The 'butterfly effect' and Covid-19: Implications for sustainable investing

THE reverberations of the Covid-19 pandemic can be imagined through the lens of Edward Lorenz's "butterfly effect", visual imagery 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 has spread rapidly and globally through travel routes and supply chains. There's also scientific evidence that the spread of diseases can be exacerbated by prominent, interconnected sustainability issues including rising temperatures, deforestation, and poor sanitation.

The idiosyncratic, non-linear nature of systemic risk from this event makes it challenging to predict where, when, and to what extent the effects will be felt, but we're closely monitoring the near- and longer-term consequences on sustainable investing.