Has the pandemic changed sustainable investing for the better?
Olga Miler
Making finances exciting & joyful for all I Multi-award winning Innovator & Fintech Entrepreneur I TOP Voice LinkedIn I Financial Education & Wealth Management Expert I TOP 100 Women in Business I Author
It makes me celebrate that sustainable investing saw such a successful 2020. Two-thirds of European asset and investment managers ‘believe that the pandemic has made sustainable investing more important, and since 2018, net assets in sustainable funds 'have more than doubled '.
While investing in line with your values and beliefs continues to become the norm, I was wondering whether the pandemic has caused any changes in the themes that people care about, or even introduced new, previously unconsidered themes.
I took some time to research all of this by comparing pre- and post-Covid-19 trends, and today I'd like to share what I learnt, and how this can give us a better idea of what is worth investing in today.
Before the pandemic: transparency and seeing the benefits was a challenge
Looking back at how sustainable investing was presented in the late 2010s, especially with the knowledge of what was to come, was a strange task. While reading reports and financial predictions on the ‘emerging ESG trends’ from 2016-19, many were consistent with our 2021 realities. But there were also some useful insights to be found in our past…
Transparency has been an issue since day one:
In 2018, the HSBC Sustainable Financing and ESG Investing Report found that ‘in terms of ESG Policy, we see a less transparent approach, with 68.8% of issuers, and 66.7% of investors not disclosing their policies’.
Of course, huge shifts such as changing company policies, or implementing globally-acknowledged classification systems, will take time. However, what made me stop and think about this was that, even in 2016, when the majority of articles were still explaining ‘what sustainable investing is’, calls and predictions were already warning that a lack of disclosure could hold up future progress at scale.
Why do we keep 're-popularising' sustainable finance?
Back in August 2019, KKS Advisors said that ‘one can look at the widespread adoption of ESG principles [as evidence] of the “mainstreaming” of sustainable investing’. The more I read about sustainable investing, it seems that every year, a different publication claimed it had ‘finally entered the mainstream’ or ‘gained widespread support’.?
It’s interesting that the system somehow has been reluctant to fully accept sustainable investing as ‘mainstream’ for close to a decade. What does this say about future innovations and positive changes, that we’re still not fully accepting the clear economic benefits and global opportunity offered by investing sustainably?
'Regulation and consumers will increasingly punish those companies that don't pursue positive ESG policies, whether that means reducing carbon emissions, or adhering to decent work standards' - Jamie Broderick, Impact Investing Institute .
During (and beyond) the pandemic: increased attention on our personal finances
In 2019, The Ascent found that the average American spent 2.84 hours a day watching television, compared to just 0.03 hours on managing their household finances. With people dedicating 95% more of their time to their favourite shows than their personal budget, they would of course be far less likely to engage with money-related content in the wider world.
But the pandemic has begun to shift this sense of financial disinterest. As our social lives moved online, memes became a way to ‘gamify’ the stock market, making investing far less daunting of a task for younger and first-time investors. Plus, with people donating anything they could to help those hit hardest by the pandemic, the attraction of sustainable investing flourished.?
The average monthly spend on investments rose 41.9% between 2019 and 2020 in America - Mint .
From this increased awareness and interest, what ESG trends are now emerging - and how do they compare to our insights from before the pandemic?
Today: emerging ESG trends, increased self responsibility and a rising focus on the social governance
Sharpened ESG themes:
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This data is taken from a range of reports on the subject, including those by Refinitiv , UBS , MSCI , & ESG Clarity .
Additional 2021 themes include:
Transparency is now in our hands:
Transparency and disclosure in sustainable investing has improved hugely over the last year. 2020 saw a 45% increase in the number of companies achieving an A-score from the Carbon Disclosure Project, and according to the Green Finance Platform , ‘it is evident that environmental awareness among the business world remains on the rise despite Covid-19 disruptions’.??
Where this differs from before the pandemic, however, is that now, the impetus for upholding transparency is not with the companies themselves, but with us, the general public, and their source of profit.?
Fidelity’s 2020 Sustainability Report highlighted the impact that Covid-19 has had on speeding up a shift towards citizen-led engagement, noting that ‘being a good corporate citizen and supporting local communities are now seen as essential to building and sustaining brand equity’.
The pandemic has also highlighted the extreme need for people to engage and hold companies accountable. Take the example of the recent Pemex gas leak, which was described by many as an ‘eye of fire’ in the middle of the ocean.
Social & Governance goals are gaining traction:
Compared to the late 2010s, when environmental issues - primarily climate change - were used to sum up sustainable investing, we are now seeing Social & Governance goals gain traction. This makes sense, considering that the pandemic highlighted for many how vulnerable we are to a health crisis.?
Over the last year, remote working, or the need for increased flexibility has also revealed to many that their companies were not prioritising mental wellbeing. This, alongside more time on our phones (meaning more time to read about social issues around the globe), has left people more passionate than ever to make a change.?
While Environmental issues such as climate change are still at the forefront of sustainable investing - and rightly so, Social & Governance goals are now more equally represented. This is only predicted to continue over the next decade.
To return to the 2020 Fidelity report :
?‘Nearly 70% of our analysts expect some or all the changes their companies are enacting to be permanent, raising the possibility that in years to come, the pandemic will be seen as a significant milestone on the path to companies taking a more prominent role in driving positive social change’.
So with all these facts, what are you thoughts. Has the pandemic helped to change sustainable investing and accelerate it for the better - which trends and themes do you see emerging? Share your comments and thoughts down below!
Sharing resources, events and data
With all the various data and insights collected as part of writing these articles, I’ll be including a new section to Money’s Impact. At the end of each issue, you find interesting talks, events, and reports - if you have something you’d like to share be sure to send it my way!
Campaigning since 1982. To increase your influence & power. Impossible is just a word for change!
3 年Thank you, Olga Miler ?? for this overview. It will help me to campaign for even more change in this so important field.