Illustration of house and wind turnbines in front of hill landscape

Illustration of house and wind turnbines in front of hill landscapeIn the U.K. there are signs of growing support for a green recovery from Covid-19. One of the findings of the recent Progeny survey showed that 1 in 10 would welcome the introduction of a carbon tax, as one of a number of potential mechanisms to help cover the cost of the pandemic, while doing some environmental good at the same time.

If the Government really is to inspire the country and make good on its aim to ‘Build Back Better’ from the crisis I believe that a focus on sustainability will be key to its success. What’s more, it will require all participants in the economy – businesses, households as well as the government themselves – to be fully engaged and committed to the sustainability drive.

Key component of financial planning

At Progeny, a culture of sustainability runs deep and can be seen in myriad ways. From an innovative next generation investment solution, Bravo ESG, to a drive to achieve B Corp status. From an emphasis on Corporate Social Responsibility, to creating the next generation of advisers through our Adviser Academy.

Sustainability is also a key component of financial planning and underpins many of the principles of financial advice. Building sustainability and resilience into the financial lives of our clients is at the core of what we do.

This is achieved by an unwavering focus on the long term and the robust analysis and research process that informs holistic financial planning. For example, lifetime cashflow modelling allows us to explore multiple ‘what if’ scenarios with our clients to help them develop a robust financial plan that takes into account a range of eventualities.

For individuals

One of the lessons of the crisis, at an individual level, is that people with more savings were better positioned to navigate the waterfall decline in the markets early last year.  A surplus of savings enabled them to weather the storm and avoid withdrawing from their portfolios when markets were at trough valuations in March 2020.

The crisis equally exposed the broader lack of financial protection and insurance against adverse outcomes amongst the population, which is the bedrock of financial planning.  Those who had financial protection were better placed to withstand the conditions. We were reminded of a fundamental truth that we often forget which is that often our biggest asset is neither our house, our investments or our possessions, but our capacity to earn an income.   As this past year has shown us, the importance of having a robust and actionable plan B when needed cannot be under-estimated.

For businesses

At the corporate level, sustainable practices were once perceived as inconsistent with the profit-maximising principle. That notion has long been consigned to the history books and the pandemic itself has shone a spotlight on global supply chain deficiencies.

A case in point is semiconductor shortages forcing car plants to shut down for weeks. This shortage of computer chips, used in cars for anything from brakes to seats, is the latest example of the risk of relying on “just in time” production.

A greater focus by businesses on sustainability can address weaknesses in supply chains. This could mean, for example, diversifying the number of third-party fulfilment partners or reducing dependency on overseas manufacturers and suppliers. Companies are now increasingly addressing sustainability across their operations, including their suppliers, distributors and consumers.

Evidence shows that companies who successfully balance profit with purpose and achieve the B Corp accreditation gold standard have enjoyed faster top-line growth, higher expectations for future growth, stronger levels of innovation and more robust governance processes[1].

For the future

The next decade is likely to be one of the most consequential in human history as global leaders address the climate crisis with an urgency not seen before. There is a need to build more inclusive economies coming out of this pandemic; to deliver health care and education in more effective and affordable forms; and to transform food systems, transport networks and power systems.

The crisis has highlighted sustainability issues that must be addressed, such as weak supply chains, and a fundamental lack of resilience in many of the institutions and businesses on which we rely. This has resulted from years of underinvestment and a lack of proper preparation for an economic and health crisis on such an epic scale.

Economic recovery from the pandemic must be combined with sustainability at all levels – national, political, commercial, domestic and individual – if we really are to build back better.

[1] Autumn 2020 survey of the 332 UK B Corps.

This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.

Past performance is not indicative of future results and the value of investments can fall as well as rise. No representation is made that the stated results will be replicated.

Richard Gillham

Financial Planner

Richard joined Progeny in January 2021, following more than 20 years in investment management, primarily with Legg Mason.

Learn more about Richard Gillham