Never waste a crisis: Lessons learned from COVID-19 for sustainable investment strategies

Panel discussion takeaways from “Sustainable Investment Strategies Post-COVID”

    Dr. Giulio Boccaletti

    Dr. Giulio Boccaletti Honorary Research Associate at the Smith School for Enterprise and the Environment,University of Oxford

    Kim Catechis

    Kim Catechis Investment Strategist,Franklin Templeton Investment Institute

    John Levy, CFA

    John Levy, CFA Director of Impact, Franklin Real Asset Advisors

    Mary Jane McQuillen

    Mary Jane McQuillen Portfolio Manager & Head of ESG,Clearbridge Investments

    PREVIEW

    Franklin Templeton and Green Templeton College, University of Oxford, recently launched a three-part series of virtual academic sessions and investor panels focusing on “The Way Forward: Navigating the COVID Challenge.” Academics from Green Templeton College will be sharing and debating their latest research with Franklin Templeton investment professionals, with the hope of delivering actionable insights. Here are some of the key takeaways from the second session on “Sustainable Investment Strategies Post-COVID” held on March 23, 2021.

    KEY TAKEAWAYS

    • Governments around the world responded quickly to the COVID-19 crisis in terms of providing much needed fiscal support—demonstrating signs of the political will to respond to global emergencies. The same type of response is necessary to address the climate crisis.

    • The world’s problems are addressable through markets, from which profit seeking companies can create scalable solutions, while simultaneously doing good.

    • Impact investing continues to create attractive long-term investment opportunities, particularly in sectors associated with renewable energy, organic food production and social infrastructure real estate.

    • Real opportunities are in companies addressing the future, not those anchored in the past.

    • Building back better will also involve the surface of the earth, in a literal sense. Mitigating carbon emissions will be landscape intensive, transforming the surface of the planet in tangible and visible ways.

    • Tangible sustainability metrics are necessary to stress-testing investor’s portfolios against macroeconomic risks associated with the significant climate transition that lies ahead.

    • All participants—governments, public institutions, the corporate sector, and consumers—have key parts to play in building sustainable economic growth.
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    In part two of the series, “Sustainable Investment Strategies Post-COVID,” panellists met virtually to discuss sustainable investments and the climate crisis, they assessed recent lessons learned by governments, the corporate sector, and the general public. The first session of the series focused on “Framing the COVID Challenge” and the final session will tackle “Measuring Progress towards a Better World.” This summary comes from the Franklin Templeton Investment Institute.

    WHAT ARE THE RISKS?

    All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values-based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating. Investment in the commercial real estate sector, including in multifamily, involves special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector. Investments in infrastructure-related securities involve special risks, such as high interest costs, high leverage and increased susceptibility to adverse economic or regulatory developments affecting the sector. Investments in fast-growing industries, including the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments. Special risks are associated with investing in foreign securities, including risks associated with political and economic developments, trading practices, availability of information, limited markets and currency exchange rate fluctuations and policies. Investing in the natural resources sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector. Diversification does not guarantee profit nor protect against risk of loss. Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.