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.
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