A sustainable stimulus

As Vladimir Lenin said, “There are decades where nothing happens; and there are weeks where decades happen”. Our stewardship director Matt Crossman tries to grasp what the current pandemic means for the planet and our plans to save it.

Hand holding dandellion with a pink sky background

The impact of Covid-19 exhausts superlatives. Seemingly every news report starts with some combination of “never before”, “not since”, or “in living memory”. The globalised world is facing up to the kind of global health crisis frequently explored by script-writers yet scarcely experienced in reality. As self-isolation meets social distancing, schools close and working from home becomes the new normal for most in a desk job. Meanwhile, those in more vulnerable work face the twin threat of a global health crisis and an uncertain financial future.

Once the scale of the crisis became clear in Europe, the response was swift and powerful. Tentative talk of increasing fiscal discipline was banished at once, as the UK government promised, in bizarre capital letters, to do “WHATEVER IT TAKES”. French President Emmanuel Macron promised that no French firm will collapse, the US Federal Reserve cut interest rates by an historic margin, and the European Central Bank announced plans to make €750 billion (£708 billion) in new bond purchases.

However, the problems which seemed to capture the public imagination in 2019 – climate change in particular – are not going away. As the number of new cases in China reportedly drops to zero, we are reminded that the initial Covid-19 crisis will end, though we cannot say when or at what cost. Yet, in the background, the nagging need for systemic reform of the global economy stays constant. Indeed, our current crisis only highlights the weaknesses of the current system.

2020 marks the start of the decade in which the UN’s Sustainable Development Goals (SDGs) will be met or missed. On the face of it we couldn’t have asked for a worse start: millions of people in lock down, the poor and vulnerable at extreme risk, and virtually every economy in survival mode. Despite stumbling out the blocks owing to this unforeseen event, as a society we must remember we are in a marathon not a sprint. If we are to build a more resilient economy with our stimulus, the steps we take to get the world moving in response to Covid-19 must be done in alignment with the SDGs.

Global crises such as the Covid-19 pandemic have a peculiar feature – they are no-one’s fault. The 2008 financial crisis created clear villains in the form of those creating speculative financial instruments; ‘greedy bankers’ were everyone’s enemy. Bailouts of banks were necessary but met with opprobrium. With a global pandemic, while you can argue about which government responded ‘best’, we can agree that we all face a common threat. Political divisions about who benefits most from the coming financial stimulus, and whether such moves are ‘fair’, are diminished. This is an opportunity of historic proportions – at the moment when society needs it most.

A ‘sustainable stimulus’ isn’t a new concept. There was talk and indeed delivery of a green stimulus in the wake of the 2008 financial crisis as key players like the US and China focused recovery efforts on cleantech and renewables. Writing at the time, HSBC estimated that around the world, governments “allocated more than $430 billion in fiscal stimulus to key climate change investment themes”. The following decade saw two major and significant developments: the drastic fall in the cost of solar power, and the collapse in investor confidence in coal. Correlation is not causation, but it’s fair to assert that such targeted stimulus had the double benefit of getting the economy moving and delivering on global goals.  

As Vladimir Lenin wrote, “There are decades where nothing happens; and there are weeks where decades happen.” It’s our assertion that global governments, have the chance to, in the words of the SDGs, “shape a decade of recovery in which they recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.”

Our actions now will affect the decade before us – could a truly sustainable economy rise from the ashes of Covid-19?

 

 

Important legal information

This area of the site is for professional advisers

Please read this page before proceeding, it explains certain legal and regulatory restrictions applicable to the distribution of this information. It is your responsibility to inform yourselves of and to observe all applicable laws and regulations of the relevant jurisdiction.

This section of the website is directed only at investment advisers and other financial intermediaries who are authorised and regulated by the Financial Conduct Authority (FCA).

The information provided in this site is directed at UK investment advisers only and must not be circulated to private clients or to the general public. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

I confirm that I am an investment intermediary authorised and regulated by the Financial Conduct Authority. I have read and understood the legal information and risk warnings below:

Important Information (Terms and Conditions)

The information contained on this site is believed to be accurate at the date of publication but no warranty of accuracy is given and the information is subject to change without notice. Any opinions or estimates included herein constitute a judgement as of the date of publication and are subject to change without notice. Furthermore, no responsibility is accepted for the accuracy of any information contained within sites provided by third parties that may have links to or from our pages.

Rathbone Investment Management Limited ("RIM") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered Office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW. Registered in England No 01448919.

In accordance with regulations, all electronic communications and telephone calls between Rathbones and its clients are recorded and stored for a minimum period of six months.

The information provided in this site is directed at UK investors only. It does not constitute an offer to sell, or solicit an offer to purchase any investments by anyone in any jurisdiction in which such offer or solicitation is not authorised or in which a member of the Rathbone Group is not authorised to do so.

In particular, the information herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in France and the United States of America to or for the benefit of United States persons (being resident in the United States of America or partnerships or corporations organised under the laws of the United States of America or any state, territory or possession thereof).

In order to comply with money laundering and other regulations, additional documentation for identification purposes may be required.

Rathbones shall have no liability for any data transmission errors such as data loss, damage or alteration of any kind including, but not limited to, any direct, indirect or consequential damage arising out of the use of services provided or referred to in this website.

Past performance should not be seen as an indication of future performance.

The value of investments and the income from them can fall as well as rise and you may not get back the amount originally invested, particularly if your client does not continue with the investment over the longer term.

Changes in the rate of exchange between currencies may cause the value of an investment to go up or down.

Interest rate fluctuations are likely to affect the capital value of investments within bond funds. When long term interest rates rise the capital value of units is likely to fall and vice versa. The effect will be more apparent on funds that invest significantly in long dated securities. The value of capital and income will fluctuate as interest rates and credit ratings of the issuing companies change.

Tax levels and reliefs are those currently applicable and may change and the value of any tax advantage will depend on individual circumstances.

Investing in emerging markets or small companies may be potentially volatile, as these investments are high risk.

The design, text and images are owned, except as expressly stated by members of the Rathbone Group. They may not be copied, transmitted, displayed, performed, distributed, licensed, altered, framed, stored or otherwise used in whole or in part or in any manner without the written consent of Rathbones except to the extent permitted and under the procedures specified in the copyright Designs and Patents Act 1988, as amended and then only with notices of Rathbones' rights.

Rate this page:
Average: 5 (5 votes)

Subscribe to the In the KNOW blog email

Archive