How did you perceive the coronavirus pandemic to impact sustainable investing?
Well, at the time I decided to focus on the topic of sustainable investing, which was more than 14 years ago, there wasn’t more than a handful of books or essays about sustainability. And though over time it became a fundamental part of investors’ vocabulary, there have always been equally strong critical voices who viewed sustainability-themed strategies as mainly a bull-market trend that would falter at the first sight of a downturn. The coronavirus crisis served as this acid test and sustainability can finally show what it’s made of.
The pandemic can be described as a baptism of fire for sustainable investments. They tend to be less prone to bankruptcies and earnings downward revisions, as higher prudence towards environmental, social and corporate governance (ESG) risks helps to protect them from scandals and can improve innovation and productivity.
The coronavirus crisis has reinforced demand for sustainable investments. It served as a reminder of how fragile our systems can be to unfamiliar shocks and thereby strengthened the desire to support organisations that are actively helping to reduce imbalances.
Recently the focus has shifted to the social aspect, which grew even more critical by the current health crisis.
What do sustainable companies do differently?
In the past there were cynics who considered sustainable investors synonymous with tree huggers. However, this has definitely changed in recent years. It took a lot of educational work, not only from me internally but also a lot of tailwind from the regulatory side. Sustainable companies have proven to have more innovative solutions to meet today’s sustainability challenges and thereby support the transformation of entire sectors.
How will companies need to adapt?
I think the pandemic will put more companies under scrutiny for decisions that impact employees, customers and society. Sustainable investing never was and never will be about creating shareholder value, but about maximising value for all stakeholders. Even though Covid-19 has potentially opened further doors to sustainable investments, it is a mega trend with long-term impact.
Are there specific themes that grew more important in this environment?
Indeed. Until recently, an important trend was to concentrate on the environment, since climate change is largely regarded as the greatest challenge of our time. Recently, however, the focus has shifted to the social aspect, which grew even more critical by the current health crisis. Customers and investors are increasingly avoiding companies with sensitive working conditions. Furthermore, the organisations themselves have recognised that the inclusion ofthe social factor creates added value.
Will the boom continue?
We believe it will. It’s worth noting that these strategies have been around for decades. The inflows, however, have only occurred over the past five years. So it is really the first time these strategies have gone through an acid test. Popularity has risen, and so have product supply and regulation, which will further support their maturing into an established investment segment.
Regional trends
Regis Burger, managing director and head of Middle East & Africa at Julius Baer:
We definitely see an increase in client interest relating to sustainable investing, especially in areas of electric mobility and clean energy, and we believe that this trend is well positioned to gain further traction over the coming months. This is driven also by the next generation of clientele who are not only motivated by profit but also by various social/environmental aspects.
The uptake in the trend is supported by the initiatives of local governments in the Middle East who are looking at long-term growth by building green economies with new-age technologies.
As a wealth manager, we strongly believe that being invested will help preserve and generate wealth for the generations to come and we are very happy to support our clients in the region to do so in a sustainable fashion.
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