Creating impact in a Covid-19 world

Franklin Templeton’s John Levy says the Covid-19 pandemic has taken the world by storm, shedding a light on the growing need for impact investments


John Levy, director of impact, Franklin Templeton

While the pandemic has shocked the world and ignited carnage across markets, it has also proven the importance of supporting society, employee protections and many other ESG principles

Social infrastructure is crucial to the health and vibrancy of communities and these vital assets have become indispensable during the crisis.

These assets seek to improve the quality of social services provided to local communities, while reducing the carbon footprint of the built environment, with examples including hospitals, schools and affordable housing. The pandemic has further proven the importance of these assets, as Covid-19 has created more demand than ever for impact-focused capital. In line with this, asset managers and investors can truly create change and support the economy through infrastructure investment that will not only support pandemic-relief efforts but will create a long-standing impact in society.

The demand for impact investments comes not only from society, but from investors who are seeking to use their money in a way that creates a positive change on the community, while achieving positive returns. Individuals may not have access to help a society as an individual, so social infrastructure investments can provide access to important causes, such as providing rent relief for elderly home care facilities, by funding a built-for-purpose Covid-19 hospital or supplying nursing home and hospital beds to those in need.

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Impact in practice

Aligning investment and impact considerations at every step can be a challenge for investors. One approach is to take the UN’s 17 Sustainable Development Goals (SDGs) as a guide for any investment’s entire impact management system and process. The SDGs outline suggested areas of investing that can help specific causes, all of which are in line with pandemic relief. These goals are more significant now than ever, as the pandemic has created not only a health crisis, but a humanity crisis.

In addition, following these guidelines can create long-standing results that are uncorrelated with volatile markets caused by the pandemic or otherwise. For example, the volatile pricing of natural resources will not have a dire effect on assets that use renewable energy and innovative technology in efforts to stop the effect of climate change.

Investors are seeing the value of putting their money to good work

At the beginning of the pandemic, critics expected investors to deprioritise ESG and impact initiatives as they weathered the market downturn. However, the crisis has only accelerated the need and demand for such investment principles. For example, the pandemic has caused a global health crisis, where empty hospital beds are rare, sanitation issues are on the rise and personal protective equipment (PPE) production is lagging. This burden has been too heavy for governments and societies to handle alone, and impact investors are working to assist with relief efforts.

In addition, impact funds strive to implement clean energy in these new and improved assets, such as specialist Covid-19 hospitals. We have seen an uptick in innovation, with new protocols in these assets being implemented quickly and effectively, such as glass barriers and social distancing protocols being built. On the societal front, many people have lost their jobs and ability to afford housing. Impact funds can help to support societies by providing more affordable and stable housing options. Lastly, education has been at risk, as the pandemic caused schools to close for an extended period. Social infrastructure strives to create quality education and actively respond to the unique challenges posed by the pandemic, such as funding these assets, so they can be adapted to allow students to return to school in a safe and social distancing manner.

We believe, demand for products that care about people and the environment is only going to increase. The pandemic has put these strategies on the radar of investors who were potentially unconvinced beforehand. The green economic plans to kickstart the global recovery will create an increasing amount of opportunities for impact investors to take advantage of.

Investors that are focused on impact are currently well-positioned and we expect this bodes true during the recovery. In the coming years as the world recovers, we expect to see an increase in impact strategies as well as a continued, strong interest from investors.

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