Jul 06, 2020  | Tags: covid-19, sustainable investing, sustainability

Our Insights

Sustainable investing has already been on the rise in recent years, however COVID-19 looks set to drive it into the mainstream.

As the human impact element of the global pandemic has reinforced the need for social responsibility, sustainable investment will become an important part of our transition into post-coronavirus phase.

Here's what we expect to see.

Increased demand from investors

Sustainable investing has already caught the attention of investors, with climate change and environmental issues at the forefront of investment decisions.

Now, social responsibility has also become a huge focus. So, an increased number of investors will be driven to sustainable investments and companies with effective policies on employee health and safety, job security, supply chains, resource risk, resilience and more.

In the long-term, it's expected that majority of investors will integrate social, environmental and governance (ESG) factors into their decision-making processes, and reassess their investment strategies to incorporate ESG factors.

This demand is expected to continue in the long-term, with new research from the Responsible Investment Association Australasia (RIAA) revealing the sustainable investment market could reach $100 billion by 2025.

Better performance

While the economy and stock markets have taken a big hit during COVID-19, sustainable investments have actually performed better, with early research revealing that ESG investing has seen better than average returns and a steady increase in inflows.

Sustainable investments and companies with better policies on social issues and environmental sustainability have also proven to be more resilient in the recent volatile market conditions.

Because of these facts, and the rising value for social and environmental responsibility, it's expected that sustainable investing will have a huge role to play in the gradual economic recovery from COVID-19. 

Improvement in ESG data

One of the challenges that has faced sustainable investment is the difficulty of capturing the right data to measure the sustainability and impact of companies. There has also been a lack of standardisation with key performance indicators and metrics. For some investors, this had created some confusion as they looked to assess the ESG alignment of their investments.

Fortunately, sustainable investment has become much more sophisticated in recent years and, with sustainable investment becoming increasingly important during and post COVID-19, issues with ESG data and metrics are being addressed, fast-tracked and improved.

Change in investor mindset

Despite the increase in sustainable investing, it still holds the perception of being a trade-off between financial return and personal values.

However, recent performance trends have proven the ability for sustainable investments to give investors the best of both worlds.

Therefore we're expecting to see more ‘traditional’ investors adopt sustainable investment practices as part of their strategy.  

Sustainable investing goes mainstream

With COVID-19 significantly accelerating the interest and benefits of sustainable investing, it’s expected that sustainable investments will become mainstream and treated equally with traditional investments.

Higher expectations for companies to establish better policies will motivate more business leaders to review and adapt their strategies to ensure they meet the values of the market.

Invest in your values

Now is the perfect time to consider sustainable investing and put your dollars into companies that are aligned with your values, whether they’re environmental, social or governance based.

Our team is ready to help you transition to a better way of investing.  

Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment. 

Written by Anthony Hill for Calder Wealth Management.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.