Executive summary

The contours of the post-COVID landscape are yet to fully come into focus. Unlike in the wake of the Global Financial Crisis however, there are clear signs that concerns about environmental issues have been elevated by what we have recently experienced.

The pandemic and associated response have reinforced the imperative to transition to a more sustainable economy. It has reminded us of the fragility of human society in the face of a natural phenomenon and has triggered the kind of collective response that will be needed to address climate change and other sustainability challenges.

Over the summer, our research team has taken a step back from the immediate market volatility to consider implications for the firm’s investment thesis. Their observations are the basis of this report which is not intended to be a forecast, rather a framework for thinking about how the future may look.

The report draws three key conclusions:

  1. Four structural changes are disrupting business models — a heightened awareness of systems-level risks; exposure of supply chain vulnerabilities; the social distancing measures changing behaviour; acceleration towards a digital economy;
  2. The reaction of policy makers as they move from lockdown to rebuilding economies, will likely incorporate societal feedback that simply returning to the old normal is not enough;
  3. Tangible investment opportunities include industrial automation advances, digitisation acceleration and an underscored importance of health, safety & well-being theme. In addition, risks associated with areas such as human capital management, diversity, climate change and biodiversity are becoming relevant to fundamental analysis across sectors.

Impax’s investment process, particularly its Sustainability Lens, Environmental and Gender focused investment universes and integrated ESG risk management practices already address the main COVID-19 challenges, yet certain aspects will gather renewed importance:

  • Recognising the value of biodiversity, and protecting wild areas from further encroachment, could reduce the risk of further zoonotic transmission and improve our quality of life.
  • Tackling persistent inequalities of gender, race and opportunity would equip companies with a broader talent pool and reduce operational and reputational risk through supply chains.

As we start to rebuild from the human and economic damage inflicted so far in 2020, we believe that tackling these two critical topics will increase resilience.

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