Bryan Turner offers insight into a few business trends that could be critical during the rest of 2022 and beyond
By now, it’s almost cliche to say that the past two years have been tumultuous from a business perspective. Of course, cliches are grounded in truth.
Phrases like ‘new normal’ and ‘unprecedented’ feel grossly over-used, but they’re still accurate descriptions of what we’ve all experienced.
But even as we grapple with what’s happened and the impact it’s had on us as people, employers, colleagues, and investors, many are also looking forward, wondering what’s next. It’s definitely a discussion worth having, especially because amid the flurry of articles around hybrid work and the post-COVID realities we all know and understand, there are some important issues that are being glossed over.
While I can’t speak for massive multinational corporates, there are a few bubbling trends that I feel could be critical in 2022 and beyond.
1Beyond ESG
Already an emergent trend prior to the pandemic, environmental, social, and governance (ESG)-based investing has exploded over the past couple of years. In fact, so keen is everyone to demonstrate their ESG credentials that ESG assets are on track to reach US$53-trillion by 2025.
But as nation-states and major investment vehicles (such as pension funds) place increasingly strict conditions on companies when it comes to sustainability and governance, it will become increasingly difficult for companies to stand out on ESG alone. They therefore need to start thinking beyond ESG. One way of doing so is for companies to align themselves with the United Nations’ Sustainable Development Goals (SDGs).
Adopted in 2015, the SDGs are a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. When it comes to achieving those goals, the UN calls on businesses to play their part too. While some in the business world might argue that taking an SDG-focused approach presents unnecessary obstacles, we believe that it can provide stronger businesses, economies and societies. Businesses can only gain by better serving and supporting the communities they operate in and by taking a long-term view informed by sustainability.
2Investors return to on-site meetings
There are, undoubtedly, advantages to the rise of video calling occasioned by the pandemic. I can meet with colleagues and investors in Norway and portfolio companies across the SADC region throughout the course of a day. But it’s also true that you miss out on things when you don’t meet in person. This is especially true when it comes to meeting with potential investee companies. As useful as financials and other virtual forms of due diligence can be, you get a much better sense of whether a company’s worth investing in by visiting its premises and meeting with its management team face to face.
The trick in the coming year will be for investors not to get sucked back into old behaviours, especially as restrictions are lifted. We should all keep using virtual meetings to foster and maintain connections. They allow us to be more agile and decisive. In-person meetings, meanwhile, should be approached deliberately and with purpose.
3There will be opportunity amidst the chaos of the pandemic
From a geopolitical and macroeconomic perspective, 2022 has already delivered a number of major shocks. It’s likely, however, that what we’ve witnessed to date is just the beginning. With conflict hotspots cropping up around the globe, already jittery markets are tenser than ever. Couple this political uncertainty with predictions of a stock market superbubble on the verge of bursting and it’s easy to see why investors might be left scratching their heads as they look for safe places to put their money.
But as our experiences in Southern Africa have shown, investors can still make good returns (and a positive impact) in unstable economies. They can do so by investing in good companies that meet the needs of people in those countries. These businesses provide genuinely useful and necessary products and services that make a positive impact on the communities they operate in. They will also continue to do so for some time to come, which should be welcomed by investors.
In fact, the coming year and beyond could see growing opportunities in Africa, especially among companies that have faced the storms of COVID-19. They’ll need investment to rebuild and be profitable. In particular, Africa will present opportunities for infrastructure and technology growth. When it comes to the former, investors will have to find projects and companies capable of going beyond the feasibility and planning stage. When it comes to technology, meanwhile, the most important thing will be identifying the companies that best take advantage of the growing levels of connectivity on the continent.
Investors looking to take advantage of these opportunities shouldn’t go in blind. Instead, they should look to partner with experienced players who understand where the best investments really are and how to take advantage of them.
4Sustainability will be more than a buzzword
There is absolutely no doubt that ‘business as usual’ is no longer an option. Many historic business practices have proven to be damaging to people and the planet. In a bid to change that, many investors have started demanding that their portfolio companies meet environmental, social, and governance (ESG) standards or that they operate in line with the United Nations’ Sustainable Development Goals (SDGs). That’s unlikely to change anytime soon.
In fact, global ESG assets are on track to exceed $50-trillion USD by 2025. While some have questioned how viable ESG really is, the problem isn’t with the concept itself but a lack of standards and regulation until now. Ultimately, we’ll probably see today’s ESG standards become regulatory norms.
By taking a sustainability-first approach, businesses are able to extend those benefits to the communities they serve and operate in. Ultimately, then, sustainability won’t just be a buzzword in 2022 but an imperative for survival.
Above all, be adaptable
There are, of course, many things that are unpredictable in 2022. While some were hopeful, we might see a return to the global order that dominated prior to the pandemic, it’s clear that is unlikely to be the case. Instead, the pace of change will continue to accelerate.
In such an environment – where the next ‘black swan’ event could come from anywhere – it’s imperative that businesses and investors alike be as adaptable as possible. A stubborn refusal to change because ‘it’s always worked for us’ simply won’t work anymore. Over the past two years, many companies learned just how costly inflexibility can be. For those looking to survive, and thrive, in 2022 and beyond, being open to new markets, ways of doing things, and investment channels will be key.
And if you’ve come this far, you deserve to give yourself the best possible shot of staying the course.
Bryan Turner is a Partner at SPEAR Capital
