Council Post: How The Global Crisis Could Affect Sustainable Investing

During times of uncertainty, even the smallest glimmer of positivity can go a long way, and in today’s world, we pray that the rising tide of impact investing will become stronger.

Prior to international lockdowns and stay-at-home orders, impact investing was on the rise. The response of investors to the virus seems to have shifted even more attention and focus to human health. And that is good. Human health is part of sustainability. But in reality, all the challenges of the global virus, pollution, cancer and climate change all grow in strength from the same fundamental source: the lack of our vision to face the inevitable future before it arrives, and our lack of responsive action. Impact investing is a more powerful imperative than ever before.

General Awareness Heightens Demand 

The current atmosphere of ensuing stay-at-home orders, huge rates of unemployment and market instability has forced consumers and investors alike to rethink where we’re putting our time, effort and long-term investments. Passive ESG screening is increasingly viewed as “greenwashing.” Private-directed investing for impact is real action. The perception of this truth is growing. Reports show that impact investing has performed well so far this year, further strengthening its position. According to Barron’s, “We are experiencing early indications of strong performance and resiliency in so many of the impact investments we follow.”

If we’ve learned anything during this crisis, it’s that our supply chain systems are in desperate need of disruptive innovation in order to avoid what has happened this spring. The crisis has exposed inherent issues in supply chain management and manufacturing, leaving a wide-open opportunity for workforce infrastructure, manufacturing and supply chain innovation. New companies with better, more sustainable solutions can now be given the chance to put their technologies to the test.

Supply chain bottlenecks for various resources and materials could also push companies to explore alternative, more sustainable materials they otherwise might not have pursued.

Ignoring Environmental Health Negatively Impacts Economic Health

Zoonotic diseases like what we’ve experienced so far this year are largely related to stress on the global environment. These diseases, although typically harmless to animals, can be extremely contagious and even fatal in humans. In fact, The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) warned in a report published April 27, 2020, that pandemics like COVID-19 could occur more frequently unless we stop rapidly destroying nature, and argued that government stimulus plans should include sustainable initiatives.

Prior to the pandemic, ignoring calls for sustainable initiatives seemed harmless, but now investors are learning that by ignoring the obvious warning of the pandemic, they are flunking the environmental IQ test that Earth has administered. They are beginning to realize that ignoring environmental health leads to higher rates of natural disasters and viral outbreaks. Since the beginning of this year, the markets have taken some of the worst hits in years, and entire industries are collapsing under the stay-at-home orders.

The wake-up call that environmental health is synergistic with economic health is here, and it is time to face the future with the courage of our knowledge.

Positive Movements In Finance Are Moving Toward Impact 

The silver lining in all of this is that we are seeing more action toward more impact investing. In Q1 of 2020, we’re seeing demands for making transportation more carbon-neutral as we see what can happen when transportation slows down. But more is needed. We need comprehensive analysis based on science and the courage to act based on our knowledge.

There has been a recent surge in ESG investing across asset owners, money managers and lenders, which we hope will endure as long-term commitments from investors.

In Asia, there has been a surge of interest for impact investments as investors shift their focus toward public health and the environment. Multibillion-dollar money manager Harris Associates has recently pledged to adopt climate measures. Its CEO had been known to be a climate change skeptic, so this commitment is evidence of change.

Although we’ve been faced with unprecedented challenges in recent months, the shift in mindset of both consumers and investors is a cause of optimism for the future.

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