Pandemic puts ESG credentials under scrutiny

There will be an increasing focus on responsible investing in the post-pandemic world, according to First Sentier Investors.

Kate Turner, First Sentier Investors Asia

A white paper, released by the asset manager this week, argues that the greater awareness of climate change and biodiversity, human rights and modern slavery, and workplace health, triggered by the Covid-19 pandemic, will have a profound effect on investing.

“With attention focused on environmentally and socially significant issues, including climate change, biodiversity, human rights, mental health and diversity, we now have a chance to redouble our efforts to create long-lasting, sustainable positive change,” said Kate Turner, First Sentier Investors’ responsible investment specialist and lead author of the paper, at a media briefing on Tuesday.

“The way we allocate capital and engage with companies can have a significant positive impact, and the pandemic has underlined the delicate balance between human action and the environment, which makes us even more conscious of our role as stewards of our investors’ capital,” said Turner.

The paper outlines how lockdowns had an impact on energy demand, which has consequences for the infrastructure sector. For example, in the US, the reduction in demand squeezed high-cost-to-serve technologies out of the market, shown by a 20% reduction in demand for coal-generated electricity. Conversely, as renewables capacity was added, demand for renewable energy is estimated to have increased by 15% last year.

“Given the competitive costs of renewable power generation when compared to coal and nuclear, we anticipate that renewable energy will continue to take market share, and this will only be accelerated if the Biden administration in the US puts a Federal price on carbon,” said Turner, whose team advises the First Sentier fund managers of $177bn billion of assets.


Modern slavery is another issue on the investment agenda, as millions of people have been thrown into poverty and unemployment due to Covid-19, according to Turner. In addition, some factories and warehouses have faced high demand and tight production times, making unsafe and unfair working conditions more likely.

During 2020, First Sentier Investors wrote to 27 companies across the healthcare supplies and apparel industries to ask how they are addressing modern slavery issues amid the pandemic, which “sparked meaningful conversations with many of them”, she said.

Finally, the white paper notes that workplace health has been significantly affected by the pandemic, forcing a shift in the way employers think about the welfare of their staff.

Bosses who had previously thought of workplace health simply in terms of “lost time incident rates” have been prompted to take steps to support the mental health of employees feeling isolated and stressed.

“Organisations were forced to make major decisions about how to protect the physical health of their people by sending them to work from home, while the challenging conditions of lockdown made mental health a key issue,” said Turner.

The paper concludes that while Covid-19 created a whole new set of challenges for investors, companies and communities to deal with, “it has also created opportunities”.