COVID-19 will change how we think about responsible investment
Regnan’s head of advisory, Susheela Peres da Costa
INVESTORS may think they invest in companies and markets. But they’re really investing in economies and societies.
It’s not until we experience a crisis like COVID-19 that this becomes clear.
When beverage producers start making hand sanitiser and car manufacturers start making hospital ventilators, it becomes clear there is limited value thinking about companies in isolation from their social context. When even the most blue-chip of companies have found themselves needing society’s generosity, the social contract becomes apparent.
As we recover, the community will expect businesses to meet their end of this bargain.
The article, COVID-19 shows universal owners need active ownership to safeguard social assets and advocate for principled political economy, can be found here.
Social assets such as population health, intellectual investment, cohesive communities and strong, trustworthy institutions are the foundations on which economies grow and markets flourish, Ms Peres da Costa says.
“If Environmental, Social and Governance (ESG) is about seeing the forest and the trees, COVID-19 shows how both depend on strong roots in solid ground.
“These foundations are all but invisible in better times. For this reason, they are easily undermined when we are inattentive to their maintenance.
“But widely-diversified investors are exposed to social assets and the performance of the economy, and need better metrics that enable them to monitor their strength and resilience through good times as well as bad.
“The interests of individual market actors can be in tension with the healthy whole.
“Investors also need ways to ensure those roots are not undermined for a one-off windfall. It is important to empower decision-makers who can prioritise social assets and thus the economy when faced with competing interests of market actors.”
Regnan is a leading provider of ESG research, engagement and advisory services.
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