The coronavirus has been a wake-up call to a world that has been brought almost to a standstill by its impact. It has caused chaos in developed and developing countries alike and all but destroyed global travel and tourism, the industry most vital to Bali.
The disruption to work, travel and the lockdowns has also given people time to reflect on our fragility. What if the next virus is far more virulent and wipes out 90% as opposed to up to 3% of those affected? What if the growing number of forest fires, hurricanes, floods and other extreme examples of climate change cause so much damage that whole countries are brought to their knees?
In the past, these topics have been the subject of science fiction, disaster movies and such like. But now, the reality is getting much closer to home. The human race has failed to respect nature; now nature is fighting back.
So what can we do about it? Viruses and plagues have been around for centuries so we can’t lay the blame on the present generation for the virus itself. Except that over-population and urbanisation have provided a perfect setting for viruses to spread. As for climate change, it can also be argued that there have been major changes in the earth’s climate since time began. But science can show that the changes occurred over centuries, whereas recent extreme climate events have occurred over a very short period. And while there may be non-believers, including the one who claims climate change is a hoax (because believing in it doesn’t serve his personal interests) the world’s best scientists have agreed that most of the damage is being caused by human behaviour. To prevent the destruction of the planet that behaviour has to change. And yes, we can do something about it. Ironically, the pandemic has a bright side to it; for a short time we have been able to see blue sky in cities like Jakarta as reduced traffic flows cut down pollution while people stayed at home.
How can we make the planet more sustainable?
The pandemic has already given us some clues.
We need to reduce our reliance on motor vehicles. The past few months have demonstrated that it’s not too difficult for many people to work from home.
We need to travel less and fly less to meetings and conferences. We have seen how this can be done by use of Skype, Zoom, Microsoft Teams and similar.
Solar power can be used to generate electricity and heat homes in colder countries, reducing the need for harmful fossil fuels. The same electricity generated can be used to charge electric cars and further reduce pollution.
We can reduce waste as we have seen with the plastic bag initiative, of which Bali was among the first to introduce. We can order goods online and save time, money and fuel with shopping.
But the changes will have some negative consequences
The changes will result in the loss globally of millions of jobs, an inevitable consequence of efforts to save the planet. It is also a shame to see high street shops disappearing and malls closing in some countries, but this trend was happening already, well before the pandemic struck. On the brighter side, the new industries will generate millions of new jobs although there will be a mismatch of skills for some time. People must face the reality that change was already happening but the pandemic has accelerated those changes. Those who are able to should try to develop skills that meet the changing needs of industry.
We can put our savings and pension plans to better use
The pandemic has put on hold people’s financial plans. Many who have lost their jobs, if only temporarily, have been forced to dip into their savings. There are reports also of pensions being drawn down too quickly and even of many trying to access pensions before they were allowed to and falling for scams.
But not everyone has been affected and those who can afford to do so are reviewing how they should invest for the future to ensure they have ample funds for retirement and that such funds are safe and not going to be destroyed by the next crisis. People are also keen to help prevent the destruction of the planet and want to invest in companies and funds that are sustainable. They want their money to grow but they want to invest responsibly. Members of pension schemes are also pressing trustees to ensure their funds are invested responsibly. New research from the Royal Bank of Canada shows that
75% of institutional investors now incorporate ESG (environmental, social and governance) principles into the investment process.
Fund houses are being forced to fall in line as investment money is pouring into the ESG sector. They are being forced to drop companies that are associated with products like fossil fuels or palm oil. It doesn’t mean that no-one will invest in oil companies in the future but the companies that survive will be those that can demonstrate they are making a bold effort to diversify into alternative and clean forms of energy.
So where to invest to make money and create a better world?
Clearly the pandemic has ruined the short term and possibly even long term prospects for many investment sectors. Now is not the time to be investing in the airline, hotel or travel industry. There may be opportunities in the future but the immediate prognosis is bleak. Property funds that invest in commercial offices or retail shops are to be avoided as the demand for office space falls and people do more shopping online.
So what sustainable investments are available to ensure your savings or pension money will not follow a failing industry down the drain? Here are a few examples:
- Climate change funds
- Environmental opportunities
- Sustainable / Alternative energies
- Sustainable timber
- Sustainable water
- Sustainable healthy living
- Socially responsible equities
The ESG sector is now huge and is a work in progress. But it is a complex area and not without pitfalls. Everything is not black and white. It is easy enough for a fund manager to exclude tobacco firms for example. But how do you assess an oil company that produces a harmful product yet is genuinely attempting to diversify into cleaner products? The answer lies in ratings, although these can be quite subjective.
The direction is a clear one. Successful investing in the future must be sustainable investing. This article can only scratch the surface. I will be happy to provide more specific details to those who wish to invest responsibly or review existing investments in the light of the pandemic and the clear future trends.
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly in normal times! If you have any questions on this article or related topics you can contact him at colin.bloodworth@ppi-advisory.com
You can read all past articles of Money Matters at www.BaliAdvertiser.biz
Copyright © 2020 Colin Bloodworth