As lockdown eases in some countries but not in others, and as the death toll continues to rise, there may be a light at the end of this long, dark tunnel of uncertainty – as long as the world does not backtrack, back to business as usual, nor falter on the promised path toward a sustainable future.
For Jamie Jenkins, co-head of the responsible global equities team at BMO Global Asset Management, it’s going to be very difficult to return to how things were before the pandemic rattled markets worldwide.
“The particular nature of this current crisis, or recessionary period we’re about to go into, is different. Every time you get a drawdown in markets, every time you get some kind of shock, it tends to be different,” he says.
“And what’s different about this one, from the financial crisis in ‘08/09, is that first and foremost it’s a public health crisis that is leading into a consumer crisis because of this unparalleled period of government-mandated lockdown. And so it’s a health crisis, it’s a consumption crisis, and by extension, it becomes a financial concern because of the stress on consumer income.”
The consensus is that businesses will be focusing on pure survival in the short term as the crisis continues. “In the medium term, I think it’s going to act as a catalyst for further adoption of progressive ESG behaviours by companies.
“When we look back at the intensity, this moment of the crisis, we’ll see that those companies that have dealt with it in a very resilient fashion will be those companies that already have a particularly advanced appreciation of the environmental and social, as well as governance risks and opportunities that they’re confronted by,” adds Jenkins.
The Covid-19 crisis could rebalance the focus towards social issues, and less so on environmental issues that have received much more attention over the past couple of years, he argues. Technology and healthcare will remain key sectors for investment managers looking forward, especially in light of current circumstances.
A report by the International Renewable Energy Agency, an Abu Dhabi-headquartered intergovernmental organisation pushing for a transition away from fossil fuels, claims that renewables could lead the way to an economic recovery. The study says increasing investment in renewable energy could drive global GDP growth by almost $100 trillion between now and 2050.
Jeremy Richardson, senior portfolio manager at RBC Global Asset Management, says that this is “quite feasible” and adds: “Sales of traditional internal combustion engine-powered cars were already under pressure before the pandemic, because consumers were responding to the policy actions, carbon taxes and restrictions on when they’d be able to replace their old cars.”
For Richardson, ESG [environmental, social and governance] won’t be going out of fashion any time soon. “If it’s all about helping investors have a more complete and holistic view – that’s always going to be relevant, even more so now, arguably, than it’s ever been. This won’t, by any stretch, be the high-water mark for ESG, or the death of sustainability,” he argues.
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