Capital post-COVID 19: a new normal?

Apr 19 2020 · 6 minute read

On March 16th, the Snowball team had just finished a full day strategy discussion in north London. That was our last day together: at 6pm, James, one of our board members with whom we had met only a few days earlier, wrote saying he had CV-19. The fear was James would have infected me and that I would have infected Abi, who was afraid for her older father, whom she had just visited. The chain of action and reaction was visible – and it created panic.

Back in 1979, when James Lovelock published “Gaia – a new look at life on Earth”, the scientist talked about how fine-tuned the earth is in its chemical balance – so that even small changes could yield an inhabitable planet. In Greek mythology Gaia is the ancestral mother of all life: the primal Mother Earth goddess. In Lovelock’s book Gaia is the story of a planet that is alive, connected and self-regulating in a fragile balance – and thus partial to disruption and loss of life.

One of the things this pandemic has allowed us to see with greater clarity is that interconnectedness – and how we can’t dissociate our actions from consequences which may be many steps removed, but are still very influential. These consequences are often more intricate and interdependent than we know or give them credit for.

As we stay confined in our homes (and we are the lucky ones who have a home) we lament the freedom lost and crave to ‘go back to normal’. But, really, we can’t go back to normal: normal was what got us here in the first place. We need a new normal, we need a new system that takes into account the fact that what happens at a wet market in Wuhan could kill Abi’s father in north London.

We are largely ignorant of these interdependencies – how our desire for more (and cheaper) salmon has led to the depletion of fish stocks, but also to deforestation in South America, as aquaculture is increasingly dependent on soya for fish feed. Or how Europe used to ‘resolve’ its waste problem by shipping it to China (only for a lot of it to end up in our oceans). How our fervent desire for cheap clothes ends up in a supply chain filled with child labour.

However, nothing is as disconnected as capital. Capital can move fast across asset classes and between opportunities until we lose track of the connection between our investments and the broken systems they support. This is because, in investing, we only look at risk and financial return, without accounting for the third and fundamental dimension of impact. How does this money hinder or nurture our planet’s environment and communities?

One of the most famous stories about this disconnect is that of George Soros, known as "The Man Who Broke the Bank of England" because of short selling US$10 billion worth of pounds sterling, which made him a profit of $1 billion during the 1992 Black Wednesday UK currency crisis. The same man is a prolific philanthropist. Similarly, trillions are invested perpetuating a form of capitalism that is killing us all. It requires that financial markets extract human and environmental resources and convert them into financial returns. Whilst in theory humans and the environment are protected by government through regulation, in practice this is not happening because financial markets have, to a substantial extent, captured the policy making process. This has led to a societal and planetary emergency. Many charitable foundations invest their billions solely with the goal of profit maximisation, to generate money then given as grants – often trying to remedy the very problems their investment helps finance. For clarity, I think philanthropy is great and very much needed – my criticism is only with the disconnect. This pandemic is telling us we can’t afford this disconnection any longer.

Everything we do has an impact – positive or negative. How we invest our money has impact – so don’t think of impact investing as a separate category of assets: see every asset generating one impact or another. It is up to you which one. Positive impact investments are intentional in contributing to solutions for people and the planet, additional to what might have happened anyway and measurable so that improvements are tracked, and stakeholders involved and informed. And they seek to constantly monitor, get real-time feedback and improve.

There are many organisations working hard to maximise the positives and minimise the negatives in a systemic way: Share Action, FAIRR, Social Finance, New Profit, Impetus – and many more. Investing whilst generating a positive contribution for society and the planet is a choice. It is possible to be profitable whilst employing autistic people, whilst bringing electricity to remote areas in Africa and whilst improving healthcare services. Snowball has been doing this successfully for the past three years – and our investment strategy has been validated by the resilience of our portfolio in this downturn.

Capital is, more often than not, the glue between action and reaction. Under-investment in health systems, in social resilience, and in basic infrastructure will be clearly shown in this pandemic, which has not yet hit the Global South in a meaningful way. Whilst the virus hits both rich and poor, young and old, we know that it will be the old, sick and poor who are most likely to perish. The dimensions of the disconnect will be felt when frail social contracts crumble.

Whilst these seem to be problems for governments to solve, the investment choices which interact with these social and environmental issues already exist. Yes, they are not yet widely available (watch this space!) but there are choices each of us can make with how we use our money – understanding where our pension money goes is a good start. We can also choose what we buy in the supermarket, our clothes or how we save or invest: this is one of the main acts of influence we can have. Capital is a great contributor of the system failure we are witnessing. And it can, inversely, be part of the solution. By its very nature, Snowball’s portfolio is de-coupled from these systemic risks. In this crisis, our investments have been more resilient and counter-cyclical, whilst at the same time helping the homeless, funding renewable energy, and financing micro-businesses.

I sincerely hope that, when the crisis is over and the fear subsides, we can have the strength and courage to create a new normal. Courage to believe it is possible to let go of past beliefs, structures and systems – and allow a new reality to emerge: one which sustains and nurtures life and communities.

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Daniela Barone Soares, CEO, Snowball
Daniela Barone Soares, CEO, Snowball