The coronavirus pandemic is already strengthening the case for responsible investing

Since the outbreak started, companies that score highly on environmental, social and governance issues have outperformed the rest - that trend will be more pronounced once the disease is under control

Sustained pressure from campaigners and shifting public opinion has made policymakers act - large investors will follow (REUTERS)

The UK's largest private pension manager has said it will stop investing in tobacco, controversial weapons and thermal coal because it has found these sectors to be "financially unsuitable" in the long term.

With some £70bn assets under management for hundreds of thousands of higher education workers, the Universities Superannuation Scheme (USS) said it has reassessed the long-term future of a number of sectors.

That includes firms that make weapons which cause excessive and disproportionate harm to civilians like cluster munitions, white phosphorus and land mines.

What is significant is that this is not a decision made on ethical grounds but on financial logic. The exclusion of these investments will increase returns, USS argues.

USS said that the “traditional financial models used by the market as a whole to predict the future performance in these sectors had not taken specific risks into account”.

More and more money managers, controlling trillions of pounds of assets, are starting to agree.

The argument is fairly simple. Thanks to sustained pressure from campaigners, and shifting public opinion, attitudes among politicians and regulators to climate-damaging, human rights-abusing activities are hardening.

Therefore the direction of travel on policy is clear. Rules will only get tougher, making things more difficult for companies in those sectors linked to these problems.

It is distinctly possible that this could accelerate as a result of the turmoil caused by the coronavirus pandemic, particularly with regard to the environment and public health.

Since the coronavirus outbreak came to the world's attention in January, stocks of companies with strong credentials on three key sets of issues - environmental, social and governance (ESG) - have performed much better than the wider market.

One study by giant US asset manager Fidelity found a "remarkably strong linear relationship" between better ESG performance and higher returns.

The oil and gas industry has been battered by the pandemic which has caused millions of people not to travel. The aviation sector is on its knees and most analysts do not expect demand to return to its pre-crisis peak for a few years. Some believe it will never reach the same heights again.

After past crises, environmental issues have been pushed to one side in the interests of getting the economy back on its feet but there is reason to believe that this time will be different.

There is a much more significant groundswell of opinion behind taking significant positive action on the climate.

There have already been moves in cities like London and Milan to convert large sections of roads for cycle lanes.

The idea of a Green New Deal that would see massive public investment in cutting emissions has been knocking around for a while now but the arguments in favour are stacking up.

Economies damaged by the impacts of the pandemic will need unprecedented government stimulus and borrowing rates are at historic lows. Millions of people will be out of work and there are likely to be few vacancies. After a decade of stagnant wages and cuts to public services, there is no appetite for further austerity which, most agree, would only make a bad situation worse. The backdrop to all of this, once the pandemic is under control is, of course, the existential threat of climate change.

There is a pervasive myth in some parts of policymaking circles that government intervention tends to "crowd out" private investment in industries. In fact, there is far more evidence that government investment does the opposite, encouraging private money to go into areas that seemed too risky or offered unattractive returns before. The pharmaceutical and defence industries are prime examples of this.

Any green stimulus package is therefore likely to "crowd in" new money from the private sector to those sectors that will benefit most: well-established technologies like wind and solar, as well as those at an earlier stage of development like battery technology.

If the logic around responsible investing was not clear before the crisis, it surely will be after it.