How COVID-19 might change the conversation on ESG

Hope you are doing well and staying safe. Welcome back to our brief thoughts on ESG. This week I’d like to comment on how COVID-19 might change the conversation on sustainability going forward.

One thing that is being widely discussed in recent weeks as the pandemic has forced nations left and right to send people home and slow down is whether there is a better way of generating economic growth than the one we’ve been following. In a nutshell, is there a way to de-couple economic growth from the destruction of the planet? Many would agree that there is a way to do that.

As governments realize how their economies are impacted in different levels, concepts such as universal basic income, flexible loans for small enterprises, workers protection, or even the future of fossil fuels are all being discussed more thoroughly. Adding to that, global cooperation is becoming more important than ever before.

Furthermore, it is clear by now that there will be several situations where our reactions are too slow. In this instance, once we understood how the virus was moving and what needed to be done to contain it, it was too late to have the right tools to do so without risking the economic livelihood of many people and businesses. Clearly our economies need to structurally change to accommodate for potential disruptions that may catch us off-guard in the future (and we’ve seen a few of these other than this pandemic: fires, hurricanes, flooding come to mind).

To see how this conversation is evolving, we suggest reading the following websites:

• From Harvard’s School of Public Health, a conversation with Dr. Aaron Bernstein (director of Harvard C-Change): Coronavirus, Climate Change, and the Environment.
• From the International Labour Organization, articles on COVID-19 and the world of work.
• From the World Business Council for Sustainable Development, a discussion on how business is responding to COVID-19.

We don’t expect to see anyone doing anything other than crisis management over the next few weeks. We doubt companies or investors will venture into new ESG strategies before the most critical phase of the pandemic is over. But we definitely believe as the pandemic winds down, the conversations we’ve highlighted before will continue, and thus having the right ESG strategy will be very important.

On a more down to earth basis, it is likely that COVID-19 will lead to a permanent change in how we interact with people, and thus reduce travel, real estate, and indirectly carbon emissions. New and cheap video technology, messenger systems like Slack or Zoom, have proven effective, and in many ways save time. We would expect the 7 days business trips, investor road shows, to be less common going forward, especially as companies will be under instructions to save money. We may even see companies reconsider their large concentrated real estate exposure, with flexible remote work proving a good substitute, and a money saver.

Hope this was of use. As usual, if there is anything we can help you with, please reach out. Also, don’t forget to recommend any ESG subject matter that you would like us to research and put in a forthcoming weekly.

Regards,

Marimar

Partner, Miranda ESG

This week’s recommended reading

• Barclays adds ESG assessment and Indicators to its Fundamental Research
• North America lagging Europe on ESG engagement, survey says.
• ESG moves to centre stage as CHINA´s economy eyes COVID-19 recovery
• The reason why ESG fund outperformed during the market sell-off