Our Macro Approach to ESG Integration

The vast majority of publicly traded companies have announced plans to reduce carbon emissions, but many commitments are not sufficiently ambitious or credible—particularly in high-emitting sectors. As a result, investors may be unknowingly exposed to transition risk without a rigorous process to assess these plans.

Co-Chief Investment Officers for Sustainability Karen Karniol-Tambour and Carsten Stendevad share their 2022 Outlook.

Pulitzer Prize-winning author Daniel Yergin joins Co-CIO Karen Karniol-Tambour and our investment team for a conversation on the green energy transition, the key dynamics driving energy markets, and how the politics of energy are impacting international relations.

Under current policies, we expect no decline in oil consumption for years. Pay attention to whether government action going forward will meaningfully reduce demand for oil — through carbon taxes or subsidies for alternative energy sources.

While there is nothing magical about geographic disparities, we find them to be a good way to illustrate how different pockets of the economy have performed over the recent expansion. By excluding the booming coastal cities from the rest of the US, it is easier to see just how large the “shortfalls” from maximum employment are in the bulk of the country.

Bridgewater’s Co-Chief Investment Officer Karen Karniol-Tambour participated in a panel hosted by the Conference of Montreal to discuss how investors can use systemization to enable sustainable investing at scale. Karen describes how, in an economic environment that increasingly relies on the coordination between fiscal and monetary policy to stimulate economic growth, issues of sustainability are critical to understanding today’s world.

As macroeconomic investors, we focus on questions about the impact of climate change on the major economies around the world. There is considerable uncertainty regarding the physical impacts of climate change on economies; as we surveyed expert views on the topic, we found a wide range of plausible outcomes for investors to consider. While the physical impacts of climate change will take years to play out, the economic and market impacts of policy choices or other human responses to climate change are likely to take place much faster.

Even before the COVID-19 crisis, it was clear that traditional economic measures had increasingly diverged from social outcomes. Despite a decade of economic expansion and falling unemployment, social conditions deteriorated across a variety of measures. COVID-19 has brought these pressures to a head. Looking ahead, social conditions will have rising impacts on markets as policy evolves to more explicitly consider such issues in evaluating its goals. Fiscal policy is likely to take on a greater role in the decade to come, and is inherently distributional. The Fed, too, is increasingly taking into account social disparities.

Bridgewater Founder and Co-CIO Ray Dalio explores why capitalism is not working for the majority of Americans, diagnoses why it is producing these inadequate results, and offers some suggestions for what can be done to reform it. These problems are creating widening income, wealth, and opportunity gaps which pose existential threats, bringing about damaging domestic and international conflicts and weakening America’s condition.

Populism is one of the biggest forces shaping economic conditions, fiscal and monetary policy and international relations. This report examines how the phenomenon typically germinates, grows, and runs its course.