Anxious optimism in a complex world - 2018 Global Investor Survey - www.pwc.com/investorsurvey
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2018 Global Investor Survey
Anxious optimism in
a complex world
www.pwc.com/investorsurvey
2 | PwC’s 2018 Global Investor Survey Introduction For the third year, we have set out to get insight into the thinking and strategic direction of chief executive officers (CEOs) around the world and how their views compare with the perceptions and expectations of investment professionals. We asked the two groups for their opinions on growth prospects in a disruptive environment, the effects of globalisation and the threats that companies face today. We also sought their views on managing and maintaining stakeholder trust and the challenges and opportunities presented by technology and automation. Their responses, as in past years’ surveys, unsurprisingly showed a variety of perspectives, along with many similarities. We hope these findings will help to improve the quality of engagement – and perhaps understanding – between companies and the investment community. Note: Throughout this report we use the terms ‘investment professionals’ and ‘investors’ interchangeably to describe the respondents to our survey. This group of capital market participants includes portfolio managers, equity analysts, credit ratings agencies, governance and stewardship professionals, private equity investors and individual investors. They cover a range of industries and focus on the equity markets, fixed income markets or both.
3 | PwC’s 2018 Global Investor Survey
Contents
4 10 12 15 21 24
Global growth: Threats: Global vs local: Challenges: Trust: A message from
Great expectations What CEOs worry Navigating a Living in an age of It’s all about the people Richard Sexton,
about is not always the fractured world disruption Vice Chairman, PwC
same for investment International Limited
professionals
24 Survey
methodology
26 Acknowledgements and
thanks
27 Contacts
4 | PwC’s 2018 Global Investor Survey
Global growth:
Great expectations
Investment professionals continue to show optimism in the global
economy, at least over the next 12 months. And that growth translates
into positive expectations for companies in the near term. However,
investment professionals aren’t so positive about the longer term, with
their growth expectations for companies over the next three years
declining from last year’s survey.
5 | PwC’s 2018 Global Investor Survey
Investors and CEOs are more confident about
the global outlook than they were last year
Q Do you believe global economic growth will improve, stay the same, or decline over the next 12 months?
Investors CEOs
57%
“The economy is improving. The biggest risk
54%
53% I see is a China slowdown.”
49%
45% Investment professional, US
41%
35% 34% 36%
33%
27% 29%
22% 23%
19%
17%
11%
5%
2016 2017 2018 2016 2017 2018
Improve Stay the same Decline
6 | PwC’s 2018 Global Investor Survey
Investors are less confident about growth than
CEOs, and their confidence in the long term
has declined since last year
Q How confident are you about the prospects for revenue growth for the companies you invest in or follow (for
investors) or for your organisation (for CEOs) over the next 12 months and over the next three years?
i Chart shows percentage of respondents answering ‘very confident’.
Over the next 12 months Over the next 3 years
51%
49%
45%
42%
38%
35%
30% 31%
23% 23%
20%
13%
2016 2017 2018 2016 2017 2018
Investors CEOs
7 | PwC’s 2018 Global Investor Survey
Investors and CEOs both prioritise organic growth
Q Which of the following activities, if any, do you think companies should be planning (for investors) or are you planning (for CEOs) in the next 12
months in order to drive corporate growth or profitability?
i Investors who responded ‘Other’ mentioned technology and innovation as important for driving growth and profitability.
79%
70%
62%
49%
47%
42%
39% 39%
33%
31%
25%
21%
16%
12%
10%
7%
Organic growth Cost reduction New strategic New M&A Collaborate with Sell a business Outsourcing Other
alliance or joint entrepreneurs or exit a market
venture or start ups
Investors CEOs
8 | PwC’s 2018 Global Investor Survey
The US remains in Investors CEOs
78% 46%
the top spot for global Countries important for growth in 2017
US US
China 65% 33% China Investors’ top five countries are the
investment, followed Germany 32% 20% Germany same as last year
by China UK 21% 15% UK
India 12% 9% India
Q Which three countries do you consider most important US China
85% 62%
for the overall growth prospects for the companies you Japan 10% 8% Japan
invest in or follow (for investors) or your organisation’s
growth prospects (for CEOs) over the next 12 months? Canada 6% 7% France
France 5% 7% Brazil
CEOs were asked not to select the country in which they are based. Australia 5% 6% Canada Germany UK
Brazil
Mexico
5%
4%
5%
5%
Russia
Australia
32% 32%
Spain 3% 5% Hong Kong
India
10%
South Africa 3% 4% Mexico
Italy 2% 4% Korea
Indonesia 2% 4% UAE
9 | PwC’s 2018 Global Investor Survey
Regardless of where investors are based, the US and China are top
choices for global investment
Q Which three countries do you consider most important for the overall growth prospects for the companies you invest in or follow (for investors) or your organisation’s growth
prospects (for CEOs) over the next 12 months?
i Ranking for respondents based in the region.
North America Asia-Pacific Western Europe
US 92% China 80% US 72%
China 72% US 78% China 58%
Germany 28% India 25% Germany 47%
UK 20% Japan 22% UK 29% “I don’t think Brexit will destabilise
growth, but the next few years will be
Canada 18% Australia 21% France 11% hard for the UK.”
Latin America Africa Investment professional, UK
US 75% US 63%
China 38% China 63%
Brazil 38% South Africa 43%
Mexico 25% Germany 29%
Argentina 25% UK 23%
10 | PwC’s 2018 Global Investor Survey
Threats:
What CEOs worry about is not always the same for
investment professionals
Technological advancements are in the news on a
regular basis, so it is no surprise that investment
professionals’ and CEOs’ concerns about the speed
of technological change and cyber threats have
increased from last year’s survey. But investment
professionals and CEOs differ quite significantly in
their views of whether over-regulation, availability
of key skills, terrorism and an increasing tax burden
will affect company growth prospects; although these
are keeping CEOs up at night, they don’t seem to be as
concerning to investment professionals.Cyber threats 41% 42% Over-regulation
11 | PwC’s 2018 Global Investor Survey Concerns about
Geopolitical uncertainty 39% 41% Terrorism
threats in 2017
37%
CEOs are far more
Speed of technological change 40% Cyber threats
Investors’ level of
Populism 33% 40% Geopolitical uncertainty
concern about some
concerned about Protectionism 32% 38% Speed of technological change
threats has changed
over-regulation,
28%
Over-regulation 38% Availability of key skills since last year
Changing consumer behaviour 24% 36% Increasing tax burden
terrorism and taxes Availability of key skills 21% 35% Populism Future of the eurozone
than investors are, but 35%
Social instability 21% 31% Climate change and environmental damage
Climate change and environmental damage 19% 29% Protectionism
both are concerned Terrorism 19% 29% Social instability
about cyber threats Changing workforce demographics
Increasing tax burden
18%
18% 26%
29% Exchange rate volatility
Changing consumer behaviour
Speed of technological
change
and geopolitical
uncertainty
Inadequate basic infrastructure
Lack of trust in business 16%
17% 26%
26%
Inadequate basic infrastructure
Uncertain economic growth 21%
New market entrants 15% 25% Changing workforce demographics
Q How concerned are you, if at all, about the following Uncertain economic growth 14% 22% Lack of trust in business
Exchange rate volatility
22%
potential business, economic, policy, social and
environmental threats to company growth prospects Future of the Eurozone 13% 21% Supply chain disruption
(for investors) or to your organisation’s growth prospects Exchange rate volatility 13% 21% Volatile commodity prices
(for CEOs)?
Readiness to respond to a crisis 13% 20% New market entrants
i Chart shows ranking of respondents answering ‘extremely concerned’. Potential ethical scandals 12% 20% Readiness to respond to a crisis
Supply chain disruption 10% 20% Unemployment
Rising employee benefits and pension costs 10% 18% Access to affordable capital
Unemployment 8% 18% Volatile energy costs
Volatile commodity prices 8% 17% Future of the Eurozone
Access to affordable capital 8% 17% Rising employee benefits and pension costs
Volatile energy costs 6% 14% Potential ethical scandals
Activist investors or other campaigners 4% 13% Activist investors or other campaigners
Investors CEOs12 | PwC’s 2018 Global Investor Survey
Global vs local:
Navigating a fractured world
Investment professionals continue to think that globalisation has
helped some aspects of doing business: the ease of moving capital,
people, goods and information and enabling universal connectivity.
But they don’t think it has helped as much in others: averting climate
change and resource scarcity and closing the gap between the rich and
poor. This is unchanged from last year.
Investment professionals also think we live in a fractured world and
don’t expect that to change. Notable exceptions to that are that they
think corporate integration will continue and that we are moving
towards more open access to the internet. In many other areas,
however, they think we are moving apart.CEOs generally think
13 | PwC’s 2018 Global Investor Survey Improving the ease of moving 97%
capital, people, goods and
globalisation has
information 95%
93%
helped in more areas Enabling universal connectivity
95%
than investors do Creating a skilled and educated
labour force
85%
89%
Q To what extent has globalisation helped with the
following areas? Universal access to 80%
infrastructure and basic
i Chart shows percentage of respondents answering services 87%
‘to a large extent’ or ‘to some extent’.
78%
Harmonising regulations
85%
72%
Full and meaningful
employment
78%
71%
Managing geopolitical risks
82%
60%
Averting systematic failure
77%
Upholding standard 58%
for the protection and ethical
use of data 79%
50%
Integrity and effectiveness of
global tax systems 71%
49%
Averting climate change and
resource scarcity
67%
45%
Closing the gap between
rich and poor
59%
Investors CEOs14 | PwC’s 2018 Global Investor Survey
Investors and CEOs think the world is becoming more fractured
Q Considering the following opposing political, economic and trade trends, please select the one you believe the world is moving more towards.
Singular, seamless ecosystem Multiple, fragmented ecosystem
13% 85%
Common global beliefs Multiple beliefs and
and value systems 16% 82% value systems
12% 84%
A single global rule Multiple rules of law
of law and liberties 17% 79% and liberties
16% 76%
Nationalism and
Political unions
28% 65% devolved nations
25% 68%
A single global
Regional trading blocs
marketplace 23% 73%
29% 63%
Economic unions and Multiple economic
unified economic models 34% 60% models
33% 61%
Harmonisation of global Increasing use of tax
tax rules 41% 54% competition
Widespread economic 39% 56% Concentrated economic
growth benefitting growth benefitting
more people 48% 46% fewer people
Measuring prosperity 53% 39% Measuring prosperity
through multifaceted primarily through
metrics 66% 28% financial measures
67% 27%
Open access to Restricted access
the internet 77% 20% to the internet
78% 18%
Corporate Corporate
integration 76% 20% fragmentation
Investors CEOs15 | PwC’s 2018 Global Investor Survey
Challenges:
Living in an age of disruption
Investment professionals and CEOs both agree: the increasing pressure
for companies to deliver results under shorter timelines is the biggest
challenge that companies face today. But, in other areas, investment
professionals think companies face a greater degree of challenge
than CEOs say they experience, with the biggest difference being the
perception of declining trust between companies and governments,
their workforce and their customers. And while they both have concerns
about the ability for companies to attract digital talent, investment
professionals are less likely to think that it’s the company’s responsibility
to retrain staff whose jobs become automated.16 | PwC’s 2018 Global Investor Survey
Investors and CEOs agree that the biggest challenge for
companies is the pressure to focus on the short term but
differ in their perceptions about declining trust
Q To what extent do you agree or disagree that the companies you invest in or follow (for investors) or that you (for CEOs) experience the following challenges?
“In a CEO, the person rather than
i Chart shows percentage of respondents answering ‘agree’ or ‘strongly agree’.
the tenure affects the trustworthiness
69% of a company.”
Investment professional, South Africa
63%
60% 59%
“The biggest lack of trust is when a
company is underperforming and fails
48% 48%
to tell us so.”
43%
Investment professional, Sweden
38%
36%
“It seems that if there was a big trust
28%
problem, companies would be going
24%
22% out of business. They wouldn’t get
19% 18% investments from people like us.”
Investment professional, UK
Increasing pressure Increasing pressure to Increasing pressure Declining trust Declining trust Declining trust Decreasing tenure of
to deliver business hold individual leaders from employees and between companies between the from customers the role of the chief
results under shorter accountable for any customers to take and governments workforce and the executive
timelines organisational social or political organisation’s senior
misconduct stances leadership
Investors CEOs17 | PwC’s 2018 Global Investor Survey
Investors expect more disruption from technology,
customer behaviours and distribution channels than CEOs do
Q It has been reported that the average lifespan of today’s organisations is shrinking, largely due to increased disruption in the marketplace. How
disruptive do you think the following trends will be for the companies you invest in or follow (for investors) or for your business (for CEOs) over the
next five years?
Not very or not at all disruptive Very or somewhat disruptive
Changes in core technologies of production or service provision (e.g. artificial intelligence, robotics, blockchain)
10% Investors 85%
“I see a big wave of revolution of
business models. AI, an ageing
24% CEOs 64%
population and changes in regulation
Changes in customer behaviours are pushing businesses to change.”
8% Investors 81% Investment professional, Japan
18% CEOs 68%
Changes in distribution channels
“I believe that, ultimately, all
companies will be tech companies.”
9% Investors 76%
Investment professional, UK
21% CEOs 60%
Increase in number of significant direct and indirect competitors - traditional and new
10% Investors 70%
16% CEOs 69%
Changes in industry regulation
18% Investors 54%
16% CEOs 63%18 | PwC’s 2018 Global Investor Survey
More investors expect automation to decrease company
headcount to a large extent compared to last year
Q To what extent do you think headcount in the companies you invest in or follow will decrease (for investors) or to what extent do you expect
headcount at your organisation to decrease (for CEOs) as a result of automation and other technologies?
i Responses for CEOs reflect those who expect a decrease in their company’s headcount in the next 12 months. “Although technology is advancing
2017 2018
rapidly, it does not mean everything
will change. Human and machines
13% 26% will find a point where there is a
To a large extent
25% 28%
balance of division of work. It does
not mean that employment will
72% 62% disappear totally.”
To some extent
55% 52% Investment professional, Japan
12% 10%
Not at all
19% 19%
Investors CEOs19 | PwC’s 2018 Global Investor Survey
Investors think companies should be clear how technology
can improve customer experience, but are less concerned
about them retraining employees whose jobs are affected
by technology
Q Thinking about what a company’s people strategy may look like (for investors) or your people strategy (for CEOs) for the digital age, how strongly
do you agree or disagree with the following statements?
i Chart shows percentage of respondents answering ‘agree’ or ‘strongly agree’. Investors were asked what companies should do, whereas CEOs were asked what they are doing.
91%
87% 86%
82% 82%
77%
66% 67% 66% 67%
62% 60%
47%
43%
Companies should Companies should Companies should Companies should Companies should Companies should Companies have
make decisions on strengthen soft skills be clear how plan for multiple and expect to grow their rethink their human a responsibility to
automation of tasks (e.g. teamwork, robotics and artificial emerging visions workforce through resources function retrain employees
and jobs primarily communication) in intelligence can of the future using internships and whose tasks and
based on how to their organisations improve customer scenario-based apprenticeships jobs are automated
deliver their alongside digital experience approach by technology
corporate purpose skills
Investors CEOs20 | PwC’s 2018 Global Investor Survey
Investors think learning opportunities and a modern work
environment are most important for attracting talent, whereas CEOs
are using a wider variety of strategies
Q To what extent do you think the companies you invest in or follow should be using (for investors) or is your organisation using (for CEOs) the following strategies and tactics to
attract or develop digital talent? “Companies should employ the right
i Chart shows percentage of respondents answering ‘to a large extent’. people and empower them to be
innovative and give them freedom.
62%
56% It boils down to a cultural thing where
47%
employees are encouraged to present
44%
42% their ideas. Flexibility is a big game
35%
31% 31%
33% changer and most companies are
30%
25% 26% 25% starting to embrace this.”
19% 18% 19%
14%
16% Investment professional, South Africa
11%
9%
Implementing Modernising Implementing Working with Improving Changing brand Relocating their Partnering with Outsourcing to Changing
continuous the working new flexible educational compensation and perception operations closer external providers external providers employee dress
learning and environment (e.g. ways of working institutions benefit packages through marketing to available talent codes
development rolling out digital (e.g. mobile and and advertising pools
programmes tools, creating remote working)
collaborative
physical
environments)
Investors CEOs21 | PwC’s 2018 Global Investor Survey
Trust:
It’s all about the people
A company’s ability to build and maintain trust with its stakeholders
is important; some say it gives the company its licence to operate.
Arguably, the two stakeholders a company cannot do without are its
workforce and its customers, so having their trust is vital. To build trust
with its workforce, investment professionals think a company needs to
be transparent about pay and benefits, employees’ contribution to the
business and the company’s values. They think trust with customers
can be achieved by investing more in cyber security defences and being
transparent about how they use and store customer data.22 | PwC’s 2018 Global Investor Survey
Investors think cyber security should be the top priority for building
trust with customers, while CEOs employ a range of strategies
Q Beyond providing valuable products and services, to what extent do you think the companies you invest in or follow should be using (for investors) or is your organisation using
(for CEOs) the following strategies and tactics to build trust with customers?
i Chart shows percentage of respondents answering ‘to a large extent’.
“One area where there is a trust deficit
64%
is in cyber. Admission comes far later
57% than it should and this doesn’t build
47%
50% trust with the public or stakeholders.”
44% 44%
42% Investment professional, US
40% 39%
38%
35% 35% 34%
31% 32% 32%
29%
“Businesses are not sustainable if
15% customers are not happy.”
Investment professional, UK
Investing more Creating Creating Creating Contributing to Helping to Creating Collaborating with Contributing to
heavily in cyber transparency in the transparency about transparency around combating promote diversity transparency in educators and policy philanthropic
security protection usage and storage aspects of the the taxes they pay environmental and inclusion their supply makers to improve activities
of customer data organisation’s issues such as chains the employability of
business strategy climate change future workers
Investors CEOs23 | PwC’s 2018 Global Investor Survey
Investors think trust with the workforce is built through
pay, whereas CEOs prioritise the organisation’s values
Q To what extent do you think the companies you invest in or follow could build trust with their workforce (for investors) or is your organisation
building trust with its workforce (for CEOs) by creating transparency in the following areas?
i Chart shows percentage of respondents answering ‘to a large extent’.
73%
60% 61%
59% 58%
56%
53%
51% 51%
34%
30%
21%
Compensation and Employees’ Organisation’s values People strategy Diversity and The impacts of
benefits strategy contribution to the overall inclusion policies automation and
business results artificial intelligence
on the workforce
Investors CEOs24 | PwC’s 2018 Global Investor Survey
A message from Richard Sexton, Vice Chairman,
PwC International Limited
We hope you have found PwC’s 2018 Global Investor Survey useful
and insightful. Our research into the thinking and strategic direction
of CEOs around the world and how their views compare with the
perceptions and expectations of investment professionals has identified
a number of areas in which the two parties could work to understand
each other better. Although there are a number of similarities in
view, this report highlights where companies have an opportunity to
communicate their approaches to, for example, driving growth and
profitability, dealing with disruption, maintaining trust, preventing
cyber attacks and managing customer data. It also shows areas
investment professionals may want to focus on in their engagement
with companies.
I would like to thank all the individuals who took the time to answer
our surveys and speak to our researchers. Without hearing their
opinions, we would be unable to share these insights.25 | PwC’s 2018 Global Investor Survey
Survey methodology
PwC conducted an online survey in which
we received responses from 663 investment
Notes:
Number of survey respondents
professionals in 96 countries. We also • Not all figures add up to 100% as a result
conducted 19 in-depth interviews in six of rounding percentages and exclusion of
countries. The respondents to the online ‘neither/nor’, ‘don’t know’ and ‘prefer not
survey and the interviewees were spread to say’ responses.
CEE
across a range of industries, roles and Western 2%
• The base for figures for investors is 663 North
specialisms. We compared these responses America Europe
(all respondents) unless otherwise stated. 40%
with those in PwC’s 21st CEO Survey, which 31%
The base for figures for CEOs is detailed in Middle
captured the views of 1,293 CEOs around the Asia
the CEO Survey. East Pacific
663 1%
world. Africa 16%
The online research was undertaken by 554 Latin 5%
Investment professionals answered our America
PwC Research, our Network’s global centre 438 4%
questions in relation to what they expect
of excellence for primary research and
of the companies they invest in or follow,
evidence-based consulting services. The in-
whereas CEOs responded in the context of
depth interviews were conducted by partners
what their own organisation is doing.
and staff of the PwC Member Firms in each
respective country. 2016 2017 201826 | PwC’s 2018 Global Investor Survey
Industries covered Role Specialism
49% 55% 53%
31%
22%
18%
16% 15%
6% 6%
4%
3% 3% 3% 3% 4% 4%
3%
1% 1% 1%
Generalist Financials Technology Industrials Healthcare Consumer Consumer Basic Oil & gas Telecom Utilities Buy-side Sell-side Private Ratings Individual Other Equity Fixed income Both Other
goods services materials equity/ agency investor
venture
capital27 | PwC’s 2018 Global Investor Survey
Acknowledgements and thanks
Programme coordination Academic adviser We’d like to thank the following
Hilary Eastman, PwC UK Erik Roelofsen, Endowed Professor, PwC experts for their insights
Ellie Newton, PwC UK Department of Accounting and Control, PwC Germany
Christine van den Bos, PwC Netherlands Rotterdam School of Management, Guido Fladt
Erasmus University Rotterdam PwC Middle East
Interviewers
Research and survey management Valerie Jambart
Christine van de Bos, PwC Netherlands
Hilary Eastman, PwC UK PwC Research, Belfast, Northern Ireland PwC South Africa
Gregory Johnson, PwC US Liandie Kies
Liandie Kies, PwC South Africa PwC Switzerland
Yoshiyuki Kure, PwC Japan Ilona Steffen
Michelle McKenna, PwC UK
PwC UK
Ryosuke Nakamura, PwC Japan
Ryan Brason, Mike Davies, Richard Haig,
Ellie Newton, PwC UK
Peter Hogarth, Gurpreet Kaur,
Lyndsay Taylor, PwC New Zealand
Michelle McKenna, Marie Claire Tabone
Takahiko Ueda, PwC Japan
PwC US
Spencer Herbst, Gregory Johnson,
Elizabeth Paul, Jeannine Teague28 | PwC’s 2018 Global Investor Survey Contacts Hilary Eastman Mike Davies Head of Global Investor Engagement, PwC UK Global Communications Director, PwC UK +44 20 7804 1818 +44 20 7804 2378 hilary.s.eastman@pwc.com mike.davies@pwc.com
www.pwc.com/investorsurvey At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 158 countries with more than 236,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2018 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
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