Hope you are doing well and staying safe. Welcome back to our brief thoughts on ESG. This week, as we just celebrated the 50th edition of Earth Day, I am going to share some interesting ESG-related news from around the world.
- On the E: We have all read about it, but as data keeps coming, it is still amazing to see how much pollution is changing in cities where lockdowns are being enforced.
- UK up to 60%: Coronavirus lockdown sees air pollution plummet across UK
- North East USA up to 30%: NASA Satellite Data Show 30 Percent Drop In Air Pollution Over Northeast U.S.
- IQAir: New Delhi recorded a 60% YoY fall of PM2.5, Seoul registered a 54% decrease, for Wuhan the fall was 44%, and for Mumbai it was 34%.
- On the S: 286 long-term institutional investors representing over US$8.2 trillion in AUM signed a statement urging companies to treat employees, suppliers, and customers well. Investors also asked for financial prudence, but most requests were focused on paid leave, health and safety policies, and retaining employees.
- On the G: while corporate governance seems to have taken a back seat during the pandemic as news flow focuses on the health crisis, the environment, and people, some interesting things have been happening. For starters, annual shareholder meetings have seen changes globally (different measures have been taken in different geographies) as social distancing prevents us from being in the same room with many people. Furthermore, investors have a great opportunity to measure how well governed a company is. While initially these topics may not seem as urgent as other issues are right now, things like the policy around executive remuneration, capital allocation strategies, balance sheet prudence, will all become crystal clear over the coming months and quarters. We could even see a wave of M&A further down the road if companies are clearly not behaving well (like what we saw in the last financial crisis in liquid markets like the US). Some interesting considerations have been highlighted by PWC.
Coming back to Mexico, here are some tidbits of what we are seeing locally:
- On the E: social distancing in Mexico is tough, many people must go out every day or else they will not have enough to eat. For this, pollution trends are not as straight forward. Having said that, there are estimates that show that in Mexico City around 60% of cars have stopped circulating. Because of this, there has been a reduction of up to 28% in carbon monoxide.
- On the S: the media has been on top of companies that are not safeguarding the health and safety of employees, or those that have fired employees at large scales amid this all. The situation with health workers at times has been critical (lack of protective gear, even aggressions from scared people on the streets), but in general society has raised its voice and demanded more protection for them. Large corporate donations as well as individual donations have been received across states and institutions.
- On the G: it is too soon to signal any relevant change in companies’ behavior (or even investors’ requests). Having said that, G has become a central concern for the investment teams of some AFOREs in recent times, and we do not expect that to change because of COVID (if anything, it will grow stronger). As for annual shareholders’ meetings in Mexico, here are the key changes.
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
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