A recent BlackRock survey1 revealed investors plan to double their allocations to sustainable assets over the next four years. In fact, 20% of respondents polled by the firm said the pandemic had accelerated their sustainable investing intentions, with climate-related risks considered the top portfolio concern for nearly nine out of every ten investors.

Sustainable-focused funds also saw record inflows in both Europe2 and the US3 in 2020. Meanwhile, the number of signatories to the United Nations-supported Principles for Responsible Investment (UN PRI) climbed 29% in the space of a year, rising to 3,038, according to the network’s 2020 Annual Report.

The pandemic highlighted the vulnerability of people, businesses and markets to economically destructive events that are difficult to predict and impossible to fully insulate against. However, it also emphasised what can be achieved on a global scale when we work together in order to tackle threats to our survival.

It should perhaps not be surprising then that COVID-19 has ignited rather than dampened enthusiasm for ESG matters. There are clear parallels between the pandemic and the risks posed by environmental issues such as climate change.

COVID-19 has already been described by some investors as the first sustainability crisis of the 21st century4. It is tough to disagree; society’s impact on the environment is directly linked to the spread of new infectious diseases5.

But the pandemic is fundamentally a humanitarian crisis, and one of the key trends to emerge has been a renewed focus on the ‘S’ in ESG. Historically, the ‘social’ pillar has arguably taken a backseat compared to environmental issues as sustainability awareness has grown, but COVID-19 exposed many persisting social and economic inequalities in communities across the world.

This pushed a number of material social issues to the top of boardroom agendas, and businesses quite rightly came under the spotlight for how they treated staff, customers, suppliers and other stakeholders during the crisis.

We are pleased to report that the companies we invest in demonstrated many of the behaviours and practices we would expect from well-managed, responsible businesses that take a long-term view. Not only did they act quickly to ensure the health and safety of their employees, customers and clients, but many also provided key goods and services that were integral to supporting businesses, homes and communities throughout the crisis.

Moreover, the vast majority of our companies and funds continued to make notable progress on ESG-related issues during this time, despite external market pressures – which we discuss in more detail later.