Coronavirus impact underscores need for sustainable investment, experts say
- Investments in funds based on sustainability principles rose US$70 billion in the April-June period at height of the pandemic
- Pursuit of sustainable operations has been set back in short-run due to funding issues as companies fight for survival, but long-term trend intact
The impact of the coronavirus has reinforced, for both executives and investors, the need for companies to develop sustainable operations that can withstand major shocks, experts say.
The pandemic has slowed the pursuit of sustainability goals based on the three ESG principles – environment, social and governance – because of a lack of funding as companies fight for survival, according to the latest South China Morning Post panel discussion on “Covid-19 and the Economy”.
But even at the height of the global outbreak this spring, investors poured money into ESG funds, in part because companies with sustainable business plans and operations perform better, said Phineas Glover, head of ESG research for Asia-Pacific at Credit Suisse.
Growth in ESG investment funds is “accelerating quite dramatically now”, Glover said, noting that investors added US$70 billion to such funds in the April-June quarter, according to data from Morningstar, bringing the total value of global ESG fund investments to more than US$1 trillion.
Moreover, inflows into British ESG funds from April to July exceeded total inflows for the previous five years, Glover said.
And a new ESG fund that launched in July, owned by Japan’s Asset Management One and managed by Morgan Stanley, raised more than US$3.6 billion – the most for a new fund offering in Japan in 20 years, Bloomberg reported.
While the increased investment may indicate a sense of greater civic responsibility, it also reflects the fact that such funds can perform better. “One of the interesting things we have found is that ESG funds do outperform during [times of] economic upheaval,” Glover said.