Pandemic encourages financial firms to address social issues

Populations hurt by climate change to benefit from COVID-19 focus on supporting social change.

There are many societal parallels between climate change and COVID-19, and also a potential business opportunity.

The populations most affected by climate change also have, in many cases, been the most vulnerable to the coronavirus, and banks can address some of these challenges through certain real estate or infrastructure financings, said Elsa Palanza, global head of sustainability and ESG at Barclays Plc, speaking on an online panel discussion hosted by the Institute of International Finance.

There’s a “perfect storm where vulnerable people are hit from all sides,” said Palanza. Now is a moment “to imagine how we can create new opportunities to serve these communities,” she said.

As an example, Barclays recently provided 15-year financing to a social housing company to build energy-efficient, affordable homes for those who may not otherwise have access to such accommodation, Palanza said. The deal is part of a greater focus among financial firms on social issues, she said.

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While a growing number of banks and fund managers say they consider environmental, social and governance issues when investing or lending, in reality the three pillars of ESG have never been equals. Prior to COVID-19, which exposed the lack of paid benefits and safety nets for many workers, the “S” was something of a blind spot.

The whole construct of ESG — grouping disparate issues into buckets of E, S and G — might actually be unhelpful and confuse issues, said Ben Caldecott, director of Oxford University’s sustainable finance program.

The “S” is “the least well-defined,” but it’s in the spotlight and it will be “better defined” going forward based on how companies treat their employees and supply chains, said Ewout Steenbergen, executive vice president and chief financial officer of S&P Global, during a separate IIF panel.