Bob Dannhauser, Senior Advisor to TIIP, reflects on his experience investing in the age of the coronavirus pandemic in a piece on NASDAQ. The piece, “A New Appreciation for Risk,” has Bob considering what the fallout from the pandemic will be, and how it will change investing long-term. He says events like the pandemic and climate change illustrate the need for investors to pay more attention to “systemic risks”:
Investors have some thinking to do as well about their exposure and potential contributions to systemic risks like pandemics. When Mark Carney was Governor of the Bank of England, he referred to the “tragedy of the horizon” in that climate change would impose costs over a timeframe that exceeded the planning horizons of most investors, reducing the motivations for investors to factor in the changes ahead. And indeed, one plausible fiduciary argument has been to discount climate change in favor of short term economic opportunity on the theory that all that matters is investment returns for beneficiaries, without addressing whether the corrosion of all that undergirds the financial markets should be reflected in our decisions…
The coronavirus pandemic has rudely intruded on our planning horizons in ways that climate change won’t (in the near term) but it should demonstrate clearly to us how dramatically our worlds can change. As we emerge from this crisis, ESG analysis will never be more important. We should go beyond analyzing the damage to the economy that this crisis has perpetrated, and understand how companies’ strategic and tactical choices affect the shifting foundations underpinning the systems we rely on for economic and investment profit.
Read the full article here.