Responsible investing & Covid – Cover story


any rebuild plan and that the mistakes of the past are not repeated.


These mistakes include the missed opportunity following 2008’s financial crisis for a green stimulus package. “Now there is the opportunity for green stimulus packages with attached caveats,” Pinnock says.


“There is the whole build back better movement,” he adds. “That is a role that investors can take in signing up to these things and pushing government to enact the right policy.” Sattar is clear on the approach he would take to ensure that the missed opportunity of 2008 is not repeated. “In the debates we are having about state aid, the worry is clear that if the govern- ment believes it can pick winners in certain sectors of the econ- omy then that would be a bad way of thinking about it. “If you are going to stimulate the economy it makes huge sense to get the hundreds of thousands of smaller builders doing energy efficiency and things that are relatively cheap in terms of climate change impact,” he adds. “There are sensible ways of delivering job creation and economic growth through a green economy. We absolutely should be doing that.” Pinnock adds that there is still no shortage of capital looking to go to climate or social solution investments, as long as assets are priced correctly. “At the moment, externalities, whether they be positive or negative, are not priced appropriately. Inves- tors are almost being forced to make inadequate investment decisions because externalities are not appropriately priced and they can only be appropriately priced by government.”


What happens next?


Our panel are optimistic that post-Covid responsible investing will continue to be a priority for institutional investors. The only impact from the pandemic and the resulting recession is that its importance will grow. “Post virus, it will be more of the same,” Tomlinson says, add- ing that there could be the potential for an acceleration in the next 10 years. “Covid is ratcheting up the views on many of these RI factors in peoples’ minds and it will stay there. The acceleration has been a step change and will continue to creep up through the next decade or two.


“I would frame these as cycles,” he adds. “We are moving through a series of political cycles. You can trace the behav- iours back to the baby boomers who are in power now. When you see the younger generation, born post 1980 and where these beliefs are native, coming into political power, you will see another acceleration of change.” Far from damaging the progression of responsible investing, Sattar believes that recessions increase interest in investing to benefit society and the environment.


“I would expect to see an increase in interest in responsible Issue 97 | October 2020 | portfolio institutional | 29


investment out of this pandemic. “Generally, it seems to me that every time there is a recession there has been an upsurge of interest in responsible investing,” he adds. “People want to do something but what can they do during a big economic crisis? Moving their money, their pension, their savings into doing something positive is an action that people can take.”


The themes Price expects to see emerge post-Covid include continued scrutiny over executive pay, particularly where com- panies have furloughed or released staff.


She also believes that we could see a focus on tax with the shift of companies to online and should those which operate “pre- carious tax practices” receive government support and pay it back if they have.


The interesting point about responsible investing is that the worse the economic environment, the more it is needed as an investment strategy. “We are moving in the right direction in terms of responsible investing because we must,” Sattar says. “It is an existential need to be responsible in our investment.”


My personal belief is that these RI characteristics are going to drive longer-term performance.


Richard Tomlinson, Local Pensions Partnership


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