The coronavirus pandemic has prompted massive changes for countries, societies, people and businesses. Interconnected environmental, social and governance issues have reinforced the role of sustainable investing strategies as an indispensable part of investor allocations for a post-COVID-19 world.
When the history of COVID-19 is written, the pandemic period will be seen as more than just a health and economic crisis. Both contributed to a social reckoning, with a growing focus on inequality around the world, while the intensifying global climate crisis has added new and unpredictable threats.
Taken together, these four pandemic-era trends have fueled a conceptual change in the purpose of investing. Before the pandemic, traditional investing viewed economic and social issues as largely distinct spheres; companies existed to enrich their owners—the shareholders. Now, those spheres are intertwined. You can’t fully understand the economics of a business without understanding how a company interacts with customers and society. Powerful social forces affect businesses and are fundamental to gaining investment insight into a company’s growth path and return potential. Here are four lessons that we think will endure long after the world has healed from COVID-19.
1. Sustainability Issues Are Far-Reaching—and Very Personal. The pandemic made “sustainability” personal for many people. COVID-19 is more than a health crisis—it’s a sustainability crisis. While sustainability means different things to different people, we know it encompasses social issues like poverty, hunger, healthcare and education, as well as economic issues like employment, financial security and inclusion. These issues are tightly linked.
How did COVID-19 become a multifaceted sustainability crisis? In countries that are members of the Organisation for Economic Co-operation and Development, unemployment doubled to about 10% by the end of 2020. The International Labour Organization estimates that the number of working hours lost to the pandemic was equivalent to a staggering 100 million job losses globally. According to UNESCO, 90% of children who were in school around the world had their education disrupted. Border closures and trade restrictions increased food insecurity. And the pandemic was also a gender crisis, with a disproportionate burden falling on women, who were much more likely to lose their jobs. Poorer people were disproportionately affected by all these problems, further widening social inequalities. The impact of these simultaneous challenges put unprecedented pressure on people, companies and communities around the world.
In our lifetimes, there has never been another megaevent that highlighted how sustainability issues are interconnected in such a personal way. Sustainability can no longer be dismissed as somebody else’s problem.
2. Companies Must Engage with Diverse Stakeholders to Succeed. Large, publicly traded companies are incredibly influential players in sustainable development. They employ the most people, use the most natural resources, generate the most pollution and are the most politically connected entities on the planet. Global sustainable development isn’t possible without the private sector.
Thankfully, in recent years, we’ve witnessed the rise of stakeholder capitalism—the notion that corporations create greater economic value when they consider the needs of all stakeholders, rather than just shareholders (Display). Companies should be more economically successful when they support the social and environmental well-being of the communities in which they operate and embrace sustainable business practices.