Once a month since the pandemic began, we have asked our analysts what they are hearing from the companies they follow. Part of that survey focuses on sustainability issues and, again, the findings have challenged the cynical view that in a time of crisis companies will revert to thinking exclusively about the bottom line.
Actually, more than half of the companies questioned said they intended to step up their focus on workers, consumers and their impact on society in response to Covid-19. Again, it is not a luxury that only the more affluent developed world believes it can afford. Emerging markets in Europe, Africa and Latin America and in Asia, outside China and Japan, saw the biggest swing towards a social focus in the latest survey. Many of the changes look likely to remain in place. Two thirds of companies said new measures they are taking will be permanent.
Investors have a key role to play in this process. There is obviously an element of self-interest here. During the early stages of the pandemic, when markets were falling, there were significant net outflows from investment funds but those with a focus on sustainability bucked this trend, continuing to see steady inflows through the volatility. End investor demand is a key driver.
But there is more to it than this. Big institutional investors understand that active engagement with the companies they invest in is both part of their social purpose and a way to help their clients achieve better financial returns in the long run. They can do this by ongoing dialogue with management, or by using their votes to effect positive change. Ultimately, this is almost certainly a better solution than simply taking capital away from businesses that don’t “get it”.
Capitalism is the least-worst way of managing the global economy, but it has to adapt if it is to remain the system of choice. The pandemic will change the world in many ways. It would be great if one of its achievements was to turn sustainable investing into plain simple Investing.
Tom Stevenson is an investment director at Fidelity International. The views are his own. He tweets at @tomstevenson63.