Change in considering ESG issues due to COVID-19 2020

The coronavirus outbreak had a huge global impact, leaving no industries unaffected - including the investment industry. In March 2020 all major financial markets worldwide saw sharp declines, with several impacts on the behavior of many investors . While many of these impacts could be considered negative, one area where a larger share of investors assumed positive outcomes from COVID-19 was for environmental, social and governance (ESG) issues. The positive effects are believed to be a stronger consideration of ESG issues, reconsiderations of ESG issues, and to think of it as more important than before (especially the social component).

Can the Covid-19 outbreak have negative effects for ESG investing?

Although most people assumed positive effects of the outbreak on ESG considerations, around ten percent assumed that less importance would be paid to ESG issues because of the coronavirus pandemic. This is likely to be due to current obstacles investors see with ESG investing: Some investors assume that ESG investing comes with higher risk or lower returns, or are likely to underperform, which are financial risks that investors might be less willing to take after a period of market volatility.

In what other ways did the coronavirus change investment behavior?

Aside from potentially shifting attention away from ESG factors, investors were also impacted by the coronavirus in other ways. As a result of the pandemic, many investment portfolio changes were made, especially by younger generations. While only a small share of millennial investors kept the same level of risk in their portfolio, most of the silent generation (71 years and older), did not change the risk profile of their portfolio despite the outbreak. When looking back, the question of whether to change their investment portfolio was the most important lesson learned according to investors in 2021: Avoid emotional investment decisions.