna while just last month hotel chain Accor hired high-profile French politician Brune Poirson, who has previously championed the anti-waste law within the French government and was secretary of state for the environmental transition for three years.