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Covid is changing the way we invest

Covid is changing the way we invest

We have no doubt that tackling the Covid-19 pandemic will remain a top priority for the international community in 2021.

Despite the virus accelerating around key parts of the world, and officials (re)imposing restrictions to flatten the curve, there are reasons to be optimistic.

Recently, “white shoe” vaccine makers have released results from their late-stage studies suggesting their experimental vaccines are strongly effective, which paved the way for emergency use authorisation to innoculate the public, notably in the UK and in the United States.  

Additionally, despite the material human, economic and financial costs attached to Covid-19, societies remain, albeit reluctantly, largely resilient and adaptable to the “stay-at-home” and “digital” economy.

The more we know about the virus, the more our approach to containing it will likely improve. After all, “time heals,” as the saying goes.

The vaccine is largely framed as “the” solution to arresting the spread of the pandemic.

Pharma arms race

While we can salute the scientific community for its resourcefulness and medical innovation prowess, an important question for investors remains unanswered: how can we prevent this unprecedented public health effort from turning into a “pharma arms race” to the detriment of the public good?

Covid-19 is a global, and indeed, public problem. Any solution should, by extension, be global and serve the public. In this regard, the solution must not fall victim to one of the key contradictions of capitalism.

The success of economic modernisation and technological innovation worldwide has brought about tremendous failures – including an increase in socioeconomic inequality and exploitation. 

Despite the benefits that capitalism brings to growth, it structurally relies on underdevelopment to compensate for overdevelopment in order to exponentially grow.

It is, for example, this selective growth mechanism that paradoxically saves the world from total devastation on the environmental level - urbanisation and resource exploitation allowed us to modernize our societies.

But this modernisation has caused an upheaval of the biosphere, the magnitude of which we are just beginning to appreciate. That is why the opportunities emanating from biotechnological innovation to fight Covid-19 should not produce the contradictory result of hardening economic competition and sidelining less fortunate populations.

While key trends, including climate change, cybersecurity (including privacy), technological advancements, and demographic changes, were already altering the investment management landscape prior to Covid-19, we believe the virus’s escalation to a global pandemic will hasten the shift in mindset toward sustainable investing, notably amid the elevation of the social dimension of Environmental, Social and Governance (ESG).

Investment theory

Indeed, Covid-19 has altered the global economy, but it is affecting investment theory, too. There is a growing consensus among many investors, especially among millennials poised for the “Great Wealth Transfer" coming their way, that the so-called neoclassical economic theory must evolve past the sole focus of maximizing firm profits.