Mercer Paper Highlights Governance as Key to Address and Mitigate Global Systemic Risks While Pursuing Returns

Mercer, a global leader in redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being, and a business of Marsh & McLennan (NYSE: MMC), today released its “COVID-19 – Investment Governance and Strategy to Navigate a Pandemic-Driven Market Crisis” report.

The report examines how large asset owners are finding ways to pursue attractive risk-adjusted investment returns while also taking investment actions to help mitigate and address the impact of the COVID-19 pandemic through investment governance. COVID-19 has had one of the most significant impacts on the global economy in the last century – affecting liquidity, market volatility, valuation adjustments across asset classes and significant changes to forward-looking return expectations for many asset classes. It has also driven down nominal and real interest rates and lowered oil prices, and it has damaged the fiscal solvency of some governments and the private sector.

The report is linked to Mercer’s ongoing, multi-year “Transformational Investment” collaboration with The World Economic Forum (WEF), which explores investment and governance practices for global systemic risks. These global system risks confront our global economy, society and the planet, and include climate change, water security, geopolitical stability, technological evolution, demographic shifts and zero or negative real long-term interest rates. Related to this effort, the WEF recently issued “Transformational Investment: Converting Global Systemic Risks into Sustainable Returns,” which provides new insights to help asset owners address the long-term impact of non-traditional investment risks and opportunities.

Through this collaboration, the WEF and Mercer provide institutional investors with a six-step governance and decision-making framework to pursue attractive risk-adjusted returns. Mercer’s white paper demonstrates how the framework is applied to the pandemic.

These principles include:

1. Understand the overall impact on the funding entity, objectives & beneficiaries.
2. Collaborate with similarly situated organizations who are concerned about the same risks & opportunities.
3. Design governance, policies, delegation and accountabilities for material systemic risks.
4. Invest to manage the portfolio’s exposure to the global systemic risk.
5. Transform through driving investment strategy that aims to deliver change.
6. Monitor and revisit. Apply learnings to improve policies and processes.

In this context, Mercer’s paper has two objectives for institutional investors:

1. Evaluate governance strategies developed to address systemic risks, in terms of addressing the COVID-19 pandemic-driven market crisis, and
2. Consider practical investment actions by long-term investors that support economic recovery and generate attractive risk-adjusted returns. Investments that support economic recovery and resurgence are considered “transformational.”

“As illustrated by the COVID-19 pandemic, our economy, society and planet face numerous long-term, global systemic risks, which need to be mitigated,” said Rich Nuzum, Global President of Mercer’s Investments and Retirement business. “As our report shows, institutional investors have the ability to respond to these challenges and continue to seek positive investment outcomes, while mitigating the effect of these systemic risks. This is especially true when it comes to governance, as sound and robust investment practices can benefit the economy and broader society through periods of market volatility and economic uncertainty.”

Mercer’s “COVID-19 – Investment Governance and Strategy to Navigate a Pandemic-Driven Market Crisis” report is available for download here.

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About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s more than 25,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a business of Marsh & McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 76,000 colleagues and annual revenue of $17 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

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