Public’s Cash Stash Will Cushion a Downturn? Maybe Not

Economist Shepherdson says Americans’ savings already has been whittled down.


One calming thought amid today’s economic turmoil has been that any recession would be softened by the large trove of savings that the U.S. public has accrued since the pandemic began. But that cushion may be a lot less protective than many believe, according to a study by Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Pandemic savings have “been run down further than previously thought,” Shepherdson noted. “Consumers’ financial cushion against tighter financial conditions is smaller” than before, he wrote.

Thanks to Washington stimulus and curbed spending in the early days of COVID-19, savings had run up to $2.6 trillion. New government data, however, show that this ready cash has shrunk, no doubt due to high consumer outlays that kicked in since. Almost a third of the trove has been spent.

Indeed, consumers have gone back to their previous ways of preferring spending to saving, and then some. This past decade, before the pandemic, the personal savings rate was around 6% of their disposable income. That shot up to almost 25% in early 2020 and stayed high until the middle of 2021. Lately, it is a mere 3.5%.

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Credit card delinquencies are still low, although they have ticked up recently. And Nancy Lazar, chief global economist at Piper Sandler, has observed that credit-card debt has risen 6% from pre-pandemic highs. Of course, credit card interest rates have shot up, meaning carrying costs are becoming more onerous, hitting 16.3% on average, from 14.5% a year ago.

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Canadian Pension Giant Expects Carbon Neutral Internal Ops by 2023

The $392 billion CPPIB also said it will nearly double its investments in green and transition assets by 2030.


The C$523 billion ($392.2 billion) Canada Pension Plan Investment Board expects to achieve carbon neutrality for its internal operations by the end of 2023, according to its 2022 Report on Sustainable Investing. In February, the pension fund committed its portfolio and operations to becoming net zero of greenhouse gas emissions by 2050.

“In the last year, debate has emerged over the utility and integrity of the term ‘environmental, social, governance,’” CPPIB President and Chief Executive Officer John Graham said in the report. “To us, the ESG label is not what matters. What’s truly relevant is to assess, understand, and address the wider factors affecting business growth – whether those are societal, environmental or stewardship related.”

The pension fund giant said it is conducting an abatement capacity assessment on its operations to inform its approach in creating a framework and standardized template to measure the capacity of organizations to remove or “abate” their GHG emissions. It said it has already started the process of procuring carbon credits – which it describes as “high-quality” and “verifiable” – to offset its operational emissions and help it reach carbon neutrality.

The pension fund also said it is investing in companies that demonstrate carbon-reduction innovations and practices that it believes will lead to better risk-adjusted returns. It said the investment opportunities include, but are not limited to, energy systems, built space, industry, mobility, carbon markets, and investments based on changing consumer preferences.

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“For public companies in our portfolio, we articulate clearly how integration of sustainability-related factors should inform strategy and enhance returns or reduce risks in the business,” Richard Manley, managing director, head of sustainable investing for CPPIB, said. “As a global investor, we proactively identify dynamic and emerging material business risks and opportunities and seek solutions to reduce or capture their potential within portfolio companies and align incentives.”

In its report, the pension fund said it will double its investments in green and transition assets to at least C$130 billion by 2030 from C$66 billion as of March 31. It also said that it recently developed a methodology to measure its existing green and transition assets.

“While we referenced a number of international standards for guidance, our methodology does not strictly adhere to any of them as they are mostly still evolving,” said the report. “In the absence of a widely accepted definition for green or transition assets, we arrived at our definition by considering different frameworks and taxonomies, including the E.U. Taxonomy.”

The CPPIB said it considers an asset to be green when at least 95% of its revenue is derived from green activities as defined by the International Capital Market Association. It also said it adopts the highest end of the 75%-95% range that the E.U. Taxonomy uses to consider whether assets are “strongly climate-aligned.”

Additionally, the pension fund considers an asset to be in transition if the company is in a high-emitting sector but has committed to reaching net zero “with a credible target and transition plan, and is making meaningful contributions to global emissions reductions.” Assets are eligible if they obtain certification from a credible third party, such as the Science Based Targets initiative for target setting. And companies with substantial “green revenues” that are shy of the 95% green asset threshold may be considered for inclusion as transition assets if they provide a credible plan to grow their green revenue share.

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