CFOs Are Optimistic about the Near-Term Future, Survey Says

In Deloitte poll, some 58% say now is a good time to take risks.

The chief financial officers of major US companies are optimistic about the near-term future in 2018’s second quarter, according to a survey released today by Deloitte, the professional services giant.

The quarterly poll indicated that CFOs believed now was a good time to take risks, with 58% agreeing, although that was down from the previous quarter’s 69%. But they wanted to concentrate more on organic growth—as opposed to buying other companies.

In geographical terms, CFOs were most optimistic about the North American economy, with 94% rating current conditions as good, a high for the 8-year-old survey. Sentiment was less optimistic about Europe, which recently has faced political turmoil.

“They want to stay in their own geographic” area, said Sandy Cockrell, Deloitte’s global CFO program leader. “It’s significant that nine in 10 say the North American economy is good or better than good.”

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That said, the CFOs were not as sanguine about their own companies’ prospects, which declined to 39% this quarter, from 54% in the winter. The survey, taken in mid-May, was at the outset of current international tensions over trade. The companies in the poll all have overseas operations, which could be hampered by continued trade tumult.

Before 2017, CFOs worried most about slow economic growth. But with the recent pickup in US growth, their concerns have shifted more toward how they will capitalize on opportunities and fend off threats to performance. There’s a strong tilt to revenue growth over cost reduction, 67% versus 17%, which is a reversal of previous years.

Interestingly, the CFOs had a strong affinity for investing corporate cash to expand their businesses, over returning it to shareholders (56% to 18%). Capital spending at last has moved up after years of stagnation, although so have stock buybacks.

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UK Initiates Social Impact Investment Drive

Initiative aims to make ESG investing ‘business as usual.’

The UK government said it will work with the country’s investment and savings industry to help launch social impact investment funds. It also said it plans to encourage more investments in disadvantaged areas, and to create “investment opportunities that address social challenges, while also creating financial return.”

The initiative is in response to a report compiled by senior representatives from the investment industry, and chaired by Elizabeth Corley, vice chair of Allianz Global Investors. It highlighted the need to support and promote the social and environmental responsibility of businesses across the UK.

“People increasingly want to see their savings and investments to have a positive impact on society, as well as bring financial returns,” Tracey Crouch, minister for Sport and Civil Society, said in a release. “By utilizing the wealth of experience within the financial services industry, we can expand social impact investing to help build a society that works for everyone.”

In 2016, the UK government appointed Corley to lead an industry-led advisory group that looked into ways to foster a culture of social impact investment and savings in the country.  The report, which was published in November, recommended ways to improve deal flow and the ability to invest at scale; strengthen competence and confidence within the financial services industry; develop better reporting of non-financial outcomes; and make it easier for people to invest.

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The Pensions and Lifetime Savings Association (PLSA) welcomed the government’s social impact investment drive.

“Impact investing is the fastest-growing area of responsible investment,” said the PLSA’s Caroline Escott in a release. “With their long-term investment goals, and £2.2 trillion ($2.92 trillion) of assets under management, pension schemes are particularly well placed to have a positive impact on the economy and society through their investments.”

The UK’s Department for Work and Pensions will launch a consultation next week, which will clarify rules on social impact, and environmental, social, and governance (ESG) investing.

“Social impact investing is a relatively new, yet rapidly developing investment strategy. Therefore, investment professionals need the relevant educational tools and guidance to develop the expertise that allows them to best serve their clients’ interests and needs,” said the government in its response to the advisory group report. The “government’s ambition is to ensure that consideration of social and environmental impact becomes part of ‘business as usual’ in the British economy.”

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