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Zain Jaffer headshot

When The Dominoes Fall: How The Twin Crises of 2020 Are Transforming Clean Investing

By Zain Jaffer
Clean Investing City Highrise and Nature

Part progress and part panic, the first three quarters of 2020 brought on the compounding effects of the novel coronavirus pandemic combined with the increasingly urgent state of the global climate emergency. Among other things, this year has been a lesson in interdependence. The reduction of corporate, travel, and social action culminated in signs of environmental reprieve, and people around the globe caught their first breath of real fresh air, their first un-polluted ride on the freeway, or their first glimpse at a star-studded, bright night sky.

But experts are urging the public to understand those signs as temporary and to contemplate the ways in which a warming planet creates the conditions that promote a viral outbreak. Seasons are lengthening, and the geographic range of transmission follows suit. 

As business owners, investors, and consumers alike reconsider their routines and rebuild their new normal from the bottom up, now is an opportune time to set a positive chain reaction in motion. If our collective COVID-19 management involves taking on more environmental responsibility — whether in a portfolio, a building design or a simple commute — the chances of a repeat outbreak are mitigated, and the global devastation of the coronavirus pandemic might at least begin a process of meaningful, lasting change.

Changes in consumer behavior: Reward across the board

Better acquainted than ever with the fragility of public health and safety, and the ways in which the actions of today feed the outcomes of tomorrow, consumers are shifting their behavior in decisive and tangible ways. First, transparency has become a non-negotiable. From the brands with which they place their dollar to the buildings they call home, consumers are increasingly basing their purchase decisions on sustainability solutions.

The change is especially apparent in the real estate market. Employers and residential tenants are requesting Global Real Estate Sustainability Benchmarks (GRESBs), a sustainability assessment for real estate, and landlords across multiple sectors are noting an increase in inquiries regarding the Well Building Standards. Further, investors that sculpt their portfolios around the GRESB standards are seeing outsized returns in the market.

In fact, clean investing is garnering exceptional returns across nearly all market sectors. An analysis conducted by Morningstar on the first quarter of 2020 demonstrated that clean investing and investments tied to environmental, social and governance (ESG) metrics were outperforming their industry peers by staggering margins. Sustainable equity funds were over-represented in the top quartiles of their respective categories, and 66 percent of sustainable funds ranked in the top half of their sector regarding return on investment. 

Change can be seen in spades across market sectors. Building owners are conducting audits and engineering clean solutions to existing energy leaks. Investors are looking ahead, sculpting their portfolios to represent environmental initiatives and reducing their carbon footprint. Consumer awareness is at an all-time high and, most importantly, capital reward is aligning with the ethical right choice.

The human side of sustainability

It can’t be neglected that the global public has undergone a public health crisis. Many people remain in the wake of loss, grief and economic insecurity. People have taken a step back from the bustle of daily living, and reconsidered the parts in their routines that cost them mental energy, compared to the aspects of their day that provide them with meaning. When it comes to mental health support and sustainable corporate practices, expectations have risen, and rightfully so. Gone are the days of viewing mental health as renewable energy.

Again, this mass-scale shift in behavior and expectation is providing opportunity for investors, building owners and employers. Corporate offices that incorporate green space, advanced fitness facilities and dedicated meditation space are seeing an uptick in demand. Philanthropic brands that emphasize fair-labor and employee-first company cultures are increasingly occupying the attention of consumers. For investors that are focused on both the ethics and the returns of their portfolios, the human side of sustainability can’t be overlooked.

The COVID-19 pandemic is an inflection point for new practices. Despite widespread despair and disruption, some changes have been made for the better. Due to shifts in consumer priorities, environmentally responsible portfolios are seeing huge economic reinforcements. As a moment of opportunity and a matter of life or death, the time for change in the market is most certainly now.

Image credit: Chuttersnap/Unsplash 

Zain Jaffer headshot

Zain Jaffer is an entrepreneur and the CEO of Zain Ventures, an investment firm with more than $100 million in assets under management. Zain Ventures is active in a variety of commercial real estate initiatives across the United States with a current portfolio of 21 projects across 11 states and Washington, D.C.

Read more stories by Zain Jaffer