Page 18 - DIY Investor Magazine - Issue 26

A GREEN KICK-START?
Increased spending world-wide as governments seek to kick- start economic growth may have added benefits – boosting sustainable projects. Could responsible investment solutions provide the necessary tonic for beleaguered policymakers and investors to change the face of both the global economy and society itself? Here, managers from across BNY Mellon Investment Management consider the likely road ahead.
While signs of a fragile normality return to global markets, the seismic economic ructions triggered by the 2020 Covid-19 pandemic continue to reverberate across global governments and businesses. The initial shock which followed its emergence and the longer-term reaction to it have raised many questions about the world’s economic and social priorities and the way we, live work and plan for the future.
This crisis has also come at a time when global trade relations have been – and continue to be – unusually sour. Among these have been increased Sino-US trade tensions, while Brexit has created new divisions between the UK and European Union (EU). This has created questions over the future shape and viability of some longstanding supply chains and global trade connectivity.
Commenting on the growing focus on business and social links and business practices, Mellon senior portfolio manager Robin Wehbé says: “Recent events have really opened all our eyes
to the social connections and inter-exchanges between the complex web of stakeholders in business and wider society. Where mega storms once woke us up to climate change,
so a global pandemic has hopefully woken us up to more humanitarian challenges.
Investors and other stakeholders are asking more questions about employment stability, pay equality and labour risks. How should companies manage an office full of people, a shop or a factory? Not only that, how do we now contemplate supply and distribution value chains?”
Some see the current time as an ideal opportunity to take stock and work to refashion our economies to make them both more sustainable and resilient.
‘A GLOBAL PANDEMIC HAS HOPEFULLY WOKEN US UP TO MORE HUMANITARIAN CHALLENGES’
And if no further reason was needed, the growing climate emergency is one huge indicator for which this might make sense.
Newton’s head of sustainable investment Andrew Parry says: “Is the business world about to tilt on its axis? A lot of people say the world will never be the same again, whereas others might think that could be wishful thinking because we may be seeing an acceleration of certain trends rather than a reversal of broader trends.”
Either way, the sheer volume of government funding spent to head-off global economic collapse amid the pandemic has been stark. In July European Union (EU) leaders struck a post- coronavirus recovery deal worth €750bn in grants and loans1. Earlier in the year the US Senate also approved a US$2trm emergency relief bill to address fallout from the pandemic.
Against this backdrop of spending, Parry sees a genuine opportunity to rethink our approach to sustainability and responsible investment across all three environment, social and governance (ESG) spheres. “Now may be the time for companies to rebalance expectations away from maximising short-term returns – the use of excessive debt and extended supply chains to reduce labour costs – towards the quality of those returns. In short, we have an opportunity to re-examine notions of efficiency in favour of resiliency ,” he says.
‘WE HAVE AN OPPORTUNITY TO RE-EXAMINE NOTIONS OF EFFICIENCY IN FAVOUR OF RESILIENCY’
Much, Parry adds, will depend on our ability to learn from what he sees as critical mistakes made after the Global Financial Crisis (GFC) when a reliance solely on market forces and cheap borrowing led to a compounding of challenges.
DIY Investor Magazine | Dec 2020 18