If, as you ponder what life might look like beyond the current traumas and damage of the COVID-19 pandemic, you also find yourself asking what lessons of value may have been learnt from the crisis, you are certainly not alone. This train of thought has been preoccupying the minds of business and political leaders (and commentators) across the globe. It has been particularly dominant among those considering how we might plan to build greater resilience in future, particularly when it comes to managing the climate crisis.
A recent message from the UN’s COVID-19 Response team states, “As the world begins planning for a post-pandemic recovery, the United Nations is calling on Governments to seize the opportunity to “build back better” by creating more sustainable, resilient and inclusive societies”.1
You will likely have heard this phrase, ‘build back better’, quite a lot recently. It originally emerged in the wake of the 2004 Indian Ocean Tsunami and was used in a UN Special Envoy Report at the time to define propositions for a robust recovery and future damage limitation. But it is now more broadly taken to refer to opportunities to not only restore what was damaged or destroyed by a disaster but to build greater resilience in the recovery process to systematically address causes of potential vulnerability.
So, what lessons might we derive from the pandemic and our response to it in order to build back better? And, more specifically, how might these learnings be relevant to the most pressing challenge facing humanity - that of climate change? And, of course, what does this have to do with gold?
Before I seek to answer these questions (or at least suggest ways in which they might be addressed), I am reminded of another phrase - the ‘New Normal’ - that also seems to become ubiquitous after major crises. In the wake of a crisis, we often expect a radically and enduringly changed world, in which previously extreme or abnormal conditions are made commonplace. Conversely, however, we often also seek comfort in the prospect of reverting to norm.
You may remember after the Global Financial Crisis (GFC) of 2008-09, we were frequently informed we would have to adjust to a very different set of realities; to adapt to a post-GFC world, we would need to reconsider our approach to market risk, extend our horizons, look to the long term, and acknowledge the interconnectedness of the modern world. And yet, for a great many people and organisations, the New Normal rapidly started to look a lot like the Old Normal and all those urgent calls to change our ways were soon and easily forgotten.
For years prior to the GFC, the World Gold Council had been proposing that investors adapt a longer-term perspective, better risk management and greater portfolio diversification, while consistently and repeatedly demonstrating that gold could play a significant role in protecting portfolios in times of duress. And in the wake of the crisis, gold’s performance did not disappoint. While there are still questions regarding what institutional investors actually learnt from that challenging period, sufficient numbers of them (and central bankers) took note of gold’s outperformance to cause a rapid and substantial change in the overall structure of gold demand; these buyers have been the key source of growth in the gold market ever since.
I mention this because, while many investors may previously have proven to have short memories after a crisis, in the context of climate change, returning to old habits - defining recovery via a reversion to ‘Business As Usual’ - is simply not an option open to anyone. Which brings me to…