No-one at the start of the year could have foreseen the devastating global impact the Covid-19 virus would cause. In the world of ESG, the pandemic was a huge turning point.
In no way taking away from the ongoing health and economic crises, a positive that has come from the pandemic has been the awakening of the human conscience that we simply cannot carry on as we were before – we need to appreciate the planet, society and economies we have, and take action to protect and improve the workings of all three.
Covid-19 lockdown and corporate efforts
We have realised how fragile life is and acted (stayed at home) to ensure our health systems are able to direct their efforts where they are needed most. Some of us have participated in research trials and regulators have dropped red tape so that a vaccine for Covid-19 can be fast-tracked to approval.
The work rat race seems, to many, a distant memory. No longer are we rushing out of the door in the mornings, dropping children off at educational/childcare settings before beginning the commute in traffic or packed public transport. (Honestly, when I look back on how I did this every day I wonder where the energy came from).
Companies have been forced to embrace flexible and remote working, as well as software such as Zoom and Teams, and many employers and employees have reported numerous benefits – particularly improved mental health, as a result of more time with family or for exercise or leisure. We may not be seeing the back of office working, but we have probably seen the back of Monday-Friday, nine-to-five working.
Commenting in March, when the UK and Europe were in the early stages of lockdown, Schroders’ Simon Webber, said: “It is quite possible 2020 will mark the inflection point where the corporate sector realises it can do more with less travel. In that respect, getting used to virtual meetings and the immense productivity gains it can bring will be a positive side-effect of the crisis response.”
There are also huge environmental benefits from remote working. Webber added: “For many services businesses, business travel-related emissions are the largest source of their carbon footprint. But more and more companies are committing to manage down their own footprint in line with the Paris agreement to limit greenhouse gas emissions. If the airline industry is unable to find an alternative propulsion technology to jet engines, the only way for businesses to reduce travel-related emissions is to travel less.”
On ESG Clarity Europe, we have also had many commentators discussing how 2020 was the year the ‘S’ of ESG came to the fore.
In an opinion piece published in May, Jon Mowll, responsible investment analyst at EdenTree, wrote change is afoot as short-term profitability is disregarded in favour of the employees’ wellbeing since the pandemic unfolded. He pointed to ShareAction’s Simon Rawson who remarked, “Covid-19 has shone a spotlight on the social (‘S’) component of ESG in a way that we have never seen before.”
Mowll continued those people who form the very bedrock of our societies are often poorly paid, working long hours in precarious, sometimes menial jobs.
“Nurses and carers, shelf-stackers and cashiers, delivery drivers and fruit pickers. They are at greater risk of contracting Covid-19, because they cannot work from home. Without them, society would slow to a halt. And yet many are paid scarcely enough to make ends meet.”
In an exclusive ESG Clarity interview in June, Saker Nusseibeh, CEO international at Federated Hermes, highlighted when faced with a pandemic, and the possibility of the death of a loved one, we have realised there at are things we value more than money.
“Society is telling you we value human life and good outcomes. If you do the right thing for society it does work and financially it makes more sense. In the short term, you might have volatility of returns, but longer term there are better returns and you are treating people better.”
Another social aspect 2020 will be remembered for is shining a spotlight on racial inequalities. The Black Lives Matter movement gained worldwide recognition in May as the news of George Floyd’s death at the hands of US police came to light.
“Our social fabric is fraying. Tensions are on the rise both within countries, and also between them, wrote Natasha Landell Mills, head of stewardship at Sarasin & Partners, for ESG Clarity Europe in September.
“Trust in institutions is being tested. While Covid has reminded us that our collective wellbeing depends on us coming together; there are real dangers that our failure to act to protect the more vulnerable will tear us apart. Investors should press companies to take steps that address rising tensions in society,” she said.
In an ‘unprecedented’ year we have learned society, governments, companies and regulators can work together for the greater good.
Since the pandemic hit, leading ESG commentators have devoted column inches to remind us climate change is another huge threat to humanity, and if the world can collaborate in the face of a pandemic it should be doing so to tackle the climate emergency too.
Paul Dobbs, financial risk expert at consulting firm Sionic, warned in a piece in April: “Covid-19 will impact the global economy for months if not years; climate change will impact the global economy over years and decades, if not centuries.”
Further definitive action must be taken in order to meet the Paris Agreement target of keeping the global temperature rise this century well below 2 degrees.
There are encouraging signs, which have in my mind marked 2020 as a pivotal point in terms of responsible investment.
Consumers are pushing corporates to change their behaviours with regards to their impact on the planet. As I wrote in my previous column for ESG Clarity US, governments have incorporated green and social objectives in their coronavirus recovery plans. There is a real impetus to ‘build back better’.
Furthermore, in August it was announced the Institutional Investors Group on Climate Change (IIGCC) brought together over 70 global investment firms to publish the Net Zero Investment Framework, a blueprint to align investors with the Paris Climate Agreement, and more recently asset managers representing $9trn of assets under management signed the newly created Net Zero Asset Managers initiative to support efforts in reducing greenhouse gas emissions.
We have proven collective action can be taken in the face of coronavirus, we hope to see similar collaboration and meaningful steps taken in the face of an increasing climate emergency. Where 2020 may be the year the world woke up and plans were put in place on climate change, 2021 just might be the year that real action was taken to protect the environment and humanity.
Let’s be honest, we can’t afford not to.
The ESG Clarity and Last Word Media Team would like to take this opportunity to wish our readers a fantastic festive season and we look forward to sharing our exciting plans with you all in 2021. Email bulletins will return on 4 January and the next digital magazine will be published 27 January.