US policy scenario and business opportunities for Inbound companies

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US Inbound Insights: highlights from our latest webcast

Over 1,600 business participants joined our latest US Inbound webcast on the US policy scenario and business opportunities for inbound companies. It was an impressive crowd tuning in to hear PwC professionals on US trade and tax policy, as well as PwC leaders focused upon industries such as industrial products, pharmaceutical and life sciences, financial services and technology.

Below I share some of the highlights from the webcast participant opinion polling as well as my own view on a matter of rising importance: climate change and its impact on business.

Highlight #1: A growing list of perceived threats is crowding out business’ ranking of climate change while investor focus is rising

The numbers don’t lie. Forest fires in the US are up 400% since the 1970s — and they caused nearly $25 billion in damage on the West Coast last year. In what is becoming a seemingly routine event, a massive hurricane (Michael) caused extraordinary damage (an estimated $25.1 billion) in the US. Yet when we asked webcast participants which of six business threats concerned them the least, climate change topped that list.

Poll: Which of these business threats concern you the least?

To understand why climate change didn’t rank higher as a threat in our poll, one only has to look at the rising number of threats businesses are addressing. So while the threat of climate change impact might be fast moving by many measures, businesses may not be directly impacted today. In other words, unless you’re directly impacted (as an insurer, for example), it feels less urgent than the daily evolution of trade and politics or the ever-growing cyber and privacy risks.

I’ll give my own view in a moment; for now, I’ll just note that investors are thinking about climate change. In a survey that our global sustainability team recently held, 83% of private equity general and limited partners said that they are “concerned” about the impact of climate change in their portfolios 77% called the carbon footprint of their investments important.

Highlight #2: Amid the uncertainty, big sector-level opportunities

Even as global uncertainties over trade, taxes and politics persist, there are rich opportunities for Inbound companies in their various sectors. Unsurprisingly, many (see poll result below) are related to the technology disruption that is accelerating in the US.

Industrial products companies, for example, are building smart, connected factories and products (such as smart infrastructure), often with new service-based pricing models, such as mobility-as-a-service and smart infrastructure.

In the life sciences, we’re seeing record approvals of new drugs and biologics in the US, while TMT (tech, media and telecom) companies are going full throttle on 5G. Some of the most exciting developments in 5G are not just in consumer-facing services, but also in the new enterprise solutions that make super-fast, super-reliable telecommunications possible.

Poll: Which trends present the most opportunity to drive your business growth?

In all these sectors, inbound companies that understand the full implications of tax reform for multinationals are also looking at new opportunities for locating manufacturing and research facilities.

Overall, inbound companies with the right mindset and organizational structure can find numerous opportunities to grow markets and forge attractive partnerships in the US in all sectors, so long as they pay close attention to both market developments and the evolving regulatory, tax and policy framework.

My view: accounting for climate change will soon be mandatory

I have to admit, when I asked that climate change’s impact on inbound companies be a part of this webcast, it wasn’t because of a widespread demand — as our poll indicates.

I firmly believe not just that climate change is going to have an impact on business models, but also that audit committees, boards of directors and financial statements will soon be required to consider climate-related risks and costs.

In the UK, a committee of Parliament recently called for climate risk reporting to be mandatory for UK firms by 2022. The government has not yet made such reporting mandatory, but it does “expect” all listed companies and large assets owners to make climate-related financial disclosures by that date. I believe that the pressure for such disclosures, whether they come from national governments, state governments, accounting bodies, or industry groups, will continue to grow.

Many leaders understand this imperative. Recently Goldman Sachs CEO David Solomon advocated for putting a price on the cost of carbon in a Financial Times op-ed. The Global Reporting Initiative (GRI) offers global standards for sustainability reporting. The Task Force on Climate-related Financial Disclosures (TCFD), chaired by Michael Bloomberg, also has recommendations for reporting on climate risk, as does the CPD. And the World Economic Forum, in collaboration with PwC, developed climate governance principles for corporate boards. For now, these standards are all voluntary, but I consider it only a matter of time before some become mandatory.

That’s why, as inbound companies prepare for what climate change will unleash in the very near future, they should start looking not just at the risks and opportunities that this change will bring, but also how to prepare for — and account for — related costs and investments.

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Michael Burak

Michael Burak

Tax, Partner, PwC US

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