Will COVID-19 prove a watershed for ESG?
It is impossible to look at the global health crisis and its knock-on effects without considering environmental, social and governance (ESG) factors. In this second article on whether Covid-19 represents a watershed moment for ESG we focus on the “Social” aspect of ESG and look at whether COVID-19 will accelerate or decelerate its momentum.
Has “Social” come more to the fore?
When it comes to social considerations, the long-running debate about the purpose of a corporation has been reinvigorated by COVID-19. What is the greater purpose of a company? Are they here solely to generate profit, pay tax then distribute the remainder to shareholders, as Milton Friedman famously suggested? Or should they pursue loftier goals, serving or even improving society?
During the crisis, collaboration has been the name of the game. In pharmaceuticals, public and private resources have been pooled to try to find suitable vaccines, test them and bring them to market more quickly. Notable corporate announcements include one from GlaxoSmithKline’s Chief Executive Emma Warmsley, among the FTSE 100’s top paid female leads, that the company ‘does not expect to profit’ from a range of collaborations during the pandemic. The plan is to feed any short-term gains back into research and treatment for some of the world’s poorest.
The approach harks back to the one taken by George W. Merck, founder of one of the oldest pharmaceutical companies in the world, who famously declared medicine should put patients first. Ultimately, moves like this might result in commercial pharma separating activities of high social but low commercial return from their broader business.
ESG considerations built into Aviva MAF’s range
Within Aviva’s Multi-asset Fund (MAF) range ESG considerations are built into the investment process. “ESG is already a key part of our investment process but we are continuing to evolve how we integrate ESG across all asset classes” says Kevin O’Nolan Portfolio Manager on the MAF range. “We’re market leaders in ESG and we’re keen to stay ahead of the market on this, not only because it the right thing to do, we also strongly believe it will improve returns for our investors over the longer term.”
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