Dear Brothers and Sisters,
Pollution and the exploitation of resources at the expenses of future generations is a sin: in his Encyclical Letter “Laudato Sì” on the Care for Our Common Home, the Holy Father was clear on this point.
Reading from the Encyclical Letter: “The natural environment is a collective good, the patrimony of all humanity and the responsibility of everyone. If we make something our own, it is only to administer it for the good of all. If we do not, we burden our consciences with the weight of having denied the existence of others. That is why the New Zealand bishops asked what the commandment “Thou shall not kill” means when “twenty percent of the world’s population consumes resources at a rate that robs the poor nations and future generations of what they need to survive” (you can read the full text of the Encyclical here: http://w2.vatican.va/content/francesco/en/encyclicals/documents/papa-francesco_20150524_enciclica-laudato-si.html
During the difficult months marked by the pandemic and global lockdowns, the global economy has suffered a severe blow: many people have lost their jobs and many families have found themselves in serious hardship. Yet, as history tell us, from past crises new ideas and new opportunities have been born.
And so here comes a light to brighten such gloomy landscape: renowned analysts and investment companies have highlighted how the post-pandemic period could became a momentum for global sustainability. It has now become pressingly urgent to fight climate change: if this issue is not addressed right now, it is going to be too late, and our beloved planet would be definitively and irremediably damaged.
We could, therefore, say that it was the global threat generated by Covid-19 that prompted us to reconsider priorities, giving the right importance to key issues such as social justice and environmental conservation.
From this point of view, the pandemic must be seen not as a stop on progress in terms of sustainable investments, the so-called Environmental-Social-Governance (ESG), but as a temporary slowdown, after which collective efforts will resume and accelerate, in support of a greener, stronger and more inclusive rebuilding.
A number of indicators already signal this focus shift. For example, global ESG funds saw inflows of USD 4.9 billion in the first week of July 2020, the highest weekly level reached in the past two years, with a USD 68 billion in inflows share from the beginning of the year.
At the political level, governments and institutions around the world are responding to the pandemic by adopting economic stimulus measures more radical even than the ones taken to address the 1929 Great Depression. As massive support measures will shape economies and societies in the coming decades, it is essential that such measures combine short-term economic needs with sustainable long-term goals.
What is certain is that sustainability is now a key and urgent issue. We therefore want to pause on this point to understand from sustainable investment experts which of the criteria used to date, namely the ESG, will be most significant in the near future.
Certainly, the main focus will be on the ‘E’ of Environment, and on climate change specifically. It is not difficult to understand why: the adverse impact of climate change has become increasingly visible and governments are finally showing their willingness to undertake a clear path towards more stringent regulation to address the ongoing effects of climate change.
Experts explain that we will see an increase in green government bond issued over the course of the year and that significant opportunities are already available in responsible investment in the health sector and in the transition from fossil fuels to renewable energy. Over the long term, green bonds will continue to drive the development of a sustainable economic recovery and support the transition to a zero-carbon emission and climate change resilient world.
In terms of public opinion, plastic and its impact on biodiversity has become a main issue. Social unrest and growing populism stemming from human rights concerns have also had an impact on investor choices, increasing attention on the ‘S’, or social component, of ESG criteria, offering greater attention to broader social implications of the pandemic. This change is reflected in the increase in issuance of social bonds – bonds that raise funds for social projects.
In a long-term future perspective, the focus is probably going to become more balanced, based on the interconnectedness between people, the planet and development.
This is exactly in line with the aspirations of the Holy Father in the Encyclical Letter, where it is recommended to pause and consider “some elements of an integral ecology, one which clearly respects its human and social dimensions”.
The Pope’s hope is that integral ecology (environmental, economic and social) will become a new paradigm of justice, because man is connected to nature, which is not “a mere framework” of our life. “We are faced not with two separate crises, one environmental and the other social –wrote the Pope– but rather with one complex crisis which is both social and environmental”. Hence the call to “civic friendship” and solidarity, the damage of which “harms the environment”. An integral ecology therefore “is inseparable from the notion of the common good” and this implies making solidarity choices on the basis of “a preferential option for the poorest of our brothers and sisters”.
Ultimately, one thing is clear: the crisis generated by the pandemic has definitively demonstrated that sustainable economic models are future-proof because they are more stable and better prepared to face change.
We want to reiterate that all our legal, fiscal and property consultancy and assistance activities are based on the principles of ethics and sustainability: so if you are interested in these issues and want to know more, or if you want to be sure that the management of your activities and assets is based on these values, please contact us at our email: firstname.lastname@example.org
We will be happy to give you all relevant information related to the protection of human rights and ethical finance and, if you wish, our team will be able to carry out a first general asset assessment free of charge.
Avv. Federica Loreti
Fiat Lux Legal