JEFF PRESTRIDGE: From a financial perspective (my area of speciality), Covid has wreaked carnage – but there are signs of hope in battle against virus
Slowly, but surely, we are turning a corner. We are winning the battle against the nasty mutating coronavirus, although it will not go away in a hurry and will continue to take too many cherished lives for a while yet.
From a financial perspective (my area of speciality), coronavirus has wreaked carnage. It shrank the economy by nearly ten per cent last year and has resulted in far too many good people losing jobs – and far too many small businesses (the heartbeat of our economy) being forced to close.
Sadly, the job losses and business closures are not over yet – and the number of people left financially vulnerable as a result of lockdown and national restrictions is likely to rise in the coming months. Last week, the City regulator said one in four adults are struggling with low financial resilience, brought about by over-indebtedness, insufficient savings and low (or erratic) earnings.
Moving on: As more people get protection from coronavirus, the nearer the day gets when workers can return to their place of employment and the economy can go into growth mode
But, amongst all the doom and gloom, there are glimmers of hope on the horizon which point to a brighter future.
For a start, the country’s vaccination programme has been a resounding success, resulting in 15million people being vaccinated already (much to the chagrin of the dithering French government).
As more people get protection from coronavirus, the nearer the day gets when workers can return to their place of employment and the economy can go into growth mode.
Then, there’s the pent-up spending power within many households that is ready to be unleashed as soon as the Government starts to lift restrictions, details of which we will learn more about in just over a week’s time.
Andy Haldane, chief economist at the Bank of England, believes the economy will bounce back like a ‘coiled spring’ this year. This growth, he says, will be fuelled in part by the spending of a big chunk of the savings that many households have amassed since the pandemic first bit. Savings that consumers are itching to spend on a new car, a smart TV or a meal at a restaurant in town followed by a trip to the cinema.
Combined with more spending by business and Government, Haldane says: ‘The recovery should be one to remember after a year to forget.’ Cheering words on a day when smiles and romance – rather than frowns and misery – dominate.
Ethical, green and sustainable investments are of the moment – and rightly so as we wake up to the fragile state of our glorious planet (if in doubt on the fragility front, do listen to entomologist George McGavin on Radio 4’s Desert Island Discs).
Yet in a sector where there is subjectivity over what constitutes an ethical stock, it’s imperative the managers of these funds are open and honest over what they invest in – and justify their selections. Such an approach enables investors to make fund choices in line with their personal ethics.
Take, for example Kingspan, a company that supplied some of the insulation materials used in the (fatal) refurbishment of Grenfell Tower in London.
At the ongoing inquiry into the fire that killed 72 people, the company’s representatives have been questioned over the combustible K15 insulation boards that were used in the tower’s cladding – boards it manufactured and claimed were safe.
Kingspan has been a company whose shares have long been held by ethical funds because of its energy-efficient products. But the inquiry has led to a division of opinion.
Some, such as investment manager Montanaro, have disposed of their holdings stating ‘our standards on ESG (Environmental, Social, and Corporate Governance) have to be that much higher than others’. Many, including Liontrust, have yet to do so, reserving judgment until after the inquiry concludes.
I will leave you to decide who is taking the ‘right’ ethical stance. But as Alan Miller, chief investment officer of SCM Direct argues, all ethical funds should be required to show how they go about judging a company’s ethical credentials.
Furthermore, they should reveal to investors every month the stocks they hold so that clients know how their money is being invested. Anything less, he says, is not ethical.
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