Prior to 2020, the environmental aspect of ESG (Environmental, Social and Governance) investing has garnered the most attention from interested investors. But a global pandemic has thrust social and governance considerations into a larger spotlight. As an ESG manager, we applaud this change.
At Dana, we have always given equal attention to the environmental, social and governance issues that pose risks to a business. So do many seasoned ESG portfolio managers. While a company’s environmental footprint remains an important component of that analysis, we are glad to see more end investors realize that companies have an active role to play in other societal issues. The COVID-19 pandemic has laid bare some of the deeper issues that companies must address.
In our view, the pandemic has revealed pervasive social inequalities that undergird our economy. Getting back to normal should not be the goal because “normal” is unjust. Companies should address these societal ills with responsible practices such as paying employees a living wage, offering paid sick leave, paying suppliers for all orders at agreed-upon prices, and keeping executive compensation at a reasonable level. These are all issues we will continue to push companies on going forward.
We will also be watching how the pandemic accelerates changes in the health care industry. Certainly, we should see an overhaul of the public health system as it relates to surveillance, testing, prevention, and access. Consumers have been forced to use a lot more technology, whether through telehealth, online pharmacies or mobile apps. These are important changes, particularly for an older population that may not have made the shift otherwise. We will be looking for other ways health care companies can make health care accessible to a broader set of stakeholders.
Expect more interest in ESG, and more client questions about the S & G
ESG interest already hit an inflection point in 2019, with inflows nearly quadrupling to a record $20.6 billion. Up to that point, much of the interest was fueled by investors’ desire to affect positive environmental changes.
With awareness of social and governance issues picking up, we expect more interest in ESG strategies going forward. Your clients deserve to know what their prospective ESG manager is thinking about these issues, and what policies they are pushing companies on most. We encourage interested investors to start that dialogue with us.