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As businesses press forward amid the global Coronavirus pandemic, one new trend has surfaced: more companies are talking about and investing in ESG practices. This week, JPMorgan Chase noted that ESG funds are outperforming the wider market.
For investors and corporations alike, the new question is: “will COVID-19 accelerate interest in ESG criteria?”
Note: The following takeaways were pulled from news, earnings calls, and company filings within the AlphaSense platform. For full quotes/excerpts, scroll below or login to AlphaSense.
- According to the Financial Times, ESG funds are outperforming the wider market. Trends like telecommuting, distance learning, and telemedicine are helping produce positive social change.
- Companies like Paypal and General Mills released their ESG reports during Q1 Earnings Season.
- UN Principles for Responsible Investing (PRI) issued a note to its signatories pointing out that if the business world was going to survive the coronavirus outbreak, it was imperative that long-term investors keep their nerve and stick with sustainable companies — even if it meant losing out on some short-term gains.
- Some company executives are deferring or refusing their own compensation packages in order to cut costs and help employees.
Broker & Investor Takeaways:
- Morgan Stanley: “COVID-19 crisis looks likely to alter the way that investors assess corporate governance.” (Source: Financial Times – “Big data shows Covid-19 reshaping ESG; UN PRI’s long-term crisis plan; sustainable funds stand tall”)
- Barclays: “COVID-19 will accelerate this trend [towards ESG] even further — creating a greater sense of urgency and responsibility toward everything from consumer behavior to climate change, supply-chain practices and the future of work and mobility — and potentially alter the nature of the investment process as a result.” (Source: Financial Times – “Big data shows Covid-19 reshaping ESG; UN PRI’s long-term crisis plan; sustainable funds stand tall”)
- Bank of America: “corporate response to COVID-19 exemplifies the “S” in ESG and points out that “companies allocating resources to the COVID-19 crisis are likely to foster employee and community goodwill and to enhance brand and reputation.” (Source: Financial Times – “Big data shows Covid-19 reshaping ESG; UN PRI’s long-term crisis plan; sustainable funds stand tall”)
- The latest evidence of ESG’s strong showing during the coronavirus crisis comes from BlackRock, which has launched new ESG ETFs this year. “We see a sustainable investing wave playing out in financial markets over the coming decades,” BlackRock said this week. “This year’s fund flows may offer a miniature version of this shift.” (Source: BlackRock – Q1 Earnings Call Transcript)
U.S. Government Takeaways:
- ESG Investors are paying close attention to how companies are lobbying in Washington and how corporations are helping or hurting small businesses.
- On the same day that the White House announced projections that 100,000 to 240,000 Americans are likely to die from coronavirus, the Environmental Protection Agency introduced a controversial new federal rule that will relax mileage standards. (Associated Press – Trump uses coronavirus crisis to push his broader agenda)
- The US Environmental Protection Agency has said it will not enforce certain environmental regulations during the coronavirus outbreak (FT – Amazon’s Covid-19 conundrum; polluters capitalise on chaos; CEOs plan post-pandemic life)
- The American Petroleum Institute, which represents the US oil and gas industry, sent a letter to the Trump administration requesting relief from some regulatory requirements to ensure steady supplies during the coronavirus. The administration has since announced it will temporarily ease some environmental enforcement.
Global Economy Takeaways:
- The World Bank and the International Monetary Fund estimate that the economic costs for Africa due to the Coronvavirus are likely to be approximately $100 billion (or 5 percent of the continent’s GDP.) (World Bank – Press Release)
- While many argue that the coronavirus outbreak has caused executives in the US and Europe to accelerate their adoption of ESG principles, ESG advocates are deeply concerned that the pandemic will have the opposite effect in Japan. (BlackRock in Financial Times)
Don’t miss critical insights: AlphaSense recently launched an ESG filter to help clients hone in on ESG-specific content (Sustainability/CSR Reports, Environmental Health & Governance Reports, Carbon Disclosure Reports, etc.) Sign up for a free trial or login here to explore the tool.
[Note: We are updating this post and our compilation post to reflect the most recent commentary. Last updated 5/5.]
Newmont Corporation (4/29 – Earnings Call Transcript)
In light of the COVID-19 pandemic, our purpose to create value and improve lives through sustainable and responsible mining is more relevant today than ever before.
Moody’s Corp (4/29 – Earnings Call Transcript)
We are also supporting our local communities, including providing our employees with virtual opportunities to volunteer and the recently announced $1 million program of charitable donations and other supporting measures addressing both the immediate and long-term impacts of the pandemic. This follows an initial donation in January to aid in medical relief in China. The program includes global and local grants that are a mixture of humanitarian and other aid to address the impact of COVID-19 on small businesses and education systems. I encourage you to learn more about these and other key corporate social responsibility initiatives in our CSR report published earlier this week and at our micro site, moodys.com/csr.
Lastly, we are lending our expertise to governments and policymakers to help mitigate the coronavirus’ impact and plan for recovery. Our information and analysis has been critical, for example, in helping to inform stimulus programs and the allocation of fiscal support. These commitments to our stakeholders exemplify Moody’s purpose to bring clarity, knowledge and fairness to an interconnected world.
Goldman Sachs (4/29 – Earnings Call Transcript)
The business roundtable statement of the purpose of the corporation signed by our company marks a monumental potential shift as showing greater purpose of a firm beyond short-term shareholder primacy, recognizing all stakeholders are as important as shareholders and delivering long-term value to the company and prosperity to society. The statement has the potential to become reality if adopted as policy and stated in our company’s governance documents.
To be clear, the stakes cannot be higher as the COVID-19 pandemic grips through every economy on the planet, how well our company answer the call to support communities and crisis in sustainable ways.
Avangrid Inc (4/29 – Earnings Call Transcript)
We’ve also accessed long-term clean energy funding in the first quarter, placing $237 million of tax equity financing and issuing our third Green Bond to finance our renewables projects. This Green Bond of $750 million brings our total Green Bond debt to $2.1 billion, which makes us the seventh largest issuer in the U.S. of green, social and sustainability bonds and the fifth largest in the sector. The transaction was very successful, being 2.8x oversubscribed, and with 58% of the proceeds allocated to ESG-focused investors. While treasury rates had dropped due to COVID-19, the spreads were wider than we had expected pre-COVID, bringing our financing costs higher than originally estimated and increasing the potential for higher financing costs on future financings in 2020, which we’ve estimated at approximately $9 million pretax, including this Green Bond.
Norfolk Southern Group (4/29 – Earnings Call Transcript)
Where you saw some pretty considerable supply reactions on the truckload side to a steep downturn in spot prices. So for us, it means continuing to collaborate with our best-in-class supply chain partners and our channel partners on how we give them an exceptional service product, how we look for new opportunities, new lanes for them to grow into. And then it’s also selling the things that are going to be pretty darn valuable post-COVID-19, which is capacity, a lower cost structure than truck, it’s service and it’s ESG. And we’ve got the best intermodal franchise in the East. So we’re in great shape there.
AT&T (4/24 – Annual Shareholders Meeting Transcript)
Stacey S. Maris, AT&T Inc. – Senior VP, Assistant General Counsel & Secretary
The next order of business is the proposal submitted by Jing Zhao. This is item 6. The proposal is now before the meeting. Mr. Zhao has submitted the following statement in support of the proposal. It is regrettable that our Board opposed my proposal to improve guiding principles of executive compensation by reducing the executive pay and the CEO pay ratio, especially under the current global and national crisis of the coronavirus pandemic and economic recession. It is right time for our executives to take the social responsibility on your own initiative as patriotic citizens. Please vote for proposal item 6.
Discover Financial Services (4/16 – Earnings Call Transcript)
Let me close by summarizing some of the actions we have taken to respond to the COVID-19 pandemic. We have shifted virtually all of our employees to work-from-home in a sustainable model that still continues to provide an industry-leading customer experience across all of our products. We have taken swift and meaningful action to adjust our credit policies to reflect the new environment, continuing to lend, but with tightened standards for new accounts and for growing existing accounts.
We are implementing expense reduction initiatives while preserving key investments that will allow us to grow our business over the long term, and we are prepared for additional actions as the environment evolves. While our capital position is strong, we have suspended our share repurchase program in order to enhance our capital base.
General Mills (4/17 – ESG Report: Global Responsibility)
BlackRock (4/16 – Trade Journal)
BlackRock has further accelerated its sustainability credentials with the launch of an active equity impact fund, which claims to be among the first to directly help drive the UN’s Sustainable Development Goals (SDGs).
The new BlackRock Global Impact fund will be focused on investing in companies addressing major world challenges that fit within BlackRock’s proprietary impact themes.
These include increasing access to quality education and affordable housing, advancing healthcare innovation to help with societal challenges, such as the Covid-19 pandemic, expanding financial and digital inclusion, preventing climate change, reversing environmental degradation, and increasing efficiencies in water usage and deployment.
The addition of the impact strategy forms part of BlackRock’s continued efforts to expand its sustainable investment platform as it delivers against its commitment to make sustainability its standard for investing.
Merck (4/15 – Corporate Responsibility Report)
BlackRock (4/15 – Financial Times)
ESG to take centre stage at virtual AGMs
While investors around the world are nervous about how shareholder meetings will be conducted virtually this year because of the coronavirus crisis, companies are also fretting about the votes they face on ESG topics.
About 66 per cent of shareholder proposals filed for the 2020 voting season deal with environmental and social issues as opposed to governance topics, said Nuveen, an asset manager, in a proxy voting preview report on Tuesday. Also this year, 77 per cent of the environmental proposals deal with climate change, Nuveen said.
Tips from Tamami
While many argue that the coronavirus outbreak has caused executives in the US and Europe to accelerate their adoption of ESG principles, ESG advocates are deeply concerned that the pandemic will have the opposite effect in Japan.
“My fear is the trend will be delayed, rather than get faster”, said Kenji Fuma, chief executive and founder of Neural, an ESG investment advisory company.
Mr Fuma, who is known as an evangelist of ESG in Japan, explains that there is a misconception among Japanese executives that ESG is an act of charity. “So, it would be natural for them to stop [considering ESG aspects] when their profits have been declining due to the coronavirus crisis,” he said.
JPMorgan Chase & Co (4/14 – Trade Journal)
Major ESG investment funds outperforming S&P 500 during COVID-19: Some of the biggest investment funds set up with environmental, social and governance criteria are outperforming the broader market during the coronavirus crisis.
Citywire (4/14 – AMs will turn to ESG to fill gap caused by COVID-19 outflows)
In a market update, [Fitch Ratings] said those able to offer credible ESG-orientated investment options will be able to help alleviate the outflows experienced during the Covid-19 outbreak.
Fitch said, while there has already been a longer-term focus on ESG, this should continue to be supported by increased pressure on governments to correlate stimulus aid to emission controls, evolving consumer behavior and the attitudes of younger generations as they increasingly benefit from the transfer of wealth from baby boomers.
PPL Corp (4/14 – Sustainability Report)
Financial Times (4/11 – Aircraft emissions fall sharply as pandemic grounds flights)
Aeroplane emissions fell by almost a third last month as the coronavirus lockdown grounded flights around the world, a drop in emissions equivalent of taking about 6m cars off the road.
An FT analysis of more than 6m flights, using data from FlightRadar24, found that as much as 28m fewer tonnes of carbon dioxide were emitted in March as nearly 1m flights were cancelled globally. This is equivalent to a month of the UK’s total carbon dioxide emissions and constitutes a drop of 31 per cent from the comparable period last year.
Financial Times (4/8 – Big data shows Covid-19 reshaping ESG; UN PRI’s long-term crisis plan; sustainable funds stand tall)
Barclays is starting a new ESG research publication that argues “Covid-19 will accelerate this trend [towards ESG] even further — creating a greater sense of urgency and responsibility toward everything from consumer behaviour to climate change, supply-chain practices and the future of work and mobility — and potentially alter the nature of the investment process as a result.”
Meanwhile, Bank of America argues that the “corporate response to Covid-19 exemplifies the “S” in ESG and points out that “companies allocating resources to the Covid-19 crisis are likely to foster employee and community goodwill and to enhance brand and reputation.” Indeed, it calculates for the US that “the initial round of corporate giving amounts to more than $875m in cash donations while forbearance and deferred collection of interest, rent and telco/utility bills could dwarf this amount.”
Agriculture and Agri-Food Canada (4/8 – Trade Journal)
“One of the most important challenges facing the world right now is finding ways to massively increase global food supply in a way that also manages environmental impacts and meets the needs of an increasingly health-conscious consumer,” said Paul Dellaquila, President of Defiance ETFs.
GreenBIZ reported, “Amid the white noise of COVID-19 pandemic coverage last week, news about the $80 million funding round for alternative protein company Nature’s Fynd offered a bright beacon of positivity. While the financing revelation was delayed a week because of the crisis, the sizeable round extends the steady growth of funding for this particular niche of the overall agtech space.”
Agtech and sustainable agriculture are the wave of the future and not only in the face of the coronavirus pandemic but also as an ally in the fight against climate change moving forward.
Just Food Trade Journal (4/7 – Consumer Trends Post-COVID)
KAM Media’s MD Katy Moses suggests that following the initial period of “unleashed consumption”, two main types of consumer will emerge. The first will be those who suffered from a “bad case of cabin fever” and want to be more sociable than ever. She says these people will look to dine out more and get back to travelling. The second will be people who have become more connected to the home environment. Moses talks about consumers who have enjoyed working from home, cooking and spending more time with their children.
She outlines six trends that will define the post-coronavirus consumer: hyper-connectivity; virtual experience economy; ambient wellness; delivery; more interest in corporate social responsibility; and connection and collaboration.
SNL Daily Gas Report (4/6 – Daily Report)
A large number of environmental and citizen groups asked leaders in the federal government and state governments to place a moratorium on the construction and approval of natural gas pipeline and LNG export terminal projects during the COVID-19 pandemic.
A coalition of about 200 groups including environmental advocates Sierra Club and Delaware Riverkeeper Network made the request in an April 3 letter to the U.S. Congress, state governors and attorneys general, the U.S. EPA and the Federal Energy Regulatory Commission.
SNL Daily Gas Report (4/6 – How the coronavirus is temporarily reshaping the ESG discussion)
The coronavirus has brought workforce management and other social sustainability issues into the limelight as shareholder engagement on climate change has slowed to nearly a standstill.
To prevent the spread of the coronavirus and given the recommendations of health officials, governments around the world are ordering non-essential workers to stay home and banning large gatherings. Add to this the rapid increase in people contracting the virus and companies in the retail, travel, hospitality, and other sectors are losing money. Many are therefore laying off or furloughing workers even as nations move to pass emergency funding legislation to support those workers and their companies.
The changes are causing social issues in the sustainability movement to become the focus of shareholder discussions, say experts.
Tractor Supply Co (4/6 – Press Release)
Beginning in early March as the COVID-19 crisis evolved, we saw a significant increase in our comparable store sales with a focus in our consumable categories such as companion animal food, livestock feed and heating fuel and other core categories like agricultural fencing, safes, generators and sustainable living.
Home Depot (4/6 – Definitive Proxy)
We have highlighted for you below some actions we took in Fiscal 2019 to ensure we are optimizing our governance practices to support continued value creation over the long term. And while this letter focuses primarily on Fiscal 2019, as a result of the COVID-19 pandemic, our focus today is on operating our business while taking care of our customers and associates.
Associated Press (4/5 – Trump uses coronavirus crisis to push his broader agenda)
ADMINISTRATION ROLLS BACK MILEAGE STANDARDS
On the same day that the White House announced projections that 100,000 to 240,000 Americans are likely to die from coronavirus, the Environmental Protection Agency introduced a controversial new federal rule that will relax mileage standards for years to come.
The rollback is a victory for Americans who like their SUVs and pickup trucks, but it’s hardly without a cost. The government’s own projections indicate that the new standards also mean more Americans will die from air pollution, and there will be more climate-damaging tailpipe exhaust and more expense for drivers at the gas pumps.
Trump hailed the new rule as reason for Americans to go out and buy big, new cars.
Waters Corporation (4/5 – Definitive Proxy)
Waters Corporation’s products and services, such as chromatography systems and consumables, mass spectrometry systems, and thermal analysis technologies contribute directly to the advancement of human health and well-being by playing a vital role in the creation of efficacious medical therapies, a safer food and environmental ecosystem, and higher quality materials we depend upon in many aspects of daily life. The importance of these contributions could never be more clear than during our global battle with COVID-19.
We are a values-centered organization, with approximately 7,500 employees around the world dedicated to delivering benefit to all of our stakeholders, including our customers, fellow employees, stockholders, and society. We are dedicated to purposeful innovation, developing our people and deploying leading sustainability practices.
CenturyLink (4/4 – Environment, Social, and Governance Report)
The Independent (4/3 – Coronavirus could trigger biggest fall in global carbon dioxide since Second World War, scientists say)
The coronavirus pandemic could mean this year’s world carbon dioxide pollution output falls by the largest amount in over 70 years, according to a network of scientists examining emissions data.
Rob Jackson, chair of the Global Carbon Project, which produces widely watched annual emissions estimates, said carbon dioxide output could fall by more than 5 percent year-on-year – the first dip since a 1.4 percent reduction after the 2008 financial crisis.
“I wouldn’t be shocked to see a 5 percent or more drop in carbon dioxide emissions this year, something not seen since the end of World War Two,” said Professor Jackson, of Stanford University in California.
SEB (4/3 – ARS)
Sustainability has been high on SEB’s agenda for many years. As the effects of climate change become more tangible, our customers’ demand for sustainable products and services is increasing. The financial industry is now at the verge of a shift towards offering truly sustainable finance, as climate risk partially translates into investment risk. Corporate customers are ready to make the transition towards a low-carbon economy, and many entrepreneurs want to do good for the climate. Private customers are eager to invest in green technology and want to place their savings where it can benefit the next generation. Our role at SEB in sustainable finance is to provide solutions so that individual customers can fulfil their needs and reach their objectives. We innovate new sustainable financial services, we provide advice and investments, and we support our corporate and institutional customers in their transition to more sustainable business model.
Amazon (4/1 – Amazon’s Covid-19 conundrum; polluters capitalise on chaos; CEOs plan post-pandemic life)
The US Environmental Protection Agency has said it will not enforce certain environmental regulations during the coronavirus outbreak — citing staffing shortages and social distancing requirements that may make it difficult for companies to “meet enforceable limitations on air emissions and water discharges, requirements for the management of hazardous waste, or requirements to ensure and provide safe drinking water”.
The temporary policy does not apply to any criminal violations, the EPA said, nor does it apply to imports, especially pesticides that claim to address Covid-19.
Most striking of all, on Tuesday, the Trump administration rolled back tough car emissions standards approved under President Barack Obama.
British American Tobacco PLC (3/31 – Environmental, Social, and Governance Report)
Alexion Pharmaceuticals (3/31 – Corporate Social Responsibility Report)