Sustainable investments aced the Covid-19 ‘acid test’: Julius Baer expert
Silvia Wegmann, head of sustainable investment solutions at the Swiss wealth manager, shares her insights on how companies need to adapt to a post-pandemic future
The long-standing belief that sustainable investments are more resilient in times of crisis has proved to be true during the Covid-19 crisis.
In a world looking to emerge from the most devastating pandemic in a century, the case for building a better, more sustainable and resilient “normal” is clearer than ever.
We sat down with Silvia Wegmann, head of sustainable investment solutions at Swiss wealth manager Julius Baer to better understand how companies need to adapt to a post-pandemic future.
What has been the impact of the Covid-19 pandemic on sustainable investing?
When I decided to focus on sustainable investments more than 14 years ago, there weren’t more than a handful of books or essays on the topic. Over time, sustainability has become a fundamental part of investors’ vocabularies. However, there have been strong critics who see sustainability-themed strategies as mainly a bull-market trend, which could falter at the first sight of a downturn.
The Covid-19 crisis served as an “acid test” and sustainable investing can finally show what it’s made of.
Julius Baer's head of sustainable investment solutions, Silvia Wegmann, defines the essence of sustainable investments.
The pandemic can be described as a “baptism of fire” for sustainable investments. It has shown these investments tend to be less prone to bankruptcies and downward earnings revisions, as greater prudence in terms of environmental, social and corporate governance risks helps to protect them from scandals and can improve innovation and productivity.
Covid-19 has also reinforced the demand for sustainable investments. It served as a reminder of how fragile our systems can be to unfamiliar shocks, and thereby strengthened the desire to support organisations that are actively helping to reduce imbalances.
You can do financially well while doing goodSilvia Wegmann, head of sustainable investment solutions at Julius Baer
Recently, the focus has shifted from the environmental to the social aspect of doing business, which grew even more critical under the health crisis.
What do sustainable companies do differently?
In the past there were cynics, who considered sustainable investors synonymous with tree-huggers. But this has definitely changed in recent years. Sustainable companies have proven to have more innovative solutions to meet today’s sustainability challenges and thereby support the transformation of entire sectors.
How will companies need to adapt in the future?
I think the pandemic will put more companies under scrutiny for decisions that affect employees, customers and society. Sustainable investing never was or will be about creating shareholder value, but about maximising value for all stakeholders.
Though Covid-19 has potentially opened further doors to sustainable investments, it is a megatrend with a long-term impact.
Sustainable investing on the rise in SA
Says Raoul Korn, head of Southern Africa at Julius Baer: "We've definitely see an increase in client interest relating to sustainable investing, especially in areas of electric mobility and clean energy, and we believe this trend is well positioned to gain further traction in the coming months.
"This trend is also driven by the next generation of clientele who are not just motivated by profit but by various social and environmental aspects.
"We strongly believe this approach will help preserve and generate wealth for the generations to come, and we are happy to support our clients in SA to invest in a sustainable fashion.”
Are there specific themes that have become more important in this environment?
Indeed. Until recently, an important trend was to concentrate on the environment, because climate change is largely regarded as the greatest challenge of our time. Recently, however, the focus has shifted to the social aspect of doing business, which has become even more critical during the health crisis.
Customers and investors are increasingly avoiding companies with sensitive working conditions. The organisations themselves have recognised that the inclusion of the social factor creates added value.
Will the boom continue?
We believe it will. It’s worth noting that sustainability-themed investment strategies have been around for decades. The inflows, however, have only occurred in the past five years. So it is really the first time these strategies have gone through an “acid test”.
Popularity has risen, and so have product supply and regulation, which will further support their maturing into an established investment segment.
Click here to find out more about embarking on a sustainable investment journey with Julius Baer.
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This article was paid for by Julius Baer.