As 2022 draws to a close, Nordea On Your Mind authors Johan Trocmé and Viktor Sonebäck reflect back on a turbulent year in their end-of-year wrap-up issue, "A holiday read: Best of NOYM 2022." War in Ukraine, a global energy crisis, surging inflation and rising interest rates all collided to bring about a harsh new reality for individuals and companies alike. Here are some of the key themes we covered:
The renewable energy transition
Preventing climate change owing to global warming is an existential issue for humankind, almost universally recognised by the world's nations in the 2015 Paris Agreement, which aims to limit the global average temperature increase to no more than 1.5º C above pre-industrialised levels. We applied this to our recurring corporate capex theme in our February Nordea On Your Mind report Capex IV: Saving the world, in which we argued that the necessary global transition from fossil fuels to renewable energy to reach the Paris Agreement targets would be of such a large magnitude that it should bring global corporate capex-to-sales ratios from the current 30-year lows back to at least long-term average levels.
In March, we followed the theme up with Project Finance, in which we described how this could be a critical tool for adding funding capacity for the vast investments needed in the world's renewable energy transition. Russia's invasion of Ukraine in February, and the weaponisation of its fossil fuel exports to Europe, shifted Europe's journey towards independence from fossil fuels into a higher gear.
In our NOYM report Nordic energy supply, we explored the origins of the energy crisis, why the Nordic electricity markets are so heavily affected by Europe and potential ways out of the crisis for the future Nordic electricity system.
Geopolitics climbs to the top
In the spring, we decided right from the start that our annual survey-based large corporate treasury study would be oriented around a new view on risk. We asked corporates about exposures to Russia and China, how their supply chains had changed in recent years and how they expect them to change in the coming years.
We also repeated questions on management of commodity, as well as interest rate and FX risks from our Nordic hedging survey of 2016, comparing views on these core risks now versus six years ago. Together, it all fit nicely under the study's title Treasury 2022: Reassessing risk.
Tighter bank regulation is drawing nearer
The finalisation of the Basel III global banking framework is so comprehensive that it is widely referred to as a new framework, Basel IV. Implementation will start from 2025, and the targeted harmonisation of the way banks measure credit risk is expected to lead to significantly higher reserve capital requirements, particularly for bank lending to large corporates.
Our NOYM report Basel IV-ever changing explored how corporates could be affected by the regulatory changes, and how they could prepare for what lies ahead.
Post-COVID hangover for e-commerce
Social distancing initiatives to slow the spread of the virus during the COVID-19 pandemic kept consumers effectively stuck at home, and turbocharged online migration of retail sales. This trend faced major headwinds when pent-up hunger for store visits was unleashed after the pandemic, with consumers simultaneously facing a cost-of-living crisis from soaring energy and food prices and rising interest rates.
We revisited this theme in our report E-commerce: the new normal, in which we reviewed the structural growth drivers for online retail, the lasting consumer behaviour impact from the pandemic, and the capital markets' views on the prospects for online and offline retail.