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The pandemic could have negative implications for the ‘E’ in ESG
According to communist leader Vladimir Lenin ‘there are decades when nothing happens, and there are weeks where decades happen’. It feels at the moment like we are very much living through a period where the latter is true.
In this fast-changing situation it can be hard for investors to stay on top of all the trends which are emerging. Fortunately Shares is on hand to help, including a feature this week looking at a post-coronavirus world and what it could mean for businesses and markets.
In the coming weeks we will take a closer look at the impact on individual sectors and industries as well as keeping on top of all the topics affecting investors at the moment, not least the devastating hit to their income.
One theme which is not going away but will undoubtedly be affected by the coronavirus crisis is ESG or, in long form, environmental, social and governance considerations in investing.
The latest Government advice in the UK, effectively dissuading people from using public transport given the difficulties of social distancing when doing so, feels like it will push more of us behind the wheel of our cars (if we have one) as we retreat to this bubble of perceived safety.
Rising car usage doesn’t fit with a narrative of increasing environmental awareness and, elsewhere, the collapse in oil and natural gas prices might make renewables look more expensive in relative terms.
There are longer term considerations too. The trend towards urbanisation has typically been seen as a net positive for the environment as humans have a lower footprint in cities than in rural or suburban areas.
However, the pandemic could lead more people to crave cleaner air and more outside space by moving out of built-up areas.
DOWN THE LIST OF PRIORITIES
The climate might shift down the list of priorities for a world which is concentrating on the difficult and costly task of reviving societies and economies in the wake of coronavirus.
On the flip-side, increased working from home could reduce emissions as people aren’t travelling to work and air travel is largely on hold and may not return to pre-crisis levels any time soon.
The adaptations we have made in the face of the virus demonstrate the world is capable of the kind of dramatic and co-ordinated action which might be needed as we face up to environmental threats.
The outbreak could also put an increasing focus on the ‘S’ in ESG as investors look at how businesses treated suppliers, customers and employees through the pandemic.
Morgan Stanley’s head of sustainability research Jessica Alsford says: ‘Corporate behaviour in a time of crisis – both in how companies treat employees and customers, and their impact on society in a time of need – can have lasting implications, both positive and negative. These factors can be linked to long-term performance and returns.’
There is a lot more to consider when it comes to ESG and the impact Covid-19 will have and we intend to return to this topic in more depth in the near future.