Building on our studies showing a strong relationship between the environmental, social and governance performance...

In this episode of Amplified, Tatiana Bosteels, Director of Responsibility at Hermes Real Estate, discusses how Hermes Real Estate is progressing further, building on the success of RPI to strengthen its delivery of outcomes beyond performance.

The shape of the US Treasury yield curve generally contains useful information about future developments in the real economy. In particular, when the Treasury yield curve inverts – that is, when short-term rates exceed long-term yields – a recession usually follows in the next 12 months. Historically, the yield curve has been a very accurate forecasting tool: a curve inversion has preceded each of the last seven recessions in the US. The Treasury yield curve flattened significantly in 2017, and last month, the spread between 10-year yields and two-year yields narrowed to about 50bps. It is therefore possible that the spread could turn negative at some point this year. As such, it is unsurprising that market observers have become nervous about the possibility of an economic slowdown. But given the current environment of loose monetary policy, to what extent should we trust the US yield curve as a harbinger of a recession?

At Hermes we have long held the belief that the financial system should operate in the interests of its ultimate asset owners, not its various agents. We also recognise that the decisions financial practitioners make on how to invest beneficiaries’ money entrusted to them shapes the society they will live in. Further, we argue that the differentiation between ‘shareholders’ and ‘stakeholders’ which is often produced to justify the status quo is inherently false. Today, the majority of shares are owned (through savings and pensions) by the very people who make up what we think of as societal stakeholders. That the majority of these same stakeholders perceive the ‘system’ to have failed them is becoming increasingly clear around the developed world and has been noted by many, most recently here by the Prime Minister.