Will COVID-19 lead to accelerated impact investing?

Lockdown measures taken globally to contain the spread of COVID-19 have imposed new habits and lifestyles, with consequences on consumption and business models of companies. The emergence of the pandemic caused severe turbulence in the financial markets, with losses in the first quarter of the year on a scale not seen since Lehman Brothers went bankrupt in 2009.

However, the nature of this crisis seems to be different, as it cannot be confined to finance alone. Hence the need for a more articulated response both from a governmental and private point of view, for the economy to restart. In this renewed scenario, there seems to be a growing awareness among investors of the weight of their financial choices, in which the environmental and social impact they may determine becomes more important.

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A structural change from lifestyles

“It’s the moments of change that give us more opportunities to redesign not only our lifestyle and work, but also the way we’re going to re-evaluate our investments,” explained Simona Merzagora, managing director of NN IP. “Let’s start with a very concrete example: if we can continue to work today and our children finish school it is thanks to digitization. New habits are becoming necessary, such as online shopping or home fitness. And above all, there is a greater focus on health care, with the hope of the discovery of a vaccine for the coronavirus,” she added.

These examples, which appear more tangible at the moment, were already defined 5 years ago by the United Nations’ sustainability goals, with the aim of solving a wide range of economic and social development issues by 2030. “Given the value of the opportunities generated by the achievement of ESG goals, companies have an incentive to grow by incorporating these goals, both at product and service level and at operational level,” Merzagora explained. “These companies are best positioned to adapt to economic and social change and because of their lower sensitivity to external risks, they are the ones that have held up best to the indiscriminate sell off in recent weeks,” she said.

The thematic offer of NN IP

NN IP has identified in the ESG criteria the way to define its thematic strategy, which consists of three solutions dedicated to climate and environment, digital connectivity, and health and well-being.

Ivo Luiten, senior portfolio manager impact equity explained: “With the Climate & Environment fund we are present in companies that reduce negative stresses on the ecosystem, including companies that create new forms of housing insulation or operate in renewables.”

Among the companies in the portfolio is Solar Edge, which produces inverters to optimize energy production through solar panels.

“In the Smart Connectivity fund we focus on companies at the forefront of digital connectivity. A good example is Helios Towers, a telecom operator in Africa. The company is present in countries like Ghana, Congo and Tanzania where mobile telephony is the only way to access the internet and we believe it has a positive social impact,” explained Luiten.

Healthcare and well-being finally focuses on health and wellness. Among the companies invested is Thermo Fisher Scientific, which is at the forefront for the identification of diagnostic tests for coronavirus. “Another company is the Italian company Technogym, which produces fitness equipment and whose mission is summarized in the concept of healthy people for a healthy planet,” concluded Huub van der Riet, lead portfolio manager Impact Equity.

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(Featured image by cocoparisienne via Pixabay)

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First published in FUNDSPEOPLE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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