Will the Covid-19 pandemic cause a change with respect to the investment policy of foundations towards ESG sustainable investments. For many years convincing and enticing foundations to move in the direction of ESG sustainable investing, was a struggle. The question was always: ‘why should we give up finacial returns by going in that direction’ and ‘why should we not go for the highest return, irrespective the nature of the investment, in order to have the highest return to spend on the public benefit’.
Foundations felt a bit ashamed when they realised that they even could solve problems with their right hand, that were created by their left hand. An example was a well known cancer foundation, that had invested its endowment in shares of Phillip Morris. But more important than guilt, were a few other factors, that gradually improved the practice of ESG investments in the foundation community. First of all a comparison over the last 15 years of the MSCI world index of shares with the comparable Dow Jones Sustainable index shows that risk-adjusted returns of both indices do not differ that much. Secondly you could well argue that foundations, given their long-haul approach and public benefit mission, have a moral obligation to allign the nature of their charitable spending with tha nature of their investments. I am advisor of DoubleDividend, an independent investment specialist dedicated to sustainable investments, and I have witnessed the growing importance of sustainable investing, of relating investments to the SDG’s (sustainable development goals of the UN). Yet many foundations were still hesitant to take these steps.
Could the corona crisis accelerate the practice of ESG sustainable investing. I believe so. A crisis like this one is not God given but Men made; it has everything to do with us not taking care of our own planet. Fortunately among young people there is a greater awareness about the imprtance of our environment. Hence this pandemic is likely to accelerate the mindset, also of foundations, to embark on ESG investments. But there is another factor that comes in. Recently governments have injected substantial sums of money in the economy to have a bail-out of large and small companies to avoid that they go bust. It is extremely likely that governments, politicians and the public as taxpayers of these monetary and fiscal stimuli, will demand conditions from the corporate sector. Over the last week discussions about not paying dividends, not paying bonuses to top management have become frontnews. Stakeholders of companies will become more important than just the shareholders. In that social and economic climate legitimate conditions will be formulated about the contribution, that companies and also us as citizens can make to a sustainable future.
Foundations have to follow suit. If you want to be there in perpetuity, you have to take care of the environment in which you operate. You do so because of conviction or because you are smart and realise that it is enlighthened self interest. Therefore the present crisis in my opinion will cause a structuiral change with respect to the importance of ESG sustainable investments