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Generation Investment Management: COVID-19 creates a generational opportunity for sustainability



ImpactAlpha, July 8How and where we live. How we work. What we want – and need – to consume. 

The global pandemic has caused severe health and economic impacts in the short-term. It is also accelerating long-term trends that, with decisive action, could accelerate the transition to a sustainable and inclusive future. 

“We believe the action and momentum triggered by events this year will prove a powerful catalyst for sustainability,” say authors of the latest “Sustainability Trends” report from Generation Investment Management. “There is a sense of new political and social realities forming that provide a generational opportunity.”

Generation Q&A: How the pandemic strengthens the case for sustainable investing

For the fourth year running, the $20 billion investment firm, co-founded by Al Gore and David Blood, has documented the “sustainability revolution.” The more than 200 charts and figures detail trends in energy and health, the economy and finance, mobility and buildings, consumers, trade and travel.

The COVID disruption, says Generation’s Anthony Woolf, has awakened an understanding of inequality, injustice and an economy living beyond its means and resources. 

“2020, in hindsight, will be seen as this chance to rethink, reset and, to some extent, redesign, how we do things,” Woolf told ImpactAlpha.

Sustainability disruptions

Take healthcare. In the U.S., large percentages of Hispanic and Black Americans remain uninsured. Lower-income people pay a higher share of their income in out-of-pocket healthcare expenses. During the pandemic, one in 10 people have turned to lower-cost telehealth services for migraine and coronavirus symptoms. “These are structural changes that may persist beyond the pandemic,” says Generation.

The Impact Alpha: Let’s make this s***storm matter

In food, for example, growth rates of fossil-fuel intensive beef production have fallen sharply in recent years. Interest is growing in plant-based meat as an alternative. Sales growth of plant-based meat, creamer, yogurt, eggs, cheese and ice cream are all out-pacing their animal-based counterparts. The cost of producing protein has plummeted; funding for food and agri-tech startups has spiked. 

In March, Generation backed alt-protein company Nature’s Fynd, which makes protein using a fraction of the land and water resources required by traditional agriculture.

How 10x tech can drive 10x impact in 10 years

Companies that facilitate remote work have taken off in the pandemic. Zoom grew users from 10 million in December to 200 million in March. Still, the ability to work from home differs sharply by income, race and geography. “The transition to a sustainable economy requires hard choices and investments,” says Woolf. 

Building back better

A chorus of stakeholders are calling for a green-investment-led plan to boost the economy after the pandemic. Spending on renewable energy, for example, creates nearly three times as many jobs as spending on fossil fuels.

Europe and Canada have seized the need for stimulus as an opportunity to drive sustainability. China, India and the United States, which have all pumped trillions into their economies, so far have not. The five most important policies, according to the Oxford Review of Economic Policy: Clean energy infrastructure, building efficiency retrofits, education and training for workers, natural capital investments and clean research and development. 

“Whether it’s Black Lives Matter or the climate crisis or our air pollution or the transition to electric vehicles, we all need to do more than just hope for change,” says Woolf.

As sustainability trends have accelerated, so too has sustainable investing. Responsible assets under management continue to grow, while more than 50 financial institutions have joined the Science-Based Targets initiatives to set emission reduction targets in line with climate science. A quarter of global emissions are now under carbon-pricing schemes.

Sustainable investments are growing, and outperforming, in a volatile market

And sustainable investments aren’t just growing. They’re outperforming the market. The drivers: A focus on workers, customers and governance.

“The net investment required for climate action is a lot smaller than the economic cost of the pandemic,” says Woolf. But unlike the pandemic, he says, the required climate investment “represents a massive economic and social opportunity.”

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