Showing posts with label Social. Show all posts
Showing posts with label Social. Show all posts

Tuesday, June 2, 2020

The Intersection of ESG & Covid-19, Lana Feteiha, Impact Investing Intern

COVID-19 has forever altered standard business practices.

Prior to recent events, Environmental, Social, and Governance efforts have been an afterthought. But the global pandemic demonstrates the fundamental role that ESG plays in corporate investments. The presentation focused on three main points: corporations’ social responses and disclosures to stakeholders regarding ESG factors, how investors incorporate ESG factors into business decisions, and how this crisis will affect what happens next.

The first speaker, Martin Whittaker, is the CEO of Just Capital; a non-profit organization that strives to create a more just market in America through the collection of data. Whittaker discussed the importance of corporate social responses in today’s climate by addressing the Environment and Social aspects of the crisis. COVID-19 has resulted in hazardous working conditions, so companies should be prioritizing the wellbeing of their employees. According to Whittaker, the proper treatment of workers is pivotal for investors. Therefore, companies that protect the health and wellbeing of their employees are more resilient. Whittaker applauded the corporate social response of some, stating that the humanity of business has shone through during the crisis, as companies continue to support stakeholders as we slowly start to reopen.

The head of International and Corporate Strategy for BlackRock, Mark Wiedman, spoke next. He detailed the importance of implementing sustainable business strategies, citing that this year, 90% of them have outperformed their conventional counterparts. This statistic is significant because it notes a distinct correlation between ESG efforts and a company’s success. Moving forward, Wiedman believes that corporate strategy, risk management, and human management will be the long-term focus of businesses. Therefore, improved and accurate disclosure of ESG efforts should be a priority.

Katherine Collins, the head of Sustainable Investing at Putnam Investments, expanded on the importance of ESG reporting and data. She acknowledged that the improvement of data has allowed companies to provide more real time data. However, there is still a gap between businesses reporting ESG, and businesses that are not. This gap not only exists because companies are at different points in making their operations sustainable, but also because some companies are disclosing irrelevant information. For the purpose of investing, Collins recommended that ESG reports be tailored to each corporations’ main function. In doing so, ESG reports will more accurately reflect on the efforts of each individual business. This is important because companies shifting to sustainable outlines will attract larger groups of investors. As we shift away from crisis mode, Collins recommends financing sustainable practices and decision making as a long-term solution. Although these efforts are not typically noticeable on a surface level, these types of investments payoff overtime.

The last speaker was John Goldstein, the head of the Sustainable Finance Group for Goldman Sachs. He spoke about ESG as a whole, claiming that some may get caught up in which letter of the acronym is more important. Goldstein sets the record straight by declaring Environmental, Social, and Governance of equal significance since all three components determine the financial performance of a business. He predicts that the key focus of sustainability will be strategic clarity, data, and making information accessible and relevant.

The COVID-19 crisis brought the foundational cracks in certain corporations to the forefront,
emphasizing the importance of ascertaining ESG requirements in order to remain resilient.

Tuesday, May 19, 2020

ESG Investing Webinar Review. Andrew Taber, Impact Investing Intern, Emory University

The Intersection of ESG and COVID-19. Call hosted by Goldman Sachs to discuss the impact of the global pandemic and economic recession on ESG, with a focus on both the investor and corporate perspectives.

ESG Investing is the consideration of Environmental, Social, and Governance factors in 
investment decision making. 

As emphasized in the presentation, while some consider the ESG qualification to be simply a box to check, it is becoming a very important marker of strong investments. This presentation discussed the growing importance of ESG factors and the relevance of COVID-19 on future investing.

Martin Whittaker of Just Capital discussed how the pandemic is emphasizing the importance of risk factors and relationships for corporations. As a nonprofit which surveys thousands of Americans in building their company rankings, they have found that the way corporations treat their workers and care for their safety has become critical. Given the health risks associated with COVID-19, this is not extremely surprising, however, Whittaker suggests that these are important measures to watch as America exits the crisis. In fact, things are looking good in this area. Whittaker explained that the is was positively surprised by the efforts of corporations in supporting their workers across the board. For instance, many executives took pay cuts to prevent or reduce layoffs. Overall, Just Capital has found that the need for authentic, accurate, and current ESG data about companies has grown. The investment market needs to move towards more perfect information.

Mark Wiedman of BlackRock discussed the relationship between ESG rating and corporate
success. Overall, Wiedman explains that BlackRock believes that America’s investment market is
undergoing major developments as firms respond to climate risk. Specifically, Wiedman claimed that 90% of sustainable strategies have outperformed their conventional counterparts. The relationship between financial performance and sustainability linked to risk factors outside finance explains this trend.

ESG ratings have become important pieces of data in choosing funds. For BlackRock, they are actively seeking sustainable strategies; in the last two years, the amount of money they have in global shares in sustainable strategies has multiplied sixfold. This is for two reasons; not only are companies with these conscious visions outperforming others, clients specifically state that they want their portfolio to contain risk-conscious companies. All in all, Wiedman finds that while priorities themselves in making investment decisions have not changed, their individual emphasis has. Echoing Whittaker, this crisis has increased the importance of strategy along with risk and human capital management.

The next speaker was Katherine Collins of Putnam Investments. First, she explained that ESG can
be defined and used in different ways, but the most important would be the Alpha generation, that is, the financial and nonfinancial performance and returns. Collins finds that in determining which sustainable companies to invest in, it is important to look at the actual purpose of the company’s ESG components. Is the company simply checking the box and filing paperwork, or is sustainability a core piece of the company’s strategy and product? This is very important. Interestingly, Collins also argues that looking at improvements in sustainability is crucial. A company may have been a huge carbon emitter, but if they are actively transitioning to renewable energy but have not passed ESG yet, they still may be a sound risk-conscious investment. Additionally, she explains the difficulty in measuring social elements; for instance, there is no real quantitative numeric to accurately measure and compare diversity in companies.

Thus, companies that are able to clearly communicate their strategies and why they are risk-conscious and sustainable are easier investments. Companies ought to look at sustainable investments as more than just a box to check and lots of paperwork but as key investments in their future.

Last, John Goldstein of Goldman Sachs sort of summarizes the whole presentation. COVID-19
reemphasized the importance of elements that ESG takes into account and demonstrated that it can
withstand even this crisis. He further supports that these sustainable companies are outperforming others, along with the idea that new business conversations are happening as risk is becoming a huge factor.

Sustainability needs to be a major part of corporate strategy and a company’s story. All things considered, Goldstein concludes that as the need for data has increased, so has the importance of taking into account risk factors. ESG is a legitimate factor in making investment decisions and has serious implications on the company’s future.