Coronavirus and the Butterfly Effect: Six implications for sustainable investing

How to invest sustainably in a post-Covid-19 world

The reverberations of the Covid-19 pandemic can be imagined through the lens of Edward Lorenz’s 'butterfly effect,' visual imagery that the MIT meteorology professor used to suggest that the flap of a butterfly’s wings might indirectly cause a tornado, which represents how small change can have large consequences.

The current crisis is said to have started in a provincial market in China, before spreading rapidly round the world through travel routes and supply chains. There is also clear scientific evidence that the spread of diseases can be exacerbated by rising temperatures, deforestation, loss of biodiversity, and poor sanitation - all of which are prominent, interconnected sustainability issues. The idiosyncratic, nonlinear nature of systemic risk from events like a pandemic makes it challenging to predict where, when, and to what extent the effects will be felt, but we are closely monitor...