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The next step: What Covid-19 means for investors and ESG

Time is running out. Covid-19 has shown us how much things have already got out of hand.

Investors are worried and confused about the impact of Covid-19 on financial markets. As investors try to get used to a new normal, Caroline Le Meaux, head of ESG research, voting and engagement at Amundi expects environmental, social and governance (ESG) criteria to play an even more important role than before. ‘In a way, the pandemic has opened our eyes to things that really matter - people and the planet. Covid-19 comes as a wake-up call for all of us.’

She explains that the pandemic has accelerated the trend toward investments that take climate, society and company structures into account. Although Climate remains a key issue, investors and societies are becoming increasingly conscious of the importance of social matters: ‘Before the coronavirus outbreak, responsible investors mainly focused on companies that would tackle environmental and governance issues, for example carbon emissions and the lack of transparency about executive pay. But since the onset of the crisis, the social aspect has moved into the limelight.’

From her point of view, social inequalities weren’t as prominent on investors’ agenda as they are now. ‘Covid-19 has really shone a light on the challenging conditions a lot of people are working in. Just take a look at the appalling working situation in abattoirs, which aided the spread of the virus. This is not just a problem that’s confined to emerging markets but also exists in developed countries.’ she says.

‘Many firms have finally realised that they really need to look after their employees and customers,’ Le Meaux continues. ‘Companies that don’t give things like staff retention and customer loyalty the attention they deserve are going to pay the price. A change in attitude was long overdue.’

It’s time to turn things around

Now more than ever, investors want to make a difference, which is why they focus on allocating their capital to businesses that take ESG factors seriously. What does the company do to reduce its carbon footprint? How does it treat its workers? Does it actively encourage equality and diversity?

While this is not the first time investors have asked these questions, Covid-19 has given them a whole new level of urgency. ‘It’s not that we’ve never had a crisis before, but this time we might have reached a turning point that forces us to rethink the way we live, work and invest,’ Le Meaux says.

She points out that it comes down to one question: ‘Do I want my money to contribute to a better future, and if so how do I invest it in companies that actually tackle the most pressing challenges of our time?’

According to Le Meaux, it is asset managers like Amundi that can help people look for investments, which are in line with their goals - be it on the environmental, social or governance side of things: Identifying companies that develop sustainable models will become a priority for investors. “We are here to help them, through an efficient ESG analysis and a strong capacity of dialogue with companies, allowing us to have an in-depth knowledge of their strategy in the face of ESG challenges. This is even more the case if the situation on the financial markets is as hazy as it is right now. We are there to guide investors through the fog and make sure they achieve their financial and moral goals.”