We are of course well aware of the human lives being taken prematurely by the virus, and of the financial costs of the lockdown introduced in response to it. Less widely discussed have been the economic implications for the world’s most vulnerable people.
Human costs of the pandemic
In the past decade, the share of the global population living in extreme poverty – defined as living on under $2 a day – steadily fell, from over 10% to just over 8%.
The pandemic has stopped this trend in its tracks. Current forecasts estimate that between 49 million and 420 million people could be pushed into extreme poverty as a result of the virus.
This should be little surprise. After all, the likelihood of suffering from disease, and of a longer-lasting economic impact from the virus and its damage to global economic growth, will be highest among the world’s poorest.
Developing countries will find it much harder, if not impossible, to borrow and spend money in the same way as richer governments have to cushion the blow dealt to economic activity, and therefore to household incomes.
‘Green shoots’ for the environment
Perhaps the only silver lining from this terrible event is that it could prove a turning point in the battle against irreversible human-led climate change.
In April 2020, amid stay-at-home policies across swathes of the planet, greenhouse gas emissions were almost one-fifth lower than a year earlier. Daily carbon dioxide emissions fell to levels last seen in the 2000s.
While a reflection of bad news, this reduction is, in itself, good news. The success of alternative business models that make greater use of remote working and local supply chains, albeit through circumstance rather than choice, could accelerate changes that are needed to set global emissions on a downward trajectory.
Optimism may be tempered, however, by indications that the drop could be a blip. Indeed, emissions rose again in May and June 2020 as parts of the world re-awoke from lockdown.
While noticeably cleaner air has been welcome, the challenge remains to cut emissions each year to limit global average temperature increases to well below 2°C above pre-industrial levels, as set out in the global Paris Agreement on climate change in 2015.
The opportunity to ‘build back better’
As we recover economically from the pandemic, it is an opportunity to consider how we might recast the model for creating shared prosperity. In other words, how we can “build back better”.
The path we choose in the coming months will have important implications for generations to come. We must ensure the recovery is sustainable and fair, including measures that support the climate and alleviate poverty. The world also needs to double down on protecting nature, particularly given the links between biodiversity loss and the risk of viruses spreading from animals to humans.
We and other investors can play a role in supporting governments to implement policies that support a green recovery. In turn, we believe it would actually help long-term investors. In June 2020, M&G Investments announced its support for the Institutional Investors Group on Climate Change’s letter calling for a sustainable economic recovery from Covid-19 in the EU.
I believe impact investing can be at the centre of such a recovery. By investing in companies that address the world’s most pressing social and environmental challenges, we can not only pursue financial returns, but also aim to play a part in supporting a more sustainable and fairer future.
The views expressed in this document should not be taken as a recommendation, advice or forecast.
The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.
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