Last month, ESG Clarity asked fund managers to highlight companies that are taking part in helping society and the world move through the covid-19 pandemic
Since then, and as the number of cases of the coronavirus disease worldwide approaches 2 million with many countries still on lockdown, it has emerged many more businesses are branching out into different areas to aid the global fight and/or are ensuring their workforces are able to cope better with the ongoing crisis.
As a result, ESG Clarity brings readers part two of Shining a light on companies helping society move through covid-19 crisis, once again highlighting how these practises will have lasting reputational benefits for these businesses and therefore potential future revenues.
Claire Jones, partner and head of responsible investment at LCP and editorial panellist for ESG Clarity, commented: “It is interesting to see how companies fare in these circumstances, their ability to innovate and create new revenue streams. Lots of companies are adapting and there will be reputational impact – we have seen companies called out by the good and the bad.
“Once the dust settles it will be interesting to see how these [factors] impacts share prices and future performance. It shows that doing the right thing is not divorced from financial factors and performance.”
Indeed, as CEO of Schroders Peter Harrison recently said in a blog that “the covid-19 crisis is a litmus test that shows who has been ‘swimming naked’ while endorsing stakeholder capitalism”, while his colleague Katherine Davidson, portfolio manager in the global and international equities team, added companies’ treatment of their customers, employees and suppliers is “under greater scrutiny than ever before” and beyond government pressure to protect jobs, “close attention is being paid to how companies treat their staff” in these tumultuous times.
“It is reasonable to expect that companies that attract positive recognition will see greater loyalty from their staff and be more able to attract new recruits after the crisis. Conversely, staff may leave employers that they felt abandoned them in the crisis (once they can afford to).
“Every employee is also a consumer, so we could also see market share shift to companies that are deemed to have ‘done their bit’ during the crisis.”
Ryan Medlock, senior investment development and technical manager at Royal London, pointed to companies that have been on the wrong side of this:
“Sports Direct announced their intention to remain open based on believing they provided an essential service to society before reversing that decision. They were also accused of hiking their online prices.
“Wetherspoons called for pubs to remain open with increased social distancing measures instead of closing and announced that no employee would be paid until the government fulfilled its promise to cover 80% of the wages of workers affected whilst closed for business.”
Medlock added the different responses from businesses to the pandemic is adding a new corporate culture lens to ESG considerations.
There have been three key areas of focus for healthcare companies to fight the spread of covid-19; testing, treatment and vaccines.
John Glencross, CEO of Calculus Capital which manages the Calculus VCT, told the AIC three of its holdings were involved in developing tests for coronavirus, including Mologi, which has been awarded £1m of UK aid.
“This rapid test could mean results are provided in 20 minutes, and without the need of a medical professional or sending samples to labs for testing. This will mean patients can be treated quickly, reducing the risk of them passing the virus on to others and helping them to recover faster.
“Another portfolio company, Genedrive, has pivoted part of its core resources towards development of two SARS-COV-2 tests, which can determine whether someone is infected with coronavirus. They anticipate that a clinically validated test could be available in approximately eight weeks.
“Finally, a third portfolio company, Yourgene Health, has unveiled a contract manufacturing agreement with Novacyt SA for a covid-19 diagnostic test.”
EQ Investors impact specialist Louisiana Salge also flagged Integrated DNA Technologies, a sub-company of Danaher Group and position in the Impax Environmental Leaders fund the wealth managers holds, which has been scaling up the manufacturing of a key component of genetic testing, which will enable about five million tests per week mostly in the US.
She also highlighted Thermo Fisher Scientific, a weighting in the Wheb Sustainability fund the wealth manager holds, recently announced it expects to ramp up its testing kit production, and already has about 1.5 million tests available to ship.
In terms of treatments, Trevor Polischuk, portfolio manager of Worldwide Healthcare Trust, told the AIC that Japanese firm’s Takeda’s recent acquisition of Shire and their plasma derived therapy business has led to an investigational new treatment to boost the immune function of infected covid-19 patients.
“Chugai’s anti-inflammatory drug, Actemra, may also be useful in treating infected patients who are suffering from severe lung dysfunction resulting from coronavirus,” he added.
Ailsa Craig, manager of International Biotechnology Trust, pointed to Gilead as having the “most advanced potential treatment” in terms of timescale.
“They expect their trials to read out in April for a drug called remdesivir. We owned Gilead in the portfolio prior to the outbreak due to its compelling valuation and we have added to the position in recent months.”
At the same time, Amati AIM VCT has taken a position in respiratory drug discovery and development company Synairgen, which announced in March its plans to initiate a pilot phase II clinical trial for a potential treatment for covid-19 patients.
Dr Paul Jourdan, founder and CEO of Amati Global Investors, explained: “Synairgen’s trial is part of the urgent global effort from the medical community to establish proven pathways to mitigate the covid-19 pandemic.”
Similarly, Jamie Ross, fund manager of Henderson EuroTrust, said that pharma company Roche is working on both tests and a drug to help those who are critically ill with covid-19.
EQ Investors’ Salge added Roche, with recent backing from Chinese authorities, will start worldwide trials on hospitalised patients with severe covid-19 pneumonia.
Another pharmaceutical company Novartis was also highlighted by Schroders’, sustainability analyst Mannat Chopra for donating 130 million doses of hydroxychloroquine, an anti-malarial drug that is being tested as a potential treatment for coronavirus. Novartis have also vocalised their desire to work with the World Health Organization to determine the best distribution channels to ensure broad access to patients most in need of this medicine globally.
Companies around the world are, thankfully, are racing to find a vaccine against covid-19. Salge said US firm Moderna has broken the record for the fastest time between identifying a virus and creating a vaccine ready to test in humans: doing this in just 42 days.
“We don’t know how long it’ll take for this vaccine to pass all necessary clinical trials before it can be mass produced, but it is an important development already,” she said.
The company is held in the Baillie Gifford Positive change fund, where the manager Lee Qian said: “The company has used its cutting-edge technology and rapid response team to become the first company globally to file a potential vaccine for clinical trials.”
At a time when a large proportion of the global workforce adjusts to remote working, the benefits of video conference apps Zoom and social media software House Party have come to the fore.
EuroTrust’s Ross said he holds Telecom Italia, which facilitates Zoom calls, while there are other companies in the telecoms sector “doing their bit”.
“Customers can access sites without using up their data allowance, irrespective of their payment plan. On top of this, Vodafone have added extra capacity to their broadband and mobile networks to put them in the best possible position to cope with any extra demand as more people work from home.”
As previously highlighted in part one of this article, this is undoubtedly one of the most trying times retailers have faced but supermarkets in the UK and across the world have been hiring more staff to replenish shelves, increased the number of delivery slots and prioritising these for the vulnerable, as well as allotting certain shopping hours for medical staff.
Schroders’ Davidson said supermarkets have done their best to enforce the government’s guidance on social distancing with many now operating a ‘one-in-one-out’ policy and has taped out 2 metre marks for queueing outside to protect customers and staff.
“The companies will have seen a financial benefit from stockpiling in the last month, but are acting in the national interest by rationing some items.”
It is also worth noting Marks & Spencer has raised pay for its frontline workers by 15% from 5 April to 31 May, and Sainsbury’s supermarket is giving workers an additional payment worth 10% of the hours they have worked between 8 March until 5 April.
Taking a compete leap in an unfamiliar direction, however, is Burberry which has used its global supply chain network to fast track the delivery of over 100,000 surgical masks to the NHS, transformed its trench coat factory in Yorkshire to make non-surgical gowns and masks for patients, and is also funding research into a single-dose vaccine developed by the University of Oxford that is on course to begin human trials next month.
Marco Gobbetti, Burberry’s CEO, said in a statement: “The whole team at Burberry is very proud to be able to support those who are working tirelessly to combat covid-19, whether by treating patients, working to find a vaccine solution or helping provide food supplies to those in need at this time.”
Looking at businesses in China, Schroders’ emerging market analyst Jonathan Fletcher said Alibaba has supported small and medium-sized enterprises by waiving fees, offering low and interest-free loans and subsidising logistics for deliveries.
“The company has also provided remote working digital tools to help businesses adapt to the disruption. Furthermore, outside of China they have also provided AI technology and cloud-based services for free to researchers and medical practitioners in order to aid epidemic prediction, fast-track diagnosis and drug development related to the virus.
Back in the UK, it is not just the larger businesses that have been able to reach out. A small business that only launched six months ago has contributed over 20,000 carton-bottles of water to NHS hospitals nationwide. Sukhi Sindhu, co-founder of DRINKS3 , a company on a mission to become the lowest carbon footprint drinks brand in the UK by 2022, said: “On 22 March 2020 we launched the 20,000 Thanks campaign. We set out give away 20,000 WATER3 carton bottles to NHS hospitals across the UK, which is under immense pressure from dealing with worldwide covid-19 pandemic and as hydration is a vital part of keeping health and recovery, and as so many NHS staff are wearing PPE under which it becomes very warm, it was quite apparent this was a must.”
DRINKS3 is exploring further ways in which it can expand this initiative as well as give greater access to those that are the vulnerable in our society, and recently worked with the Wimbledon Local Action group that are providing food and drinks for those that are at high risk.
Previously, ESG Clarity highlighted tech firms Mastercard and Microsoft and this time some additional well-known brands have been singled out.
Schroders’ Davidson pointed to Netflix and YouTube, which have agreed to reduce their streaming quality in Europe for at least a month, with so many people now staying at home, responding to calls from EU officials to relieve pressure on broadband networks.
She also said Amazon’s infrastructure has become increasingly important as citizens are confined to their homes and supermarket shelves are stripped bare, but admitted there have been other concerns for its workforce.
“The company has responded by prioritising essential items in its warehouses. However, as usual, there are frictions around Amazon’s labour management. Employees in some countries have protested that by not closing warehouses the company is not taking sufficient measures to protect them from infection. But the company is treading a fine line in balancing the needs of customers and staff given the surge in demand. The company has said they are adding 100,000 new staff and have increased salaries by $2/hour for all new and existing staff.”
At the much smaller end of the scale, UK technology developer Inevitable is offering businesses free advice and assistance in this time of need.
Co-founder Sean O’Mahoney explained: “The assistance we have been offering has been quite broad due to the experience our team has, spanning business, technology, algorithms, GDPR, pipelines, contacts and general innovation / problem solving to adapt to the current situation many industries are facing in these times.”
A more familiar name to our readers, Dynamic Planner has launched a content hub in response to the ongoing impact of coronavirus to support advisory firms.
Ben Goss, CEO of Dynamic Planner, said: “The entire world has seen an almost instantaneous shift to homeworking and online meetings, and this is the same for advisers and their clients. Advice firms tell us that Dynamic Planner is playing a huge role in helping them to make this transition, but we wanted to take things a step further and give them even more support.
“Our Content Hub will provide advisers with expert insight from our team on a variety of topics – from concerns that advisers tell us are close to their hearts such as investment risk, to market outlook and analysis from our in-house investment experts, including chief investment strategist Abhi Chatterjee.”
Legal & General has also stepped up; it has begun offering to accommodate NHS key workers across its property developments in the UK, has registered 25 its properties with the NHS for their use and made warehouse space available in its Bracknell development for medical supplies.
In part one, we also highlighted Quilter and Majedie’s donations to the National Emergencies Trust COVID-19 appeal, and how RWC also said it was continuing to pay employees and service providers across its global offices, even if they were unable to carry out their work.
More recently, specialist ESG asset manager Alquity launched its 40-40 Campaign targeting support at those who will be hardest hit by the crisis.
Alquity’s business model already donates 10% of fees revenues to social support for the most disadvantaged people in the emerging markets in which it invests, but the 40-40 campaign quadruples that commitment, with Alquity donating 40% of its net management fees derived from new investments into its funds from client partners for the remainder of 2020. Via Alquity’s Transforming Lives Foundation, the money will be delivered to charity partners running projects specifically aimed at alleviating the impact of covid-19.
Paul Robinson, chairman at Alquity, said: “Our 40-40 Campaign is our response to the severe economic and social hardship the coronavirus pandemic will cause many people around the world. Alquity has always believed that wherever you are born, you should have an equal opportunity in life and this is even more relevant today. As some of the freedoms and comforts we are used to in developed countries are dramatically reduced, we are getting a glimpse of what daily life is like for a some of the poorest people on the planet. This is our chance to transform investment and create a fairer, more sustainable society.”
The firm is also seeking partners across the investment industry to support the 40-40 Campaign. Robinson added: “We believe the global investment industry has a role to play in supporting the most vulnerable in society at this time. We invite any fund platforms, consultants, asset owners and other investment service providers to join 40-40 and play their part.”
Schroders’ Harrison agreed
that fund managers can play a part in helping businesses move through this crisis:
“The asset management industry will face its own test. It’s a practical test of how we can support otherwise healthy and viable businesses. It’s also a philosophical test of whether we are true long-term investors.”
Royal London’s Medlock added there will be more pressure to behave in a way which better benefits the overall society, not just in the investment community but across corporates with governance and social responsibility “being scrutinised like nothing before and fuelling the momentum for ESG investing even further”.
“2020 may be remembered for the year we went into lockdown, but I also think it’ll be the year we look back at as a game-changer for ESG considerations,” he said.