28.09.18

Snapshots first came across Kondratiev waves almost a decade ago. The Soviet economist, Nikolai Kondratiev, first brought these to attention in his book, “The Major Economic Cycles” in 1925. Kondratiev waves were described as long economic cycles brought on by major technological innovations. The Austrian and American economist, Joseph Schumpeter expanded on Kondratiev’s work to include shorter infrastructure investment cycles and even shorter corporate business cycles.

We have been fascinated with waves and cycles in economics and politics (and even in physics and geography) ever since. We find that thinking about longer-term waves and cycles is an excellent way of grounding yourself in what can feel like chaos on a daily basis.

ESG and Capitalism 2.0

We also think that we are on the cusp of a new investment cycle which has the potential to impact corporate behaviour and the cost of capital.  As specialist providers of debt capital to European companies, we are taking note.

Investors have been increasingly asking us to incorporate an ESG (Environmental, Social and Governance) policy into our investment process.  At the same time, an ecosystem of ESG rating providers has developed, much like rating agencies developed in the late 1800s/early 1900s to rate sovereign and railroad bonds.

We have teamed up with one of these providers and are in the process of implementing an ESG scoring, assessment and engagement system into our investment process.  We think adoption of ESG scoring by investors and asset managers has the potential to have an impact on the cost of capital for companies.  As with all waves and cycles, this will take some time but it is clear that it has been set in motion.

Good luck.

Asif Godall
Co-Chief Investment Officer