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Sustainable investing is actually up during the pandemic recession

Sabri Ben-Achour, Chris Farrell, Meredith Garretson, and Erika Soderstrom Aug 3, 2020
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Investors have not only stuck with, but have actually embraced, funds with high sustainability and environmental ratings. Pixabay
COVID-19

Sustainable investing is actually up during the pandemic recession

Sabri Ben-Achour, Chris Farrell, Meredith Garretson, and Erika Soderstrom Aug 3, 2020
Heard on:
Investors have not only stuck with, but have actually embraced, funds with high sustainability and environmental ratings. Pixabay
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When the economy sank into the pandemic recession, some climate change activists and others braced themselves for investors to abandon investing based on social goals. It’s known as ESG — environmental, social and governance — investing.

It turns out social impact investing is alive and well. Marketplace senior economics contributor Chris Farrell has the story. The following is an edited transcript of his conversation with host Sabri Ben-Achour.

Sabri Ben-Achour: So investors are still investing based on social or environmental causes even during a pandemic?

Chris Farrell: That’s one of the results that comes from this pandemic-inspired study by two economists. And they look at a number of things, but what I focused on is they found that mutual funds with high ESG ratings … have performed particularly well against various benchmarks during the pandemic. And so the results were particularly strong for those funds that have an environmental focus.

Ben-Achour: Why have investors continued to be so bullish on green assets or green products during the crisis?

Farrell: I mean, one, the evidence has just been compelling over the past couple of years. Look, there’s little return difference between investing for money and investing for money and values. But the scholars also offered this striking conclusion. So a lot of the critical commentary aimed at ESG investing in recent years has been this belief that it’s a luxury good. And people typically cut back on luxury goods when times are tough. Well, the economists conclude that since investors have not only stuck with but embraced sustainable investing during the major crisis, it suggests that “they view sustainability as a necessity, rather than a luxury good.”

Ben-Achour: Something not “nice to have,” but but “need to have”?

Farrell: That’s right. And there’s something else maybe at work. Now there’s this survey. And, of course, you always have to be wary of surveys, but it’s by the deVere Group, which is a independent financial advisory firm. And they found that more than half of the people they surveyed consider sustainable and responsible investments as safe havens, which in a way makes sense, because companies with strong records on employee relations, environmental sustainability, corporate governance — they tend to do well over the long haul.

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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