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: Marketplace Morning Report
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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
Investors have not only stuck with, but have actually embraced, funds with high sustainability and environmental ratings. Pixabay
HTML EMBED:
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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

Are people still waiting for unemployment payments?

Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.

Are we going to see another wave of grocery store shortages?

Well, public health officials are warning that we could see a second wave of the virus before the end of the year. And this time retailers want to be prepared if there’s high demand for certain products. But they can’t rely totally on predictive modeling. People’s shopping habits have ebbed and flowed depending on the state of COVID-19 cases or lockdowns. So, grocers are going to have to trust their guts.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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