It looks like another effect of COVID-19 might be a shift of investors’ ESG focus by placing more emphasis on social issues. As noted in a SGP 2020 proxy season blog, the “S” issues in ESG were frequently focused on culture and diversity, and now, there’s greater focus on worker safety and employee engagement.
ESG funds are getting a lot of attention these days with many noting how ESG funds fared better than the overall market during ongoing turbulence. There’s a Wall Street Journal headline and a Morningstar report showing how sustainable funds generally outperformed conventional benchmarks during the first quarter. Not too long ago, Rhonda Brauer blogged about initial investor responses to the COVID-19 pandemic and noted how some investors have been asking companies to prioritize worker health and safety, among other things.
Climate concerns are clearly still a priority, but a recent letter from the International Corporate Governance Network about shared governance responsibilities places emphasis on social issues. The focus on social issues coexists with a long-term perspective aimed at protecting financial stability and longer-term sustainability. The letter says COVID-19 presents a new era of engagement and lists governance priorities for companies and for investors — with social issues topping the list. Here’s an excerpt:
The ICGN Statement of Shared Governance Responsibilities broadly emphasizes the need for companies to:
– Prioritize employee safety and welfare while meeting short-term liquidity requirements to preserve financial health and solvency
– Pursue a long-term view on social responsibility, fairness and sustainable value creation and publicly define a social purpose as we all adjust to a new reality
– Take a holistic and equitable approach to capital allocation decisions, considering the workforce, stakeholders and providers of capital
– Communicate comprehensively with all stakeholders to instill confidence and trust in a company’s approach to build resilience into strategy and operations
– The Covid-19 pandemic presents the most significant public health and economic crisis of our time and calls for new forms of cooperation on a global scale. It has ignited an acute recognition of social failures and deep gender, racial and income inequality.
-Lynn Jokela, TheCorporateCounsel.net May 13, 2020
