Investing With Your Values Proves Resilient During Coronavirus Pandemic

Investing With Your Values Proves Resilient During Coronavirus Pandemic

The COVID-19 crisis has forced entire countries into lockdown, induced widespread panic, triggered economic meltdown, and revealed our society’s profound vulnerability to systemic shocks. But rather than give in to a collective desire to “return to normal,” now is the time to redefine what “normal” is. While the immediate health crisis continues to demand a forceful response, it is also essential that we look to the long term. At one level, this means now is the time to force a shift in our economic thinking, from a system that extracts, exploits, and exhausts to one that regenerates, replenishes, and restores.

Fortunately, this kind of thinking is already at the heart of global social movements, including the growing socially responsible and impact investing movement. 

“In such a stressful and uncertain time there’s a predictable reaction to think, ‘all the good stuff we were working for needs to get pushed to the back burner now,’” says Corey Klemmer of Domini Impact Investments. “It’s predictable that people would feel a push to make money in old ways, externalizing costs onto the environment and society just long enough to get our financial feet under us again. But if we can find a moment to be still and let all the fear, stress, chaos, and pain of this crisis subside, the deeper lesson is abundantly clear. Perhaps the spread of the virus could not be stopped, but the relentless pressure we put on ecosystems around the world makes this and future pandemics all but inevitable.”

A look into the root causes of the COVID-19 outbreak has revealed that, like some 60 percent of existing infectious diseases and 75 percent of emerging infectious diseases, this virus is “zoonotic,” meaning that the virus jumped into humans from animal hosts. Scientists attribute this leap to the large-scale destruction of forests and biodiversity, largely for extractive activities like logging, mining, and agribusiness, and indigenous peoples have known for a long time that forest destruction could unleash disease. In an Earth Day missive, UN Secretary General Antonio Gutteres wrote, “Land use change and deforestation are primary global drivers of biodiversity destruction. They heighten the risk of further pandemics by bringing humans into contact with new threats such as the coronavirus. Every species lost is an irreversible event that decreases the resilience of natural and human systems on a permanent basis.” 

Deforestation of course is also a major cause of global heating — indeed, if deforestation were a country, it would be the world’s third largest greenhouse gas emitter after the U.S. and China. Deforestation is also strongly linked to an epidemic of violence against human rights defenders — a tragic consequence of our economic system that is only getting worse as countries from the Amazon to Indonesia increase forest destroying activities and land defenders on lockdown become “sitting ducks” in the words of Michel Forst, UN Special Rapporteur on the Human Rights Defenders. 

The global deforestation crisis is rooted in and exacerbated by inequity, between rich and poor countries, but also between genders, with women facing the increased burden of extractive development projects in the forest frontier. As Rita Uwaka of Friends of the Earth Nigeria told me in a recent interview, “African governments see palm oil as the new black gold, and smallholder farmers, forest dependent peoples, rural communities, and fisherfolks suffer huge impacts, with differentiated impacts on women and girls.”

There have been growing cases of harassment and sexual violations against women around industrial plantation areas in Africa,” Uwaka reports. “Women who speak out sometimes suffer more violence and intimidation. But in recent times, these consistent violations have compelled many women to break the silence.”

Seen in broad terms, then, the global deforestation crisis is not merely about saving trees, or even about planting trees — it is a systemic problem that sits squarely at the nexus of climate change, gender inequality, biodiversity loss, public health, global development, and overconsumption.

That’s where investing your values comes into the picture. While systemic change requires action from regulators in Washington and the Lords of Finance on Wall Street and the City of London, everyday investors can do their part as well. In fact, for reasons ranging from the public health crisis to the climate crisis to the economic crisis, there has never been a better time to invest with your values.

An effort to “defund deforestation” — and associated biodiversity and human rights impacts — has been quietly growing for some time. Earlier this year, As You Sow and Friends of the Earth U.S. expanded the web-based toolDeforestationFreeFunds.org — to help ordinary investors take on the global deforestation crisis by finding out if their investments, including 401(k) plans, support companies contributing to destruction of the world’s forests. The site uses real-time data provided by Morningstar to show how thousands of US mutual funds may be linked to public companies that produce, trade, and finance palm oil, cattle, timber, pulp and paper, soy, and rubber — the six commodities that drive the lion’s share of global deforestation.

“It sends a really important signal to the market that there is demand for investments that don’t destroy the forests,” says Klemmer, who routinely engages with deforestation-risk companies in her role as head of engagement for Domini. “Those signals matter. And protecting forests matters to all parts of the market and society — from the issues of zoonotic diseases and biodiversity to the vaccines derived from genetic materials in the forests to the intangible but essential value of experiencing nature.”

DeforestationFreeFunds.org is part of a suite of Invest Your Values sites, including Fossil Free Funds, Weapon Free Funds, and Gender Equality Funds, that allow people to “vote with their dollars.” By using the data on the site, investors can take their money out of climate-destroying companies and invest in funds aligned with their values that can earn similar or even better financial returns. The websites also feature an action toolkit that gives advice on how to speak with your financial advisor for individual investors or human resources or plan administrator for employees with a 401(k) plan. The toolkit provides step-by-step instructions, including a sample letter.

Prudent investors out there may ask, with the economy in an apparent death spiral, is now really the time to invest your values? The answer, it turns out, is a resounding yes.

Morningstar reported recently that sustainability funds are proving to weather the market crash much better than conventional funds: “Like all equity funds, sustainable equity funds suffered sudden and large losses during the first quarter of 2020 because of the coronavirus pandemic, but they held up better than conventional funds. Seven out of 10 sustainable equity funds finished in the top halves of their Morningstar Categories, and 24 of 26 environmental, social, and governance-tilted index funds outperformed their closest conventional counterparts.”

Another study by the Man Group, a global hedge fund group, affirmed that the Covid-19 downturn will not stop the momentum of  sustainable investing. “Some of the driving forces behind responsible investing are very much long-term structural drivers, not short-term cyclical drivers,” the study notes.

It shouldn’t be surprising that stocks oriented towards sustainability would be more resilient than conventional stocks. “A feature of sustainable funds is, of course, their emphasis on companies that have performed well on various ESG (environmental, social, and governance) criteria,” Morningstar wrote. “These tend to be companies that attend to their environmental challenges, treat their stakeholders well and govern themselves in an ethical way. Many such companies are proving to be more resilient during the crisis in which we now find ourselves. They are the quality companies of the 21st Century, and quality companies tend to hold up better than their lower-quality counterparts in difficult markets.”

Domini’s Klemmer takes the argument a step further to highlight systemic risks: “If our investments generate returns by extracting value and shifting costs onto society and the environment, we will continue to face crises like this one. We have the power, through our investments, to lift up companies that are trying to build better and stronger social and environmental systems. It’s essential that we use our voice as investors to call for sustainable and shared value creation and to help companies along in their journey to get there.”

“Ultimately, people want to be human in the middle of this,” says Klemmer. “I think overwhelmingly people want to help, to be part of the solution. Aligning your investments is one way to do that.”

As You Sow’s Invest Your Values suite of tools recently won Fast Company’s World Changing Ideas award for the impact investing category.

Jeff Conant is the senior international forests program manager at Friends of the Earth US.