Responsible investment after coronavirus

How the investment community can help advance the environmental gains that have come out of COVID-19

The consequences of the coronavirus pandemic will clearly be profound, wide-ranging and long-lasting.  

So, it’s no surprise that any sources of optimism to be found as the crisis unfolds are quickly seized upon. Perhaps the most significant so far has come in the form of the immediate effects on the environment.  

Greenhouse gas emissions have fallen, according to analysis by Carbon Brief1, while data from NASA2 suggests that air quality has improved dramatically as countries around the world have taken steps to restrict activity and travel.

“The environmental impact has been largely positive,” says Sam Turner, Responsible Investment Consultant at St. James’s Place Wealth Management. “It’s good to see less travel and declining pollution, as well as the health benefits of that.” 

He sees this as an opportunity for organisations to rethink how they do business  – and question whether they need to return to a form of normality in which, for example, employees are flown to meetings that could otherwise be held using video conferencing facilities.  

A more realistic rate of change 
Unfortunately, however, the environmental positives are likely to be temporary. Indeed, there is now a risk of efforts to address climate change becoming a lesser priority as governments focus on dealing with the economic implications of the crisis. 

This is why the investment industry has an important role to play maintaining the momentum that has gathered in recent weeks and months, according to Turner. 

“The biggest crisis now is clearly COVID-19, but the biggest crisis of the 2020s is still climate change, and we need to ensure that once we’re on the other side of the coronavirus pandemic that governments keep focusing on it.”  

But the environmental gains from the pandemic have clearly been made alongside painful social, economic and health consequences. In other words, the current rate of improvement is unsustainable. 

“If we’re taking climate change seriously we would rather see a smooth, ‘just’ transition at a rate less dramatic than we’re seeing at the moment,” says Turner. “We don’t want to be in a position of having to bring a halt to everything, as we are now, in order to have that environmental impact.” 

ESG: the new VIP 
Responsible investing isn’t just about the environment, of course. The crisis has also shone the spotlight on corporate behaviours – both good and bad – and helped illustrate why businesses cannot simply be about making profits. 

“If they are going to be successful they need to think about their wider stakeholders,” says Turner. “Companies that have put measures in place for employees, for example, will come out of this with higher employee satisfaction and community spirit – and that contributes to their long-term success.” 

The importance of environmental, social and governance (ESG) factors in investment decisions has only become clearer as the crisis has unfolded.  

“This crisis reinforces our conviction that we should encourage ESG characteristics right across our fund range,” says Turner. 

He added that St. James’s Place will continue its programme of monitoring and engaging with fund managers on ESG issues, not least the long-term threat that climate change poses to society and the economy. 

Investors increasingly seek information around sustainability and responsible investing, with growing awareness of the broader long-term aspects to successful and effective investing. 

“It accelerates our belief that responsible investing is something we are right to be doing and which the investment industry should be doing,” says Turner.  

To find out more about responsible investing please get in touch today.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up.  You may get back less than you invested.

Want reassurance your investments are working for the environment? Interested in exploring all of your responsible investment options? Whatever you need, we’re here to help. Just ask. 

1 Wired – How Is the Coronavirus Pandemic Affecting Climate Change? – 21 April 2020
2 World Economic Forum – This is the effect coronavirus has had on air pollution all across the world – 21 April 2020

Howard McCain is a member of Sovereign Wealth LLP.

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