Abu Dhabi, UAETuesday 27 October 2020

Why sustainable investing is key to post-pandemic recovery

Considering environmental, social and governance factors has become even more relevant to benefit your pocket and society as a whole

Illustration by Gary Clement
Illustration by Gary Clement

A few days ago, Andrew Cuomo, the much lauded governor of New York – who recently captivated legions of fans due to his handling of daily coronavirus briefings – spoke of the need to have personal protective equipment (PPE) manufactured in the US and accessible on home soil.

He framed this as an urgent matter of national security and went on to recount having to rely on a delivery from China by way of a private plane owned by a billionaire American businessman.

As I heard him say this, I thought to myself that this is one of the investment opportunities that will come about as a result of the pandemic: looking at what nations should have available on home turf, rather than depending on foreign supplies, along the lines of food security that I wrote about recently.

In the meantime, sustainable investing is coming out as a top contender for investment dollars, and it's where those with money to part with (willingly) are putting it. Exchange-traded funds (ETFs) and passive funds that integrate environmental, social and/or governance (ESG) factors registered record growth in the first quarter of this year, gathering $10.5 billion (Dh38.56bn), according to global financial services firm Morningstar.

‘Environmental’ covers such things as renewable energy or the impact a company has on the environment; ‘social’ covers how companies deal with issues such as fair pay for their employees; ‘governance’ includes the aims management has for a company.

Sustainable is certainly the word of the moment. Last month the World Economic Forum put out a piece titled “How sustainable infrastructure can aid the post-Covid recovery”. Infrastructure projects are an often used route to stimulate economies – something that will be very much needed post-pandemic.

The message is that governments should ensure investments go to infrastructure projects that are sustainable, technologically-advanced and resilient.

This is an opportunity to bring about change for the greater good too – along the lines of what the UK’s Green MP Caroline Lucas said recently around the government harnessing the lessons from the Covid-19 crisis to create a better society.

“We're in this together” is a slogan often used today. The message here is that we stay together after this era passes. It's the kind of thinking advocated by the Capitals Coalition – a global collaboration made up of the Natural Capital Coalition and the Social & Human Capital Coalition.

Its mission is to bring nature and people into the heart of decision-making – which will, by default, bring about change to the way investments are valued and chosen. The Capitals Coalition wants to transform the way we value a company’s relationship with nature, people, society and shareholders – in other words, making ESG investing the new normal.

Investing in a post-Covid future, which doesn't allow for the ESG problems we're living through right now – is high on the list for many. And there is money for it.

Venture capital firms, like Partech, which looks at global tech opportunities, are closing significant deals. A $100m seed fund focusing on shaping a new world post-Covid was announced a few days ago. The firm is both capitalising on opportunity, and catering to trends and needs being created by today's Covid world.

And yes, all of Partech’s investments are based on ESG principles. The company signed the United Nation’s PRI, the Principles for Responsible Investments, promoted back in 2012. Why not check if the next firm or fund you want to invest is a signatory too?

One contender could be an ESG 'national security investment fund’. Now that would be one to watch.

Nima Abu Wardeh is a broadcast journalist, columnist, blogger and founder of S.H.E. Strategy. Share her journey on finding-nima.com

Updated: May 7, 2020 03:48 PM

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