Coronavirus: A test of good corporate citizenship

by Eric Pedersen, 
Head of Responsible Investments at Nordea Asset Management

The COVID-19 pandemic has engulfed the global economy and altered the interactions of business with customers, employees and investors. Given the current unprecedented situation, we at Nordea Asset Management (NAM) remain steadfast in our commitment to ESG principles and practices.

Encouragingly, a large part of the asset management industry has come together during this pandemic, with 322 long-term institutional investors, representing more than USD 9.2trn in assets under management signing the Investor Statement on Corona Response. The Statement outlines a five-point plan to protect workers and the public by urging investee companies to 1) provide paid leave, 2) prioritise health and safety, 3) maintain employment, 4) maintain supplier/customer relationships, and 5) act with financial prudence. There have also been other positive large-scale investor initiatives, such as engaging with meat processors as well as pharmaceutical companies.

In addition to setting expectations and communicating these messages to companies, data has become integral in determining the corporate response to the coronavirus pandemic. In order to better monitor, understand and act upon company responses, we have developed a proprietary COVID-19 response tracker to screen ESG news volume and stakeholder sentiment of coronavirus-related discussion. This also helps to benchmark individual companies to the expectations of global investors.

Through the use of data, we have discovered areas in need of investor dialogue. For example, companies with links to deforestation are likely to face increased ESG risks related to indigenous communities, as a result of the heightened social and environmental threats brought on by the pandemic, and consequently we have initiated engagement with several companies within this industry.

In addition to this, meat and poultry processing plants have emerged as dangerous hot spots in the US in relation to COVID-19, with multiple facilities having been forced to close due to high numbers of infected workers. Meat sector workforces often lack access to paid sick leave and includes many workers at heightened risk – such as those scared of losing jobs or in fear of wage loss and reprisal by managers for calling in sick, as well as those concerned about speaking out against plant managers skirting the law. Many of the vulnerable workers are minorities, immigrants and refugees, women, and those not speaking the native language.

Though we expect all organisations to adhere to the five-point plan to protect workers, it is important to acknowledge that each company had different prospects going into the pandemic and are affected in diverse ways. Closures in tourism and service sectors – such as airlines, hospitality and restaurants – are near impossible to avoid, while companies operating within information and communications technologies see an uptick in demand. Additionally, it is important to remember corporate coronavirus responses can also greatly differ depending on geographic region, as well as the levels of support received from relevant governments.

With that said, there have been stark differences in the actions undertaken by the business community – from companies showing financial prudence by cancelling dividends, cutting executive pay and businesses maintaining the majority of their workforces, to companies widely criticised for poor handling of, for instance, workplace health and safety.

Even though we currently are unable to meet our investee companies face-to-face we continue to believe engagement is an incredibly powerful tool to bring about positive change. While field visits are an important element of this, the quality of our engagement activities has not deteriorated due to pandemic-related travel restrictions – with our investee companies making ample time to interact with us via video calls.

As investors, we recognise the long-term viability of the companies we invest in is inextricably tied to the welfare of all stakeholders – including employees, suppliers, customers and the broader community. During this turbulent time, it is an opportunity for every company to display actions of good corporate citizenship.

Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches, subsidiaries and representative offices. This document is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. Consequently, the information contained herein will be superseded in its entirety by such Offering Memorandum or contractual arrangement in its final form. Any investment decision should therefore only be based on the final legal documentation, without limitation and if applicable, Offering Memorandum, contractual arrangement, any relevant prospectus and the latest key investor information document (where applicable) relating to the investment. The appropriateness of an investment or strategy will depend on an investor’s full circumstances and objectives. Nordea Investment Management AB recommends that investors independently evaluate particular investments and strategies as well as encourages investors to seek the advice of independent financial advisors when deemed relevant by the investor. Any products, securities, instruments or strategies discussed in this document may not be suitable for all investors. This document contains information which has been taken from a number of sources. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information and investors may use further sources to form a well-informed investment decision. Prospective investors or counterparties should discuss with their professional tax, legal, accounting and other adviser(s) with regards to the potential effect of any investment that they may enter into, including the possible risks and benefits of such investment. Prospective investors or counterparties should also fully understand the potential investment and ascertain that they have made an independent assessment of the appropriateness of such potential investment, based solely on their own intentions and ambitions. Investments in derivative and foreign exchange related transactions may be subject to significant fluctuations which may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of the investment can greatly fluctuate and cannot be ensured. Investments in equity and debt instruments issued by banks could bear the risk of being subject to the bail-in mechanism (meaning that equity and debt instruments could be written down in order to ensure that most unsecured creditors of an institution bear appropriate losses) as foreseen in EU Directive 2014/59/EU. Nordea Asset Management has decided to bear the cost for research, i.e. such cost is covered by existing fee arrangements (Management-/Administration-Fee). Published and created by the Legal Entities adherent to Nordea Asset Management. The Legal Entities are licensed and supervised by the Financial Supervisory Authority in Sweden and Luxembourg respectively. The Legal Entities’ branches, subsidiaries and representative offices are licensed as well as regulated by their local financial supervisory authority in their respective country of domiciliation. Source (unless otherwise stated): Nordea Investment Funds, S.A.. Unless otherwise stated, all views expressed are those of the Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches, subsidiaries and representative offices. This document may not be reproduced or circulated without prior permission. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same but is included for the purpose of illustration. The level of tax benefits and liabilities will depend on individual circumstances and may be subject to change in the future. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches, subsidiaries and/or representative offices.

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