03.11.2020

The impact of Covid-19 on ESG investment and Green Finance

The impact of Covid-19 on ESG investment and Green Finance

At the start of 2020, sustainability, ESG (Environmental, Social and Governance) investment and Green Finance were heading to the top of the political agenda. Then the coronavirus pandemic came along and changed everything.

Yes, 2020 certainly looked set to be a year in which focus on sustainability issues was to be intensified. There was to be, for example, the United Nations Climate Change Conference scheduled for November and momentum on the Green Deal in Europe, aiming to transform Europe from a high to a low carbon economy. And let’s not forget, the latter aims to do this without reducing prosperity, all while improving people's quality of life through cleaner air and water, aiming for better health and a thriving natural world. That’s not just a Green Deal…it’s a big deal too.

Then along came Covid-19. That meant the 2020 Climate Change Conference was postponed by a year. Meanwhile, we have to be realistic about the Green Deal for Europe which is going to suffer in the shorter term whilst Covid-19 continues to change our priorities worldwide. In the immediate future, policymakers are perhaps more concerned with focusing on crisis management and redirecting already scarce financial resources to support their economies.

However, there are some positives to come out of the pandemic with regards to sustainability. For example, with such a large percentage of people not moving about so much, satellite images from NASA recently showed a substantial drop in the noxious gases emitted by motor vehicles, power plants, and industrial facilities. Concentrations in many countries were down by 50% in periods of heavy lockdown.

Also, at a time when governments need to reorient their focus and financial efforts towards crisis management, private investors have the opportunity to step in and fill the gap governments leave with investment in projects that give a return, but also support the environment’s long-terms goals.

In the UK, this could actually accelerate what the UK government intended when it launched its Green Finance Strategy last year, ahead of the Green Deal in Europe. The Green Finance Strategy recognises the crucial role that the financial sector will play in delivering environmental objectives and lays out a plan to incorporate redirecting private finance flows into areas such as improved air, water and wildlife.

So private investors still have the opportunity to get involved in projects that give them a return, whilst also supporting long-term environmental goals. Even before the coronavirus crisis it was estimated that public funds alone would only cover 15% of what is required for the projects to meet their goals. This leaves the private sector - firms and investors - the opportunity to provide the balance. They should be keen too, as the potential return on a lot of these projects is as much the priority as the environmental benefits.

With both Green Finance and ESG investing being such hot topics, we’ll soon be launching some training assets on this. Yes, we’re currently taking in feedback as to what clients want and sitting down at the drafting table to work out exactly what these training assets will look like. However, to give you some ‘inside knowledge’: they will look a bit different! We’re going to say no more at this stage. Watch this space for more details!...

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